The COVID-19 pandemic proved that schools offering online learning options for students have better resiliency and business continuity. However, launching and growing these online options is complex and there are many strategic implications to institutions. The infrastructure and processes needed to attract, support and retain online students differs from on-campus students – and this population is an increasing percentage of higher education. In addition, most institutions are not equipped to support, at scale, the kinds of flexible online and hybrid courses and programs that today’s non-traditional students require.
Schools need a different model from an online program management company to scale online programs
That’s why so many colleges and universities have sought the help of online program management (OPM) companies to transition their established on-campus programs online in exchange for a share of tuition over a set number of years. However, as competition increases and views on traditional degree formats shift, these revenue-share agreements may be hurting institutions in the long run.
If your institution is already working with an online program management company to support its online programs, or is looking for help doing so, there are other models that may better suit your goals. Read on to learn more about the hidden secrets of working with an OPM and how an alternative model with an online program enablement (OPE) company can improve your institution’s long-term health and innovation, as well as enable you to own the future of your online programs.
Bringing your programs online: OPM vs. OPE
Many of today’s higher education leaders recognize they need help to launch and grow their online programs and certificates. That’s why they’ve historically turned to private sector companies. The two most common types of providers and models include:
- OPM company: Offer a full suite of turnkey services to help institutions rapidly bring programs online in return for a sizeable share of the tuition over a set period of time.
- OPE company: Offer unbundled, fixed-fee services to bolster a school’s internal online program efforts.
Online program enablement companies differ from their online program management counterparts in several ways, including the types of services offered and the programs supported. Most notably, OPEs do not rely on revenue-share agreements to fund the partnership. Due to this, OPEs are an ideal partnership option for schools to maintain the overall health of their institution and own the future of their online programs. This is because the institution is able to build internal capacity and intelligence that can be leveraged across the organization and programs to improve marketing, enrollment and support services.
6 reasons OPMs can hurt schools more in the long run
One of the primary reasons online program management companies appear attractive is that, under a revenue-share model, schools can largely bypass the upfront costs required to quickly launch a new online program. While this partnership model worked well when competition in the online space was smaller, it is now proving to have big risks and long-term limitations for institutions. These include:
- Long-term, restrictive contracts that are difficult to terminate. Most OPM contracts are between five and ten years and there are limited options for institutions when enrollment objectives aren’t met.
- Complete lack of transparency around performance. Due to the nature of revenue share contracts, the online program management company has no incentive to share strategies and data (especially in marketing and admissions). This prevents the school from learning the operational and analytical nuances of operating at scale and understanding why certain decisions are made.
- Conflicting objectives. OPMs typically focus their efforts on specific programmatic offerings with the highest profit margin and are highly selective in what they are willing to support, which may not align with an institution’s mission and needs. In addition, some tactics OPMs use are in direct competition with tactics the institution is already employing to recruit students for non-OPM supported programs.
- No development of internal online infrastructure. OPMs operate in a very closed, “black-box” manner. Strategies are not shared with the school and technology benefits are only realized by the OPM. When the relationship ends, schools are left without the capabilities, expertise and recruiting pipeline, as well as the data, insights or knowledge of what worked or what it took to launch their online programs and grow their enrollments.
- Lack of control around decisions and strategies. In a revenue-share agreement with an OPM, the company often has ultimate decision-making authority on non-academic processes. This can cause friction with faculty and leave schools with no way to intervene.
- Less revenue generation over the long term. While OPMs help schools see revenue right away as enrollments grow, revenue-share agreements eat away at revenue over time. OPMs often collect more than 50 percent of revenue over the course of several years.
A better alternative for long-term online course and program growth
Although fee-for-service OPE partnerships require schools to invest in the upfront costs of launching online offerings, they’re potentially the best option for schools wanting to own the future of their online programs and transform the institution. By not sharing revenue with a company in exchange for investment, the institution is able to fully control their online programs and enjoy the following benefits:
- Complete transparency and development of in-house capabilities. With an OPE, incentives are aligned so there can be open, strategic conversations around what it takes to successfully implement marketing, admissions and enrollment strategies.
- Full control over decision making and strategies. Institutions have control over their investments, as well as branding and messaging, as there’s less reliance on the “black box” paid media tactics of OPMs to drive leads.
- Marketing investments benefit the entire institution. Unlike the targeted programmatic marketing initiatives of an OPM, the partnership with an OPE is designed to comprehensively enhance the branding and positioning of the school and deliver improved visibility of the institution while giving the marketing department greater insight into key data and metrics.
- Alignment around institutional objectives. OPEs don’t need to recover investment costs and can therefore look at the health of the entire university, not just an individual program’s health. This means the institution can launch and grow whichever programs or courses it desires.
- More revenue captured over time. With an OPE relationship, once an online program is launched, the school retains all of the revenue generated – and ultimately, a greater share of the net proceeds. Framed differently, instead of giving away 50 percent of tuition revenue that’s generated in an OPM agreement, schools can realize the benefits of scale and invest that money back into improving their courses and programs or other key strategies and initiatives.
5 steps to address concerns and plan for a successful OPE partnership
If your institution wants to control the future of its online programs but needs help getting started, fixed-fee OPE partnerships may be the answer. However, since OPE partners don’t invest their own capital in programs and courses, your school will need to fund that upfront.
Below are five recommendations for ways you can manage the process and relationship to enjoy higher ROI on your online offerings over the long run:
- Consider your school’s entire financial picture. Leaders should create a long-term financial model that compares options. Determine the maximum acquisition cost the institution can accept for a new enrollment and make sure all marketing, admissions and technology investments fall under that amount. Understand that a fee-for-service model involves investing up to 20-25 percent of revenue, but the school should keep the remaining 75 percent to cover other costs and achieve returns, which allows for reinvesting those returns into further scaling online programs.
- Research and talk openly with OPE providers. Find an OPE partner that has successfully launched and grown online programs for many schools. Ensure that they’re willing to build long-term, sustainable financial models that support objectives within the available budget. If you want to bring certain components in-house over time, evaluate how nimble the company could be in helping you do that.
- Identify available funding. Evaluate new online programs through an investment lens and consider the return on investment for the program, but also the impact to the overall institution. Potentially look to donors who might be online education proponents and demonstrate to them the benefits to the institution. Consider investing recent COVID-19 relief funding allocations into building and enhancing online learning experiences.
- Understand your long-term vision for online learning offerings. Determine which services to bring in-house and build internal capacity in, and which ones to outsource. There are certain areas, like marketing and recruiting, that are more cost effective to outsource due to the specialization and skills necessary to keep up with the shifting market. Determine how you gain the benefit of knowledge transfer and where to build internal capacity.
- Start slow and grow. Begin an OPE partnership with programs that have market relevance. Build a five-year plan and look at performance and success from that perspective. Understand that breaking even is a two- to three-year proposition. But once you reach that point, you can start to accelerate into real levels of profitability.
Investing in the future means investing in your internal online infrastructure
Most faculty and administrators now acknowledge how essential online learning options are to long-term success. However, building a long-term strategy is complex, the market is shifting and they want to own and control the future of these offerings.
The revenue-share OPM model should be seriously considered against the long-term compatibility with schools’ long-term goals. To avoid being overly bound to the interests of an online program management company, schools must learn to deploy and support their online programs in-house and augment them through partnerships where they retain control and achieve organizational evolution. An OPE provider like Collegis Education can help schools successfully own the future of their online courses and programs.
Learn more about the support we offer by visiting our Online Program Enablement page.