The Value of the Online Program Management Industry
The Online Program Management (OPM) industry has emerged over the last decade as a key part of the online higher education marketplace, with $1.1 billion in revenue. And education research firm Eduventures expects this growth to continue for the next several years.
Recently, the OPM industry was discussed in an article published in The Atlantic, and the verdict was not favorable toward certain OPM providers. There is much more to share, however, about the reality of the OPM industry, its value propositions, and where its shortcomings might be.
As part of this, it is important to clarify the rationale for the OPM sector and why I believe it is here to stay.
The Higher Education Landscape
Over the last decade, online education has become mainstream. According to the latest Online Report Card from the Online Learning Consortium, almost one-third of postsecondary students take at least one college class online and approximately 15 percent of all college students (nearly three million students) are earning their entire degree online. Online is especially effective in reaching the more than 30 million adult learners who have started but have not completed their degree.
Not only are there more students going online, but there are more schools offering online programs and courses. Competition has increased, but the business model of most schools has not evolved, and they are seeing decreases in revenue. The traditional model, where recent high school graduates steadily fill classes in college and tuition consistently increases, is no longer working. Online offers a way for schools to expand their student base, especially for non-traditional learners who frequently prefer the flexibility of learning online.
The question, then, is not whether to go online, but how.
What Is Online Program Management?
OPM providers are organizations (typically for-profit companies) that help non-profit schools, both public and private, develop online programs. While many partnerships are for master’s-level programs, the growing undergraduate market indicates many providers (including Learning House) are focusing on degrees at the undergraduate level as well.
OPM providers offer various services that traditional institutions might not have the experience or capital to support. Typically, the services include a bundle of at least three of the following: market research, marketing and lead generation, enrollment management, student success and retention, career and placement services, curriculum development, technology hosting, and student and faculty support.
Understanding the Business Model
Typically, an OPM provider charges 30 percent to 80 percent of tuition and fees and offers at least three of the services listed above. The majority of new deals have a revenue share of 50 percent to the OPM provider, although the revenue share can be less if not all the services are utilized. The life of contracts can vary from three to 10 years, although there are some outliers. Some contracts have out or termination clauses, which usually involve the meeting of certain benchmarks, such as number of enrollments by program or overall.
When this model works, schools get a revenue-producing online program that simply would not have existed without the help of an OPM provider. When this model does not work, schools either find another vendor (which rarely happens), take over all the services previously provided by the OPM provider, or shut the program down.
Because most of the upfront costs are shouldered by the OPM vendor, there is little downside for schools — they get the opportunity to launch new programs with little investment in time or money. Additionally, to the existing student, this transition should be smooth, as the education is always delivered directly by the university’s faculty. For the behind-the-scenes services like instructional design, schools have to manage this transition as they would with any outsourcing partner, whether they choose another vendor or decide to bring these services in-house.
7 Reasons to Use an OPM
When deciding to offer online programs, schools have three options: do it themselves; cobble together various outsourced fee-for-service or software-as-a-service solutions from different vendors, such as LMS providers, marketing agencies, and instructional designers; or partner with an OPM provider.
Many schools of all shapes and sizes — elite universities, big and small public universities, and small- to medium-sized private universities — are turning to OPM providers to help build and grow their online programs for the following reasons:
Shifting risk. Growing any new program, especially an online program in a competitive marketplace, takes a lot of capital and expertise. Whether the school has access to capital or not, using an OPM provider allows the school to shift a lot of the risk to the OPM provider in exchange for a share of the tuition revenue. OPM providers invest anywhere from $1 million to $10 million over two to four years before realizing a profit within a single year. It could easily be five years before an OPM provider breaks even on an investment, which is why the contracts are long-term in nature.
This is not a risk-free model for the OPM provider. Programs that are not successful mean the OPM provider loses money. While of course the hope is that these contracts will work, the majority of the deals will be revenue share and long-term in nature to mitigate risk.
Access to capital. For many schools, especially the ones with small endowments and high tuition dependence, access to capital is not necessarily easy, especially for a high-risk investment like building a new online program. Turning to an OPM provider to largely fund the development and launch gives schools the flexibility they need to launch these programs. And with the right OPM provider, the schools are the primary beneficiaries. At Learning House, when a contract expires, a school can run the program on its own, using curriculum and methodologies developed and refined by Learning House. We accept that risk, and choose to work to stay relevant and offer a higher level of service and knowledge so schools will continue their contract with us.
Leveraging expertise. Online education is still relatively new and many schools do not have the expertise needed to successfully implement instructional design, professional development, technology, marketing, enrollment, and retention. While schools can outsource some of these services, finding experts in these areas is challenging, especially for schools with minimal resources. Partnering with an OPM provider accelerates schools’ learning curve and allows them to instantly compete against larger players.
Not only do schools have access to expertise to develop a program, but partnering with an OPM can help schools build their entire online brand. We provide consulting services and best practices to help schools become more customer focused and more market relevant, not only in their online programs but also in traditional programs.
Delivering stellar customer service. Higher education is not known for its stellar customer service. Students, however, are increasingly coming to expect a high level of customer service, especially non-traditional students. They want faster response times, efficient systems that cut through bureaucratic layers, and updated systems for everyday tasks like attending class. While developing these systems can be challenging for schools, OPM providers can help. Most OPM providers, especially Learning House, pride themselves on delivering exceptional student services both during the enrollment process and as the student matriculates through school, and universities can use this expertise to provide a high-quality experience to their students.
Not only can OPMs deliver customer service directly to the student, they also can help schools deliver a quality learning experience. Teaching online can be very different than teaching on-ground. OPM providers can provide instructional design support to develop classes that work online, and faculty support to ensure faculty have the skills they need to successfully teach online.
Supporting change. My experience has been that change does not come easy on college campuses, whether it’s agreeing to launch new programs, updating systems or implementing new strategies to increase enrollment. Colleges pride themselves on a shared governance structure, with a lot of stakeholders. While there are many benefits in this model, a vocal (and sometimes even mythical) minority can stunt progress and prevent essential change as many leaders look to maintain a consensus. By partnering with an OPM provider, the leadership of colleges can lean on the OPM provider to accelerate necessary changes.
Developing true partnership. I find that schools appreciate and value the revenue share because it creates alignment, where a school’s success is an OPM provider’s success and vice versa. There are rare deals that are extremely long term and the revenue share is extremely high in favor of the OPM provider, where the partnership is not equal. But the right OPM provider will not have deals like that; Learning House, for example, has no deals above 50 percent and thus as long as there is growth in student populations, schools will see revenue climb. In my experience, it’s not OPMs that eagerly drive growth, but rather schools. Those that choose an OPM are doing so in the hopes of growing their programs, but in a way that is sustainable and offers strong outcomes for students. Because deals are long term, relationships build and become true partnerships, and OPMs are just as invested in delivering the right kind of growth as schools.
At Learning House, we strongly believe a rising tide lifts all boats. That is, when we market online programs, we help provide a boost to entire schools, giving them more exposure and driving interested students to the school, whether they want to attend online or on ground. We are not just a provider — we are a partner to the entire school.
Bundled service. The old saying, “the whole is greater than the sum of its parts” definitely plays out in the OPM model. For a successful online program, everything is interconnected. A well-designed, market-ready program will generate lots of leads and enrollments. A program that has onerous transfer credit policies will lead to low enrollment rates. A course with bad teaching could lead to high dropout rates. Together, a school and an OPM provider are watching all the metrics and discussing how to improve the parts to make the whole work better.
Defending the OPM Model
There are a few points that I feel compelled to address in defense of the OPM model. First, there is an assumption that the OPM market is similar to the for-profit higher education market. There are similarities in best practices, but some key differences exist.
The OPM provider must behave in accordance with the regulatory environment. For example, enrollment counselors are not incentivized in any way at Learning House, and I don’t believe they are at other providers, either. Not only that, but with nonprofit institutions, the college and university partner still ultimately controls what happens: admissions decisions, all final academic decisions, employment decisions regarding faculty, and what programs to launch. Ultimately, the OPM provider is a partner with very little control of the educational process. Third, the outcomes with OPM providers are strong. The for-profit universities drew ire because they charged a lot and didn’t deliver on their promises. At Learning House, though, we do what we say: our graduation rates, for example, on average are more than 65 percent for undergraduate degrees and greater than 75 percent for graduate degrees, well above the industry averages.
There is an assumption made in the article by the founder and former CEO of 2U, John Katzman, that the OPM model puts pressure on the system to raise tuition. From personal experience, I know this conclusion is not always true. At Learning House, many times we work with schools to lower tuition to become more competitive. Are there schools that charge the same fees for online programs as on ground? Sure, especially at elite universities. But there is a growing segment that is lowering tuition as competition grows and consumers become savvier.
It is also worth pointing out that it is not true that all marketing is bad. Good marketing helps a school share its brand in a way that is meaningful to potential students. Some of the marketing practices for-profit schools relied on, such as using lead aggregators, are not used nearly as much by OPM providers because they simply do not work. At Learning House, we dedicate a very small percentage (low single digits) to investing with lead aggregators.
The OPM market is growing for a reason: non-profit colleges and universities need a partner that can share in the risk and bring the expertise needed to grow enrollments and thus bring much needed revenue to the school. The biggest winners here are the students. They get more programs to choose from, in a variety of modalities, increasing accessibility and leveling the playing field on affordability. Schools have many options to go online, including doing it themselves; it is my honor to be a partner that schools find enough value in to agree to partner with us for years to come.
