When Colleges Consider Outsourcing Online Programs, Calculations Can Get...

Higher Education

When Colleges Consider Outsourcing Online Programs, Calculations Can Get Complicated

By Jeffrey R. Young     Apr 4, 2019

When Colleges Consider Outsourcing Online Programs, Calculations Can Get Complicated

A growing number of colleges are turning to for-profit companies to help them run their online programs, and to help finance them. These companies are known as online program managers, or OPMs.

The relationships can mean a clash of cultures. One college official recalled a meeting where the head of a popular OPM showed up wearing a gold chain and talking about the “cost of acquisition” of students. That focus on sales can be uncomfortable for traditional colleges, who prefer to talk about their nonprofit missions of preparing students to be good citizens.

Yet many colleges are in desperate need of attracting students to their online programs. At the University of Virginia, for instance, officials recently announced layoffs of 38 staff members due to low enrollments in online courses offered by its School of Continuing and Professional Studies.

“We are a giant, wonderful university with a large endowment. I love everybody I work with … but we’re not skilled in management techniques, just in general,” said Kristin Palmer, director of online learning for UVA.

So expect to see more colleges turn to these providers, said Michael Feldstein, a consultant and co-publisher of the popular e-Literate blog, who has long followed the OPM market. A survey released last week by The Chronicle of Higher Education and P3-EDU, a conference on public-private partnerships to be hosted by George Mason University, found that 42 percent of provosts, chief financial officers and presidents surveyed said that expanding online programs was the area they most considered turning to a private company to help with.

Last week EdSurge hosted an EdSurge Live online town hall with Palmer, of UVA, and Feldstein, to talk about when it makes sense to turn to OPMs, and when building your own programs may be the better solution. The session follows on a pair of articles in EdSurge last month, one co-written by an OPM leader making the case for the model, and another by Feldstein noting that while OPMs can be attractive, they may not be appropriate for every college.

Below are highlights of that conversation, which have been edited and condensed for clarity. Or listen in on the discussion here.

EdSurge: Where did these outsourcing companies known as OPMs come from?

Michael Feldstein: Going back, even to the 1970s, even pre-dating online, there’s always been two challenges to launching new programs: money and expertise at execution. It costs money to start up a new program, and it takes a lot of expertise. Some of that is getting students in the door, and some of it is just having the people who have the expertise and who aren’t busy doing other things. [Or your people running the program] have 16 other jobs, and this would be a 17th full time job. And there are a lot of things that are fairly technical in a running program that’s fully online.

Another way I heard somebody frame online program managers recently is as investors [since many front money to build the programs in exchange for a cut of tuition for the next decade or so.] That’s another way to think about them.

The University of Virginia does some work with OPMs and does some programs on its own, right?

Kristin Palmer: We’re currently partnered with Noodle Partners in our Data Science Institute. We partnered with them because it wasn’t officially a school when we decided to move their degree program online. They have no faculty, they don’t have any instructional designers. It was that outsourcing model of, “We need help, and we want a partner to provide and then help.”

We have had other experiences with partnerships that have totally gone south. Our undergraduate Commerce School was in a partnership with an OPM provider that we have terminated prematurely because of a communication guffaw. I don’t think we’ll ever work with that OPM provider again. I won’t say who it was, but that was a disaster.

Then we have other programs that are self-made. Some are successful, some are not. We just announced we’re laying off half of the individuals in our school for Continuing and Professional Studies by mid-May. It’s because enrollments down 68 percent. They have 13 different online programs in cybersecurity and project management, and a lot of fantastic programs, but they’re hosted locally. They don’t have marketing.

Can you say more about what went wrong with the OPM arrangement that failed, so others can learn from that lesson?

Palmer: Yeah, if you do go down the OPM route, you really have to make sure that there’s a cultural DNA match with your partner. We’ve seen in the conversations coming off of the article that Michael has written, and the other article, that we don’t really look at universities as a business, and OPMs are very much a business.

There can be some cultural clashing there, because they do marketing and they look at return on investment and cost per student acquisition. I think those are all valuable numbers to look at, but I think having that clear, open communication of what our expectations early on [is key]. What does success look like? What kind of numbers are we going to track? Where are we comfortable or uncomfortable?

Ours was a communication issue, where they reached out to people that they should not have reached out to, and it was the straw that broke the camel’s back.

But you say for another program, the OPM model is working. Is that because for the latest one you’re doing you didn’t have the staff to do it without a partner?

Palmer: I think we didn’t have a lot of options on that program. It was a priority for the provost’s office to move it online. We had the program existing, but to Michael’s point, the faculty that are helping out with that program, it’s job number 17. They’re already fully committed, they’re the faculty that everybody wants to have in their classes. Balancing how to pay that faculty, and our timelines, and having the structure of working with an OPM provider really helped on, “Okay, we’ve got a project manager, we’ve got instructional designers.” It was extremely helpful.

What questions should colleges ask as they consider partnering with an outside company to run online programs?

Feldstein: Outsourcing is associated in this country with outsourcing manufacturing jobs to Southeast Asia. In higher ed, the better analogy would be, “We outsource our LMS hosting to LMS companies.” [In that case, there are times when a college will say,] “Gee, there’s a third party that I would feel strongly, we’d be better off if someone else did that on a permanent basis and I’m okay if they make money on it.”

Second, when I look at the difference between paying someone a fee and paying someone a revenue share, are my concerns related to an emotional reaction? A reaction to the differences in how those affect the incentive structures to the way we develop and price our programs or a mix of those two?

More specifically, it feels icky to take student tuition and give a percentage of it to a for-profit company, even if the net result is something that’s good for the student. You have to get past that, if you’re someone who works at a university or somebody who feels committed to the mission.

That’s a different issue than saying, “You know, if we give a percentage of our revenue to a corporation for the long-term, that might affect how we think about providing tuition discounts to students, or which programs we decide to develop in the first place for online programs, because we’re only getting 50 percent rather than 100 percent.” There are complex financial calculations. You have to put on your green eye shades and figure out how those impact your decisions.

Palmer: We love discussing stuff. We are in the business of talking about ideas and bumping ideas off of each other, and coming up with ideas that other people don’t necessarily agree with and talking through them. We have these cultural conversations about what the university is even about. Is it job prep, or is it a well-rounded individual or is it creating new knowledge?

All of that’s totally legit, but 36 people in one of our schools found out on Friday that they’re going to have a job change that’s not anticipated, and that’s the reality. We are a giant, wonderful university with a large endowment. There are certainly challenging people, but I just love where I work and who I work with. But we’re not skilled in management techniques, just in general.

[Audience question from Kelvin Bentley, assistant vice president for digital learning innovation at University of West Florida]: I just wonder if OPMs’ time in the sun is limited, given that schools need to change from within to be more flexible and affordable, [as] online ed is such a saturated market already. Most schools that use a decent model for online, how will they be able to maintain quality over time of their courses and programs?

Palmer: We’re in a phase where we’re trying to adjust to our business and figure out how to serve lifelong learners. That framework for learning through your lifetime doesn’t exist right now. It is an evolving market, but it’s certainly nice to have the flexibility of working with a partner. We’ve been talking about revenue sharing, [but] there are also fee-based providers [that don’t require] a 10 year commitment with a 50 percent revenue share.

Feldstein: [The standard OPM model] was really engineered to solve a pretty well-defined problem. My impression is that, for those who have that problem, it solves that problem pretty well. I don’t think it’s going away anytime soon. In fact, I think the opposite is true. I think it has a long life, a long runway. [To succeed online,] you have to get much better at marketing, you have to get much better at differentiating, and quality is going to be one of those differentiators. Those are all things that OPMs sell on the ability to do.

Now, do they all deliver on those promises equally? Well, no. But that is something that some of them do quite well. Let’s also not forget that the United States is not the entire global market, either for students or for university clients.

A growing number of colleges are turning to for-profit companies to help them run their online programs, and to help finance them. These companies are known as online program managers, or OPMs.

The relationships can mean a clash of cultures. One college official recalled a meeting where the head of a popular OPM showed up wearing a gold chain and talking about the “cost of acquisition” of students. That focus on sales can be uncomfortable for traditional colleges, who prefer to talk about their nonprofit missions of preparing students to be good citizens.

Yet many colleges are in desperate need of attracting students to their online programs. At the University of Virginia, for instance, officials recently announced layoffs of 38 staff members due to low enrollments in online courses offered by its School of Continuing and Professional Studies.

“We are a giant, wonderful university with a large endowment. I love everybody I work with … but we’re not skilled in management techniques, just in general,” said Kristin Palmer, director of online learning for UVA.

So expect to see more colleges turn to these providers, said Michael Feldstein, a consultant and co-publisher of the popular e-Literate blog, who has long followed the OPM market. A survey released last week by The Chronicle of Higher Education and P3-EDU, a conference on public-private partnerships to be hosted by George Mason University, found that 42 percent of provosts, chief financial officers and presidents surveyed said that expanding online programs was the area they most considered turning to a private company to help with.

Last week EdSurge hosted an EdSurge Live online town hall with Palmer, of UVA, and Feldstein, to talk about when it makes sense to turn to OPMs, and when building your own programs may be the better solution. The session follows on a pair of articles in EdSurge last month, one co-written by an OPM leader making the case for the model, and another by Feldstein noting that while OPMs can be attractive, they may not be appropriate for every college.

Below are highlights of that conversation, which have been edited and condensed for clarity. Or listen in on the discussion here.

EdSurge: Where did these outsourcing companies known as OPMs come from?

Michael Feldstein: Going back, even to the 1970s, even pre-dating online, there’s always been two challenges to launching new programs: money and expertise at execution. It costs money to start up a new program, and it takes a lot of expertise. Some of that is getting students in the door, and some of it is just having the people who have the expertise and who aren’t busy doing other things. [Or your people running the program] have 16 other jobs, and this would be a 17th full time job. And there are a lot of things that are fairly technical in a running program that’s fully online.

Another way I heard somebody frame online program managers recently is as investors [since many front money to build the programs in exchange for a cut of tuition for the next decade or so.] That’s another way to think about them.

The University of Virginia does some work with OPMs and does some programs on its own, right?

Kristin Palmer: We’re currently partnered with Noodle Partners in our Data Science Institute. We partnered with them because it wasn’t officially a school when we decided to move their degree program online. They have no faculty, they don’t have any instructional designers. It was that outsourcing model of, “We need help, and we want a partner to provide and then help.”

We have had other experiences with partnerships that have totally gone south. Our undergraduate Commerce School was in a partnership with an OPM provider that we have terminated prematurely because of a communication guffaw. I don’t think we’ll ever work with that OPM provider again. I won’t say who it was, but that was a disaster.

Then we have other programs that are self-made. Some are successful, some are not. We just announced we’re laying off half of the individuals in our school for Continuing and Professional Studies by mid-May. It’s because enrollments down 68 percent. They have 13 different online programs in cybersecurity and project management, and a lot of fantastic programs, but they’re hosted locally. They don’t have marketing.

Can you say more about what went wrong with the OPM arrangement that failed, so others can learn from that lesson?

Palmer: Yeah, if you do go down the OPM route, you really have to make sure that there’s a cultural DNA match with your partner. We’ve seen in the conversations coming off of the article that Michael has written, and the other article, that we don’t really look at universities as a business, and OPMs are very much a business.

There can be some cultural clashing there, because they do marketing and they look at return on investment and cost per student acquisition. I think those are all valuable numbers to look at, but I think having that clear, open communication of what our expectations early on [is key]. What does success look like? What kind of numbers are we going to track? Where are we comfortable or uncomfortable?

Ours was a communication issue, where they reached out to people that they should not have reached out to, and it was the straw that broke the camel’s back.

But you say for another program, the OPM model is working. Is that because for the latest one you’re doing you didn’t have the staff to do it without a partner?

Palmer: I think we didn’t have a lot of options on that program. It was a priority for the provost’s office to move it online. We had the program existing, but to Michael’s point, the faculty that are helping out with that program, it’s job number 17. They’re already fully committed, they’re the faculty that everybody wants to have in their classes. Balancing how to pay that faculty, and our timelines, and having the structure of working with an OPM provider really helped on, “Okay, we’ve got a project manager, we’ve got instructional designers.” It was extremely helpful.

What questions should colleges ask as they consider partnering with an outside company to run online programs?

Feldstein: Outsourcing is associated in this country with outsourcing manufacturing jobs to Southeast Asia. In higher ed, the better analogy would be, “We outsource our LMS hosting to LMS companies.” [In that case, there are times when a college will say,] “Gee, there’s a third party that I would feel strongly, we’d be better off if someone else did that on a permanent basis and I’m okay if they make money on it.”

Second, when I look at the difference between paying someone a fee and paying someone a revenue share, are my concerns related to an emotional reaction? A reaction to the differences in how those affect the incentive structures to the way we develop and price our programs or a mix of those two?

More specifically, it feels icky to take student tuition and give a percentage of it to a for-profit company, even if the net result is something that’s good for the student. You have to get past that, if you’re someone who works at a university or somebody who feels committed to the mission.

That’s a different issue than saying, “You know, if we give a percentage of our revenue to a corporation for the long-term, that might affect how we think about providing tuition discounts to students, or which programs we decide to develop in the first place for online programs, because we’re only getting 50 percent rather than 100 percent.” There are complex financial calculations. You have to put on your green eye shades and figure out how those impact your decisions.

Palmer: We love discussing stuff. We are in the business of talking about ideas and bumping ideas off of each other, and coming up with ideas that other people don’t necessarily agree with and talking through them. We have these cultural conversations about what the university is even about. Is it job prep, or is it a well-rounded individual or is it creating new knowledge?

All of that’s totally legit, but 36 people in one of our schools found out on Friday that they’re going to have a job change that’s not anticipated, and that’s the reality. We are a giant, wonderful university with a large endowment. There are certainly challenging people, but I just love where I work and who I work with. But we’re not skilled in management techniques, just in general.

[Audience question from Kelvin Bentley, assistant vice president for digital learning innovation at University of West Florida]: I just wonder if OPMs’ time in the sun is limited, given that schools need to change from within to be more flexible and affordable, [as] online ed is such a saturated market already. Most schools that use a decent model for online, how will they be able to maintain quality over time of their courses and programs?

Palmer: We’re in a phase where we’re trying to adjust to our business and figure out how to serve lifelong learners. That framework for learning through your lifetime doesn’t exist right now. It is an evolving market, but it’s certainly nice to have the flexibility of working with a partner. We’ve been talking about revenue sharing, [but] there are also fee-based providers [that don’t require] a 10 year commitment with a 50 percent revenue share.

Feldstein: [The standard OPM model] was really engineered to solve a pretty well-defined problem. My impression is that, for those who have that problem, it solves that problem pretty well. I don’t think it’s going away anytime soon. In fact, I think the opposite is true. I think it has a long life, a long runway. [To succeed online,] you have to get much better at marketing, you have to get much better at differentiating, and quality is going to be one of those differentiators. Those are all things that OPMs sell on the ability to do.

Now, do they all deliver on those promises equally? Well, no. But that is something that some of them do quite well. Let’s also not forget that the United States is not the entire global market, either for students or for university clients.

 

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