Colleges look to OPMs as pandemic intensifies shift online

Editor’s note: This article is part of a package of stories examining the impact of COVID-19 on the business of online learning for colleges. Read more here.

Simmons University, in Massachusetts, told students earlier this year it would create online versions of hundreds of undergraduate courses for the fall term. School officials billed the move as a way to adapt to the challenges of the pandemic while growing its online footprint. 

But it didn’t take on the task alone. To aid the transition, the private university tapped its longtime partner, 2U. The company has helped Simmons develop and manage six online graduate programs, which collectively enroll nearly 3,000 learners — accounting for roughly half its students

“I’m trying to imagine us doing that without 2U‘s help,” said Russell Pinizzotto, Simmons’ interim provost. “I don’t think we would have been able to do that.” 

Companies like 2U, called online program managers, typically front the capital needed to get a virtual academic program off the ground. In exchange, they get a share of its tuition revenue, usually between 40% and 60%. The expanded partnership brings that same model to Simmons’ online undergraduate courses, though officials declined to share the revenue split.

The deal will also set up several online undergraduate degrees at Simmons targeting adult learners who haven’t finished college, and they will be slimmer and priced lower than the campus-based versions. Pinizzotto said the school will debut five programs in May to start, including in computer science and social work. 

Then-President Helen Drinan said in Simmons’ announcement that the new work with 2U would help the university “emerge from the pandemic stronger.” And it highlights a two-pronged trend industry observers say the pandemic-induced move to remote education is intensifying: More colleges are creating online programs to expand their reach, and they’re increasingly relying on third-party providers for help. 

Howard University, a historically Black college in Washington, D.C., likewise enlisted Noodle Partners, another OPM, to help it launch an online master’s of business administration this summer, though the pandemic did not factor into the timing. School officials hope the new degree will help them attract more students. It also comes amid recent growth in online graduate management programs. 

“The trend had already begun before the pandemic,” said Barron Harvey, Howard University’s associate provost for academic innovation and strategic initiatives. “I believe the pandemic, though, has increased the awareness of students, scholars and administrators that online education is going to be a significant part of higher education from here on out.”

Capitalizing on a crisis

It wasn’t immediately clear how the pandemic would affect the companies that help colleges set up and run online programs. 

2U, one of the few publicly traded OPMs, disclosed to investors in late April that the crisis could “severely impact” its business by making it harder to find clients wanting to launch online programs or causing one of its partners to shut down. Companies commonly update potential risk factors in response to major external events. 

At the time, many colleges were struggling with the transition online. Students mocked their schools by calling them “Zoom University,” and many said the education they were receiving wasn’t worth the tuition they paid. Some even sued to get it back.

Several college officials, in turn, said the pandemic accelerated plans to beef up their online offerings so they can weather this crisis and be ready for the next. Some also said the pandemic turned up the heat on their existing goals to market their programs beyond their traditional geographic boundaries.

OPMs pounced on the opportunity to help. 2U CEO and co-founder Chip Paucek told analysts in July that the company was seeing “unprecedented demand” across its offerings and “historic highs” in enrollment. He also said the company was seeing increased interest in its revenue-share model from both new and existing partners. 

“Folks are getting more and more comfortable understanding that they can’t just offer a live Zoom on their (learning management system) and consider that high-quality online learning,” Paucek told Education Dive in September. 

The OPM sector is booming. In the first six months of the year, schools across the globe struck 85 new contracts with OPMs — 51 of which were in the U.S., according to a recent report from HolonIQ, an education market research firm. Worldwide, that’s already more than two-thirds of the OPM deals made last year.

To drum up new business, OPMs are offering services beyond their usual scope. 2U, for instance, rolled out new offerings to help schools quickly transition online for the fall term. 

“Online education is going to be a significant part of higher education from here on out.”

Barron Harvey

Associate provost for academic innovation and strategic initiatives, Howard University

Amherst College, in Massachusetts, is using those services to move some of its most popular courses online, freeing up lecture hall space for smaller, in-person classes this term. Biddy Martin, Amherst’s president, did not respond to an interview request from Education Dive. Simmons is also using this service for its online undergraduate courses. 

Wiley Education Services offered similar services to help its partners adapt to the pandemic. In one case, the company had only about two months to help Loyola Law School, in California, move an in-person summer program fully online. The company billed the move as an opportunity for the school to expand the program’s reach to students in other states, including those studying at other universities. 

Another firm, iDesign, is partnering with colleges to bring instructional design support centers to their campuses. So far, several higher education entities, including the University System of Maryland and Vanderbilt University, in Tennessee, have signed onto use the service. 

Using iDesign’s services has been part of the Maryland system’s larger plan to help transition some classes online across its 12 institutions for the fall term, said MJ Bishop, associate vice chancellor and director of its academic innovation center. Some of the system’s schools are underway with primarily or fully online semesters, according to data from the College Crisis Initiative at Davidson College.

Although OPMs are mostly promoting these types of offerings as short-term services for colleges in light of the pandemic, industry experts say they have the potential to help the companies find clients and drum up new types of business. Simmons’ expanded partnership with 2U, for instance, was born out of a need to prepare for the fall term and a desire to continue expanding online. 

And the Maryland system may explore offering centralized instructional design help even after the crisis subsides. “Not all of our institutions have access to as much instructional design support,” Bishop said. “That’s going to get even worse as we begin to really suffer budget cuts as a result of the pandemic.” 

What’s ahead? 

Sources interviewed for this story agree OPMs will play a larger role going forward in bringing programs online, a roughly decade-long trend the pandemic has accelerated. They disagree, however, about what those relationships will look like.

Simmons University has worked with 2U on a revenue-share basis for several graduate degrees, and their expanded partnership will use that same model. Yet this type of contract has caught the attention of federal legislators who question whether it’s lawful and critics who contend it’s driving up the price of education. 

Drinan, now president emerita at Simmons, defends the use of revenue-share agreements. “How else are you going to pay them? Do you want to write them a check upfront?” she said. “We don’t have a check to write upfront for things like the constant ongoing development of a highly sophisticated technology platform (and) the access to marketing, the likes of which we could not possibly replicate.”

And industry experts say the revenue-share approach is becoming more attractive to colleges that want to quickly launch online programs but whose budgets are stretched thin by the pandemic. 

“There’s no question that we’ve seen an increase in people interested in the revenue sharing, and is that a surprise to us? No,” Paucek told Education Dive in September. “COVID is having a huge financial impact (on) higher ed as a whole.”

The University of New Haven, a private institution in Connecticut, struck up a revenue-share agreement with Wiley over the summer to launch six online graduate programs in January and another one in the fall of 2021. 

To transition to remote learning this year, the university upgraded classroom technology and trained faculty to teach online, said Cynthia Gallatin, its chief of digital learning initiatives. “This collaboration at this time really allowed the university to move and expand very quickly without stretching all of the existing departments and resources,” she said. “COVID demands I think helped move this through, but there had been conversations prior.” She declined to share the value of the revenue split. 

OPM leaders and industry experts are quick to point out that other forms of financing are gaining traction. 

Deals in which colleges play a flat fee for a specific service, such as marketing or instructional design, have “ticked up” slightly as a share of transactions so far in 2020 as compared to last year, despite the pandemic, said Brady Colby, founder and CEO of Thirty Two Edu, which tracks the OPM market. 

His theory? The new uncertainty over finances and enrollment could be making some colleges more cautious about entering long-term contracts. He also suspects negative publicity around revenue-share agreements and universities developing their own online capabilities are factors. 

“How else are you going to pay them? Do you want to write them a check upfront?”

Helen Drinan

President emerita, Simmons University

Yet colleges with weaker finances may feel backed into a corner. “I’m particularly concerned about the smaller, tuition-reliant institutions like the small liberal arts schools that may have had to close their (campus) …. in response to the pandemic and so lost (a) tremendous part of their revenue stream,” said Taela Dudley, a senior policy associate at The Century Foundation, a left-leaning think tank that has criticized revenue-share agreements. 

Many colleges lost key revenue sources, such as housing and dining, this year. But they still need to stabilize their finances, and attempting to boost enrollment by contracting with a third-party provider for student recruitment could be an attractive option, Dudley explained. 

John Katzman, CEO and founder of Noodle Partners, put it more bluntly: “Schools that are not desperate are done with traditional revenue-share agreements.” 

Katzman started Noodle Partners after he left 2U, a company he co-founded, and has since been a vocal critic of traditional revenue-share agreements. Noodle Partners offers fee-for-service contracts and a revenue-share model that switches to fee-based payments after a university pays back the initial investment.  

And some colleges may need more targeted help from OPMs. 

W. Andrew McCollough, associate provost for teaching and technology at the University of Florida, noted that the institution has used OPMs to start programs but learned over time how to provide some of those services in-house. When programs need help, it’s often with marketing and recruitment.  

Likewise, Jerry Rhead, head of academic entrepreneurship at Michigan State University’s HUB for Innovation in Learning and Technology, said the school has grown its capacity to run online programs and will carefully choose which services to develop internally and which they’ll use an outside partner for.

“We don’t really need instructional design support, we don’t necessarily need upfront funding from an OPM to be able to bridge the development of those programs,” Rhead said. “We need assistance in the marketing realm, and we need assistance in the student recruitment realm.” 

Schools will need to be adaptable in the coming years and the pandemic may make them wary of being locked into long-term contracts, Rhead said. Schools may also want help offering more stackable or short-term credentials.  

“The need is changing,” he added. “The service that OPMs provide has to change as well.

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