Why Do Universities Outsource Online Learning?

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  • Universities are increasingly turning to outside vendors to manage online programs.
  • These companies invest millions and receive a portion of tuition revenue in return.
  • Such partnerships benefit universities, but there are risks involved as well.
  • The future of this model remains up for debate.

Millions of students across the United States and around the world are taking online courses at high-profile schools, such as Harvard, MIT, Stanford, Columbia, and the University of Chicago. But most of them aren't familiar with such names as 2U, Coursera, Pearson, Wiley, Academic Partnerships, Education To Go, and Desire2Learn — the businesses that design, market, and manage those programs.

A growing number of universities, including the elites, are fashioning partnerships with these online program management companies, or OPMs. But why are colleges outsourcing this key academic function? What are the benefits and risks to the institutions and their students? And where is online learning headed?

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University Partnerships With OPMs on the Rise

Over the past decade, online learning has revolutionized higher education, and universities have increasingly turned to outside vendors to create, promote, and run these programs.

According to education data company HolonIQ, the number of university partnerships with OPMs, bootcamps, and similar programs grew at an average rate of around 29% annually from 2010 to 2019.

Then the COVID-19 pandemic accelerated that pace as universities scrambled to shift their programs online, and these partnerships grew almost 36% from 2019 to 2020. During the first half of 2020 alone, 51 U.S. colleges signed new contracts with OPMs.

At first glance, it makes little sense. Why would universities need to outsource online education to a third party? They're educators, after all, and most have embraced online learning in some form for years. They employ legions of IT experts to manage the technological aspects. And wealthy institutions, like Harvard and MIT, have almost limitless resources to invest in infrastructure and manpower.

Outsourcing Costs to Corporate Partners

Universities seek partners for several reasons. One is capital. Designing, launching, and maintaining online programs can be expensive. Even wealthy institutions may lack sufficient funding, especially when budgets are strained, as they were during the pandemic-induced recession.

Chip Paucek, CEO of 2U, said his company typically spends $5-$10 million in the first few years of an online partnership.

What's more, university budgets tend to be decentralized, meaning the various schools and units within it manage their own funds. A massive university endowment may suggest limitless resources, but the school of education within a larger university looking to launch a teacher certification program might not be able to make the initial investment.

In a 2019 study of more than 70 university-OPM partnerships, over half involved tuition revenue sharing.

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In this sense, OPMs serve as venture capitalists. They front the money, betting on a hefty return on their investment and assuming the risk of program failure.

And just what is that return on investment? An exhaustive study by The Century Foundation of more than 70 university-OPM contracts found that 53% of partnerships awarded the OPM a share of tuition revenue. That share was typically half but ranged as high as 80%.

"The question is, is it worth giving up 80% of tuition revenue to gain 20%?" said Brad Cohen in an interview with BestColleges. Cohen is senior vice provost for instructional innovation and chief strategy and innovation officer at Ohio University, which works with Pearson. "Some universities are willing to sign almost any agreement."

OPMs Are Flexible and Responsive to Changing Trends

Another advantage OPMs provide is course design and learning management. Institutions relying on legacy platforms encounter severe limitations compared to what modern OPM systems offer: more engaging content, a robust user experience design, better collaboration and assessment features, and a range of customized options based on learner preferences. Universities can't compete for today's students with yesterday's tools.

A third benefit is speed. An OPM can use its existing framework to scale university programs quicker than the institution itself could. The "time-to-market" factor was critical during the early days of the pandemic.

Then there's the range of marketing and recruitment activities, including call centers, online chat bots, and student coaching and retention services.

“OPMS are fronting the bill for advertising.” — Ben Kennedy, CEO of Kennedy & Company

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"Online students find online programs online," said Ben Kennedy, founder and CEO of Kennedy & Company, a firm that brokers deals between OPMs and universities, in an interview with BestColleges. "And OPMs are efficient at using online ads to generate new enrollments for schools for the least amount of money possible. OPMs are fronting the bill for advertising while being uncertain about the number of students who might enroll. It could cost $4,000-$6,000 to recruit one student, especially in the first year."

University contracts with OPMs can be based on tuition revenue sharing, Kennedy noted, or can take a fee-for-services approach whereby institutions choose specific services the OPM will provide.

Caitlin Kanaly, senior manager of corporate communications at 2U, shared in an email to BestColleges that 2U provides these critical support services so universities can focus on the core function of teaching and learning.

"What we do is help them find the right student for the right program through our marketing operation, we help them bring to life their courses in the online format through our science-supported learning design and development approach and 24/7 learning and teaching platform, and we support students and faculty in various ways throughout the entire lifecycle of the program."

Will Concern for Profits Trump Quality of Education?

While OPMs assume some risk related to investment returns, universities contend with risks of their own.

The Century Foundation study paints a distressing picture of these partnerships, specifically in the context of public universities. Conflict arises, the study suggests, when nonprofit educational aims meet profit-maximizing goals of business.

"Online higher education programs are essentially wolves in sheep's clothing," said Stephanie Hall, coauthor of the study. "While these courses are being offered under the guise of a public institution, in reality they are being run — often from top to bottom — by private, for-profit companies. This presents real and profound risks — not only for students but also for the institution itself, whose hands are often tied as a result of their contract with an OPM."

The study claims OPM services are "intertwined with the actual teaching and learning," which undermines the quality and value of the education. Because OPMs play a role in developing and delivering these programs, "the companies also have an incentive and the ability to cut production costs and, potentially, quality."

“[OPMs] may prioritize profit over the interests of online students.” — Margaret Mattes, The Century Foundation

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"Driven by the desire and need to make money for investors or owners, those to whom executives are held accountable," the study concludes, "these companies may prioritize profit over the interests of online students, to whom they owe no loyalty, financial or otherwise."

And students are none the wiser.

"Many students don't realize their programs have been outsourced to a for-profit company they have probably never heard of," said Clare McCann, deputy director for federal higher education policy at New America.

Faculty face threats as well. In cases where OPMs design courses, it can result in "the erosion of institutional control of academic missions," notes an Educause white paper. The OPM influence blurs the lines around academic freedom, program direction, and ownership of intellectual property, the paper claims, jeopardizing quality in the process.

Universities Risk Tainted Reputations

Perhaps the most significant risk to universities is to their reputation. Questions of quality and lax admissions criteria have traditionally dogged online learning.

But for colleges with reputations built on selectivity and academic rigor, any hint of relaxed standards could erode brand equity. At the most basic level, there's the matter of who or what is responsible for the academic product.

For colleges with reputations built on selectivity and academic rigor, any hint of relaxed standards could erode brand equity.

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"If [the OPM Academic Partnerships] recruits a student, takes the lead in designing their distance learning program, supplies the online platform upon which they interact, and earns half or more of their tuition," The Century Foundation study asks, "should that student's degree or certificate say the University of Texas, or AP?"

Ben Kennedy wonders when an elite university's sacred cow — the traditional undergraduate program — might be offered fully online.

"The big question out there is how might an online program erode the exclusivity of the on-ground program," he said. "When will an institution that has a really low admission rate — less than 10% — offer a fully authentic undergraduate degree completely online? Would the admissions process be equally selective? Which highly selective institution will be the first to put its undergraduate program on the block? For now, they're all tinkering at the margins."

Yet Brad Cohen believes expanding access is a virtue, even for elite schools.

"[Arizona State University president] Michael Crow challenged the idea that excellence is measured by exclusivity," he said. "There's been an enormous culture shift acknowledging that exclusivity in any form is problematic."

What Lies Ahead for OPM Partnerships?

As universities continue to learn from their relationships with OPM partners, will they eventually jettison outside providers and control all these functions in-house?

Robert Ubell, vice dean emeritus of online learning at New York University's Tandon School of Engineering, thinks so.

"OPMs are merely a stopgap therapy," he wrote in an EdSurge column. "What is needed now is a durable, self-care remedy."

Kennedy says his firm's clients already are moving in that direction.

"The trend we're seeing is mature online programs that have used OPMs for five years or so are now actively taking some or all activities in-house," he said.

Cohen, however, believes OPMs are here to stay.

"I find it difficult to imagine a future where OPMs aren't helping universities in this space," he said. "Even universities with deep pockets aren't about to throw millions down the drain on a bet. OPMs have capability that is difficult to match in-house without a significant multi-year investment in building capacity. By then, you've lost the market. It's not a value proposition you can ignore."

Feature Image: Bambu Productions / DigitalVision / Getty Images

BestColleges.com is an advertising-supported site. Featured or trusted partner programs and all school search, finder, or match results are for schools that compensate us. This compensation does not influence our school rankings, resource guides, or other editorially-independent information published on this site.

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