OPMs are a Subset of a Bigger Market

We are seeing a tremendous surge in interest regarding Online Program Management (OPM) companies. Certainly many of the major higher education news outlets are running stories on them and many analyst firms are publishing white papers. That’s a sign that others who pay attention to this space are hearing…something. But it’s not a strong signal by itself.

In our own work, we are definitely hearing more interest in OPMs, and we are also hearing from OPM companies (and OPM-like companies) that there is a pick-up in incoming requests from universities. For example, we had an opportunity to facilitate an institution-wide approach at UCLA to vet and pre-qualify OPM vendors as individual colleges determine their online strategy. There was a pretty robust and diverse range of responses. Equally importantly, the pre-qualification approach indicates a sense that different schools and other stakeholder groups within large universities or systems may have different needs.

You can see this as well in Open SUNY’s system-wide Request for Information (RFI). Here is one of the largest university systems in the country, and they are essentially casting a wide net, asking, “What do you think we should know about this space in order to serve our 64 very different campuses with a wide range of needs, while also serving the needs of the system as a whole?”

That wide open RFI from SUNY really speaks to the good news/bad news of the current state of the OPM market. The good news is that there is an increasingly broad range of options for colleges—or schools within those colleges—with different needs. The bad news is that the market is such a mess right now that it’s hard for colleges to find the right vendors to talk to and hard for vendors to find potential customers who need what they’re offering.

A lot of the analysis we’ve seen so far has been variations on a theme: “There’s a lot of [mostly unspecified] innovation in the the OPM market. For example, revenue sharing isn’t the only financial model anymore!”

While there is indeed increasing variation in the OPM space—only some of which we would call genuine “innovation”—we believe the expanding range of financing options is the tip of the iceberg. The deeper cause of the current chaos in the market is largely the result of a more profound broadening out of demand. This, in turn, is driven by a tectonic shift in how universities go about fulfilling their core mission of enabling student success. As new change management needs emerge, we don’t yet have names for the solution categories that meet those needs. But since the new solutions share elements with solutions to online program management problems, everything is getting lumped under the heading of “OPM.”

There are several factors that are major contributors to the current rush to by vendors to call themselves OPMs:

1. The variation between kinds of programs that universities are looking to launch is significant and increasing. As a result, different OPM vendors are specializing in different kinds of programs.
2. More universities are making fine-grained choices about which aspects of their online programs they want to outsource to a specialist, which aspects they want to pay a consultant to help them get started or improve, and which aspects they believe they can do themselves. This broadening out of customer choices is creating further variability in in OPM business models and OPM-like services offered by an increasingly wide range of companies.
3. As the OPM business disaggregates, universities are increasingly recognizing that certain functions that OPMs perform, like recruiting students who are likely to be successful in a program, redesigning courses to maximize student success, providing early interventions to promote student success, and working with employers to help with career readiness and post-degree employment are all services that might be useful for improving the success of their traditional programs.

The common theme with all three factors is that customers who think they are all looking for “OPMs” are, in fact, trying to solve a wide range of different problems. So wide a range, in fact, that the term “OPM” is on the verge of becoming meaningless.

We believe that all of these needs belong under a larger umbrella that we call “Digital Enablement Services.” In general, colleges and universities are beginning to move from having a philosophical commitment to student success toward operational excellence at enabling student success. The idea here is to use modern tools—and more importantly, the educational practices and organizational processes enabled by those tools—to do a better job of making sure that students don’t fall through the cracks.

It’s easiest for universities to see the need to improve their operational excellence when they are launching a new, (hopefully) revenue-generating and net cashflow-positive degree or certificate programs. They are making a substantial upfront financial investment in the hope that future tuition will make that investment pay off for the university as well as for the students. To do this, they need to keep students happy enough that they stay in the program, even as the university loses the traditional face-to-face touchpoints that they have relied on to engage with their students and have to figure out how to build digital equivalents. It can feel like a scary (and potentially career-ending) undertaking. This is why 2U—a publicly traded OPM with a $3.9 billion valuation—made a smart branding choice with their tag line, “No back row.”1 It is also why universities have been willing to accept revenue share arrangements. They reduce the up-front cost of the program—sometimes to the point of making an otherwise unaffordable program possible—and shift some of the risk to the vendor in return for a share of new revenues and some sharing of control over certain aspects of the program design and management.

There is increasing interest from universities to step away from revenue sharing agreements and be more selective in how they use external vendors to plan, launch, and manage new online programs. That’s a real trend, though it is being somewhat hyped by shallow market coverage and some industry players who are looking to differentiate themselves against more established competitors. As far as we can tell, there is growth across the different models, particularly since the range of program types universities are looking to offer increasingly have different kinds of risk profiles.

Think about the differences in launching and running the following different types of programs: (1) a largely synchronous online nursing degree, including a required face-to-face practicum at a hospital, (2) a mostly self-paced, competency-based MBA, (3) a “micro-masters” degree in cyber-security, and (4) a code academy. Think about what it would take to design and launch each type of program, how much new expertise each would require of the university, how much support the students would need in each case, how hard it would be to recruit students, to track them in the existing ERP system, and so on.

Given the differences in these challenges, there should be demand for significant variety in OPM services with different sweet spots. OPMs with different models do end up competing head-to-head in the market sometimes, but that’s partly because customers don’t yet have a good way of sorting out what kinds of characteristics are most important to support their specific goals. In its current state, the market isn’t efficient at enabling customers and vendors to determine if there’s a good fit.

The chaos we are seeing now is nothing compared to what’s coming. Universities are beginning to see needs for OPM-like services elsewhere. As budgets continue to tighten and pressure to improve outcomes continues to rise on public colleges and universities, academic leaders are increasingly realizing that improving degree completion and decreasing time to degree are good for both the student and the financial health of the institution. At the same time, changing student expectations are putting pressure on high-end private colleges and universities to recognize that the formula which has made them successful for the past century is not guaranteed to bring them top students and generous alumni in the next one. This has the potential to be a Pandora’s box. Where is the line for defining an OPM? And how can universities find vendors with the kinds of OPM-like services and business models that are appropriate for helping solve their particular problem?

Over the next months, we at e-Literate are going to try to put some definition around this market, first by defining the boundaries of the OPM solution category—and the variation within those boundaries—and then by naming and defining other, similar-looking solution categories that solve different problems. We will be blogging about it and releasing at least one report about it as well.

Stay tuned.