The Four Problems with OPMs

Online Program Managers were an intelligent solution to a big problem–how could serious universities compete online in a world dominated by for-profit schools? Though no longer the right solution, OPMs address a real and serious disconnect.

A Quick History of OPMs

Since with the widespread adoption of the Internet in the mid-1990s (think: AOL disks in your mailbox), the web economy has disrupted nearly every industry…but not, with very few exceptions, the education sector. A small cadre of early adopter institutions–notably Thomas Edison State College–did offer Internet-enabled education, though the technology was lacking and participation rates were low.

Eventually, for-profit universities–many of which are no longer in operation–adopted online delivery as a way to cut their own costs and maximize shareholder wealth, typically at the expense of student outcomes and graduation rates. Despite the poor results, it became clear that certain advantages of online learning appealed to many, as a way to access otherwise-unavailable content or to accommodate a busy schedule.

Bisk Education was the first Online Program Manager (OPM); it partnered with a few not-for-profit universities to help them create market-ready online degree programs. Other OPMs followed, generally working with legitimate, but not particularly prestigious, not-for-profit institutions. Their programs were, with a few notable exceptions, modestly successful. But they failed to live up to the hype that accompanied their launches.

In 2007, John Katzman founded 2U (which was initially called 2tor) seeking to prove that great schools could develop online programs of the same quality as their classroom programs. And he did—with USC, Georgetown, UNC/Chapel Hill, and other prestigious schools. Many more schools, and OPMs, followed suit. There are now 45 OPMs working with hundreds of universities.

Lowering Risk & Cost

In the beginning stages, OPMs faced the uphill battle of providing online students with services on par with what they would receive on campus. But there were huge risks to consider:

Financial – Launching an online program was expensive. The instructional, technology, and marketing costs could easily total $20 million or more.

Educational – There was a legitimate concern about whether the online educational experience would be on par with the traditional campus experience. Learning design and implementation had to meet a high bar.

Operational – An online program raised a host of operational questions and concerns.

Reputational – Perhaps the greatest unease stemmed from the understandable concerns about risks to the university’s reputation. Would online education be perceived as second-rate? Would key constituencies – alumni, foundations, hiring corporations – see an entry into the online world as a symptom of institutional weakness?

At An Expense

Given these unknowns (that are not nearly as mysterious today), OPMs developed a creative economic model: they would assume the financial risk in return for 60-80% of tuition revenue for 5-10 years. The pitch was appealing: the OPM only succeeded if the program succeeded.

For the first few years of the online era, this model made considerable sense. The OPMs invested in expensive proprietary technologies and quickly learned what worked – and what didn’t – to attract qualified students. The capital investment in technology was paid off and the cost to recruit a student dropped significantly.

But OPMs have evolved; no longer the solution, they’re actually a huge part of the problem.

Problem 1: Expense

The cost of the technology and services to build and run great online programs have dropped, but most OPMs still expect schools to part with 50%-65% of tuition.

High tuition is a critical problem in higher education, and OPMs make it worse. If you work with a traditional OPM, your students will pay $20,000 to $40,000 in loan repayments to cover its profit. It is increasingly hard to justify imposing that burden on your students.

Further, that cost locks you into a long-term competitive disadvantage. After all, schools that find ways to go online at lower costs will be able to invest more in great people and compelling programs, and to reduce tuition. That will make marketing your more expensive program harder. Your rankings could potentially drop given the role of value — academic quality relative to cost — as a criterion.

One part of that cost that’s not immediately obvious: typically, an OPM’s contract with the university allows it to continue sharing tuition revenue for several years after the relationship ends. That poison tail makes it very hard to end a contract, since the years following termination will be extraordinarily hard.

Problem 2: Rigidity

Ideally, the investment a university makes in online programs will benefit its on-campus programs; it will help improve recruiting, program design, support, technology, and placement. Traditional OPMs operate in a silo, however, neither taking advantage of nor augmenting the school’s capabilities.

This is not simply a waste of time and money. The duplication of efforts creates confusion for prospective and enrolled students. Moreover, the silo-ization makes it hard for schools to offer students the chance to take any course or semester in either modality. Instead of moving towards a more agile future, the OPM structure reinforces rigidity, putting off students that opt for more agile institutions.

Problem 3: Risk

A traditional OPM invests its marketing dollars where it can make the greatest return; in other words, on the programs that are least selective and most expensive. If it discovers that it can steer a student elsewhere, with less expense or more revenue, your enrollment will suffer. Given that online programs are increasingly core to your mission, working with an OPM means adding existential risk.

A more subtle risk is when a traditional OPM represents schools in different parts of the country; it will maximize profit by steering students in each region to their nearest client. While it might present this as a virtue (“You’re best able to service students in the region.”), this kind of gerrymandering cuts the OPMs marketing costs, while making it impossible for you to grow your school’s reach demographically or geographically. And the more clients the OPM has, the smaller the box it’s going to try to put you in.

Problem 4: Cherry-Picking

Traditional OPMs make their money by taking more than half of tuition revenue, so by definition, they’ll cherry-pick only those programs with the highest growth potential. By contrast, Noodle Partners is able to work with a wider range of online programs, including those with lower demand and, consequently, smaller growth potential.

A Necessary Evil

OPMs have served a critical need in bringing schools online. Today, a university has to grit its teeth to trade their cost, rigidity, and risk for a quicker entrance. There must be a better way…