The online program management industry is “on life support,” according to some experts who point to multiple shake-ups at some of the biggest players in the market.
Online program managers, better known as OPMs, made headlines over the summer with the sale, rebranding and subsequent layoffs at Pearson Online Learning Services, now known as Boundless Learning. While declining to give exact numbers to Inside Higher Ed, Boundless Learning CEO Kees Bol said the company laid off roughly 30 percent of the company “across all levels and functions” following the sale of its online services division. A Pearson representative declined to provide further comment beyond the company’s initial statement.
“We need to be financially successful, which required some steps to build foundation,” Bol said in an interview with Inside Higher Ed. “Because of that, we made changes of operating procedure, thinking through our portfolio and structure and size of the team executing on the partnerships.”
The move is indicative of a larger change happening within the market, which is rife with regulatory concerns, increased competition and an ever-evolving model, causing both universities and OPMs at large to reconsider what’s best for them.
“Schools have to ask themselves, ‘Is this the end of the OPM? Do I trust they will be around?’” said Phil Hill, a market analyst and ed-tech consultant with Phil Hill and Associates. “Right now, there’s a mind-set of how schools think of the market.”
A Shifting Landscape
OPMs have evolved over the last few years. Universities and colleges previously turned to these companies as a way to launch online programs in a revenue-sharing partnership, which allowed the institutions to save money up front and have a bit of a safety net, as the OPM also had a stake in the program’s success. Any revenue made in the programs is typically split between the OPM and institution.
That model has now changed, according to Ben Kennedy, managing partner of Kennedy and Company, a higher education consulting firm.
Almost all OPMs now offer à la carte options in addition to their bundled offerings, which could range from online course support to recruitment and counseling services.
“The smartest OPMs realize they have to have multiple facets to their offerings now and have to have good flexibility to meet new demands their clients have,” Kennedy said. “If you’re not there, I don’t think there’s much of a business with bundled shares. I see schools want to get out of them.”
Boundless Learning is not the only OPM in flux. 2U is shifting its model under the edX label, and Noodle similarly is distancing itself from the OPM label, instead calling itself an education platform. Wiley is in the process of restructuring.
“I see OPMs with revenue share being the best solution in many places; I see the value,” Hill said. “But as an outside observer … there is a big question if this is the end of the market.”
The market shift is causing both OPMs and higher education institutions to reconsider their relationships—and potential alternatives.
“If you’re a school on a revenue share with an OPM, you do have to ask a question not just about if the OPM will be around in 10 years, but will they want to do business with you in five years,” Kennedy said.
Rising Concerns—and Competition
The market has entered “dramatic times” over the last 18 months, according to Hill.
“This market is on life support right now,” he said.
A large factor is regulatory concerns. The Department of Education is reviewing its 2011 guidance on the bundled services agreement. The agreement currently allows OPMs as an exception to the ban on third parties engaged in recruiting and marketing efforts, since it is offered as a “bundle of services.” That could change, following a rule change by ED, although there is no timeline as to when that change will occur.
Kennedy said in roughly the last year, most of his clients have added a contingency clause, allowing contract changes should ED rule on the OPMs.
While higher education institutions are leaning away from bundled offerings, OPMs are also choosier about the institutions they work with.
“Schools will say, ‘We can get an OPM and not put any [up-front] investment dollars,’ and 10 years ago I would say, ‘Yeah, you could,’” Kennedy said. “But now I say, ‘They don’t want you anymore.’ The schools that want revenue share are the ones strapped for cash, and they’re the ones OPMs no longer want.”
There are three avenues an institution can take, according to James Sparkman, a partner at Alpha Education: do it yourself, pick à la carte options in a fee-for-service model or continue with revenue-sharing options. He said he has not seen an overwhelming number of institutions choose one option.
If an institution does choose to launch its own program, experts say it’s important to keep in mind the program is unlikely to balloon to the levels seen at Arizona State and Southern New Hampshire Universities. That’s because it costs millions of dollars for a program to grow to the levels seen at those institutions, Sparkman said.
“If you can build the talent in-house and have the expertise in-house, go for it, but most schools don’t,” he said. “People are anti–revenue share but then spend a few million, don’t get the results from their own money and realize you can lose your shirt if you’re not careful.”
Kennedy suggests that an institution—wanting to independently launch online offerings—lean into what makes it stand out in the increasingly crowded market.
“For a lot of our clients, we’re saying if you don’t pick the right and niche programs, it’s easy to lose a couple million quickly,” he said. “However, if you’re thoughtful of which programs, which niches, you can do successfully, there are good markets. But you have to know where your niche is and don’t go beyond that.”
What’s Next for the Industry
Boundless Learning plans to expand to other industries beyond higher education, according to Bol, who called one of their offerings a “branded marketplace.” It will serve as a technology platform that is integrated with both academic and nonacademic partners, though Bol did not disclose which industries Boundless is targeting.
“We can’t give specific names, but think of other organizations that have a lot of content, or lot of educational elements already, and are thinking of providing it to their current customer set or own employees,” he said. “A lot of the same needs that exist in the academic space exist there as well.”
Hill says while he understands the expansion, he is skeptical that the change will stick.
“Part of the knock on [the company], is, ‘Well, who are you? You have a different strategy every year,’” he said. “Are there markets outside of education that could be safer and more lucrative? Absolutely. With Boundless, it’s, do they actually mean it? Or are they just picking up something?”
Boundless’ shake-up could serve as a new model—or cautionary tale—for other OPMs.
Pearson and 2U are “two of the big heavyweights” that made changes, Kennedy said. “All the smaller OPMs are able to learn what didn’t go well with those two and adapt accordingly.”
Regardless of the form the OPMs take, each expert said they believe the demand is higher than ever for online programming.
“Schools continue to want to go online, continue to want to serve the adult market, and that shows no sign of slowing down,” Sparkman said. “Over all, in our opinion, schools will have to continue to move in that direction. The demand for schools to continue to explore—that is unabated. The issue is how they get there.”