OPMs Are Under Fire. Can Colleges and Universities Live Without Them?

Online program managers, known as OPMs, have played a significant role in higher education over the past decade and a half. They’ve offered services, including marketing and student recruitment, student retention and technology-related support, for institutions transitioning academic programs into a distance learning format. 

At least 550 institutions have worked with an OPM as of July 2021, according to an April 2022 Government Accountability Office report. 

However, the state of OPMs is in flux. The uncertainty has been brought on by consolidation, institutions opting to build out in-house services and a growing push for regulations.

History of OPMs

Dr. Michael Graham, vice president for operations and technology at National Louis University in Illinois, is quite knowledgeable about OPMs. He looked at institutional satisfaction with OPMs as part of his doctoral studies and has managed an OPM partnership from the institutional side. OPMs’ roots started in the for-profit industry. 

“A lot of the habits, in terms of marketing and enrollment, really did produce results,” he said of the University of Phoenix. “There was a great need for marketing and enrollment expertise in higher education. Running the for-profit institution playbook of really developing a marketing and enrollment strategy and then figuring out how to pay for it with the revenue shares is where the whole industry began.” 

Dr. Kelly Otter, dean of Georgetown University’s School of Continuing Studies in Washington, D.C., explained OPMs started popping up about 15 years ago, providing higher education partners services that many institutions didn’t possess. Examples she pointed to included instructional design support, marketing and enrollment. 

Utility of OPMs

OPMs are now largely being used by two distinct types of institutions. 

1. Smaller institutions that are trying to grow new programs but don’t have the funds to do so are partnering with OPMs to handle marketing, enrollment and occasionally instructional design.

Graham said many institutions don’t have expertise in online modalities. 

“Quality is something I think is now paramount,” he said of instructional design. “The student experience in the online courses is something that’s really important.” 

2. Larger institutions are also partnering with OPMs more frequently to offload responsibilities from their staff, which allows them to shift their focus elsewhere. 

“A lot of the R1s are still on the ground primarily, but they want to build a brand online,” said Graham. “They’re not going to make the investment, so they’re buying those services from external vendors.” 

Otter said out of all the OPM partnerships she manages, no two agreements are the same. 

Andrea Carroll-Glover’s perspective of OPMs is unique, considering she’s been on both sides of the equation. For years, she held leadership positions at private nonprofit and for-profit institutions, including most recently as vice provost for online strategy and programs and chief online officer at Saint Mary’s University of Minnesota. She’s now vice president and senior consultant at Ruffalo Noel Levitz, a higher education consulting firm. 

Saint Mary’s used an OPM during Carroll-Glover’s time there to help expand its online graduate portfolio. 

“It helped step into that space. It helped design, build and deliver online programs, as well as a support system,” she said. “It’s a different business model from the traditional operating methodology. That involves the need for change management.” 

Growing Regulations 

“There have been concerns on the part of the federal government, and not without good reason, because there have been some high-profile highly publicized examples of very poor decisions made on behalf of institutions and their OPMs,” Otter said, pointing to the University of Southern California. 

Carroll-Glover agreed. “There’s been a cry for transparency, not only from regulators but from within the industry,” Carroll-Glover said.

The U.S. Department of Education sent shockwaves through the OPM world earlier this year when it asserted they are subject to third-party servicer requirements because they often perform functions related to the administration of Title IV programs. 

“Entities performing the functions of student recruiting and retention, the provision of software products and services involving Title IV administration activities, and the provision of educational content and instruction are defined as third-party servicers,” a February dear colleague letter explained. “As such, the institutions that contract with these entities are subject to reporting requirements with respect to the entities, and the entities themselves are subject to annual non-federal audits of the Title IV-relevant functions they perform.” 

Importantly, the guidance in the letter will not go into effect until September 1, 2023. 

“It’s primarily around curtailing the revenue-share OPMs,” Graham said of the letter. “The ship may have already sailed in terms of the DOE but if there’s a way to keep the revenue-shares around, I have no issue with them having a very strong look at the contracts. Let someone in the accrediting or DOE have a sign-off on the contracts, but I’m not sure that it’s even possible at this point because I think the anti-revenue share has taken over in the country.” 

Wiley said it shares the department’s goals of providing transparency and quality education to students. 

“We have actively engaged in the Department’s regulatory processes over the last several months by providing public comments, as well as recommendations, to assist the Department in its efforts to achieve these goals,” the spokesperson said.  

The move prompted 2U to file a lawsuit asking the department to rescind its guidance, according to The Washington Post.

At the end of the day, Otter said, regulations for OPMs should come down to the question of what’s best for students. 

Revenue Share vs. Fee-For-Services

Most OPM partnerships fall into two categories—revenue share and fee-for-services. Graham added that John Katzman, who founded the early OPM company 2U, was visionary in his shaping of the industry. Katzman also founded The Noodle Companies, the formation of which Graham attributed to the criticism of revenue share OPMs and their relation to the quality of students and increased tuition rates.

“Know your business. Know what you’re really looking to accomplish because that’s going to help in the selection between a revenue share and fee-for-service,” Graham said. 

Otter explained revenue shares can help colleges and universities avoid risky moves with institutional resources. 

“Within higher education, we simply don’t have a business model that is as efficient and optimized as these for-profits,” she said. “By partnering with a revenue share, that protects us financially.”

Our learners are increasingly in need of hybrid and online models. These OPMs are marking a pivotal moment within higher education, which is signaling change.

Otter has shifted her institution to a hybrid model. When she first partnered with an OPM it was to gain insight into how high-quality online programs work. From there, she determined what the institution wanted to invest in internally versus allowing a partner to handle it because they will do so in a cost-effective way. 

“We’ve built out an instructional design team; we had a marketing team but built them out further,” said Otter. “We started to think more strategically about the separate areas of expertise.”

Wiley University Services is one such OPM provider. It helps institutions with customized offerings, like education technology, instructional design and faculty and student support. 

“These resources allow institutions to reach, connect and support qualified students in the institution’s own academic programs from enrollment to completion,” a company spokesperson said. 

Wiley has approximately 70 nonprofit client institutions worldwide and supports more than 900 programs, many of which are regional state universities and small liberal arts colleges. According to the company, Wiley has changed with the times to meet the evolving needs of institutions, specifically through shorter contract lengths and lower revenue share percentages. 

“We have also long offered flexible contract models, such as a fee-for-service option, and now support all degree levels and learning modalities,” said a company spokesperson. 

Circumstantial Negativity 

Graham noted revenue shares have gotten a bad reputation. 

“They’ve been very secretive about their operation. They’ve not shared data willingly. They often don’t engage with the people they’re partnering with,” he said. 

On the other hand, he cautioned that several of the studies that have dominated the revenue share discourse were flawed. He said the studies were completed using publicly available data but weren’t reflective of entire contracts. The studies showed the millions of dollars the OPMs made throughout the contracts but not the initial investments that were made. 

“What it’s been translated into is that the OPM is somehow forcing the institution to raise the tuition…forcing the institution to take unqualified students,” he said. “I think a lot of that is anecdotal evidence, not evidence of what’s happening in higher education as a whole.” 

Will it be the same as it is today? I think not…. there will be a number of regulatory changes that will impact the complexion of the OPM industry. 

Anecdotally from Graham’s perspective, he said the OPMs he vetted for a possible partnership with his institution all requested that tuition be lowered. 

“OPMs are built on a volume. They don’t make money if you have fewer students and you’re charging more,” said Graham. “They want a program that’s a quality program that they can register a lot of students that’s not expensive.” 

As for the quality of students, he said his institution oversaw the admissions process, which meant they couldn’t be forced to take students they didn’t want. 

What Institutions Should Know

Otter noted OPM partnerships once involved long agreements, approximately 10 years, and 50-50 revenue splits, but the terms are currently changing. 

“We’re becoming more savvy as negotiators,” she said. “The terms of contracts are evolving and shortening.” 

Wiley suggests that institutions gather input from key institutional stakeholders and develop a clear and collaborative vision. 

“Roles and responsibilities of the engagement must also be clearly defined and communicated up front,” the spokesperson said. “It’s important to preserve institutional autonomy in decision-making, especially for admissions criteria and decisions, the awarding and distribution of financial aid, academic offerings and instruction.” 

Carroll-Glover feels it’s important for institutions to do their due diligence upfront by assessing their internal capabilities and looking closely at market opportunities. 

“Vetting out any OPM partners that one may be considering and making sure there’s a good fit with your mission, vision and values is really important,” said Carroll-Glover. 

The study Graham conducted during his doctoral studies found the majority of the roughly 300 respondents were neutral to very satisfied with their OPM partnerships. 

“There was not a very large group of respondents that were dissatisfied,” he said. 

He noted that OPMs are businesses and are out to get every dime they can, but that doesn’t mean they don’t have a role to play. Institutions, he said, should evaluate the utility of an OPM based on whether it can benefit the institution and help provide students with a quality education. 

“You have to have complete control of them. You have to have a very strong contract. You have to have a very strong relationship,” he said. He also advised institutions to build transparency into their contracts so that both partners can see what’s going on. 

The biggest mistake Otter sees among institutions that partner with OPMs is that they turn over the keys to the car and don’t manage the partnership.  

“The institution should always maintain control of the admissions standards, determining who is admitted and making certain that the students are being communicated the same message from the partner team as they’d hear from the school team,” she said. “There needs to be close alignment.” 

Institutions Building In-House Services 

Many institutions, Graham predicts, will eventually bring the types of services OPMs offer in-house. Increasing institutional efficiency in marketing and enrollment will likely drive the trend. 

“Higher ed is increasingly reliant on external partnerships, while completely mistrusting the partnerships that they’re using,” he said. “I think the desire is always to go in-house. It’s whether you have the resources or the expertise to do it in-house.”

Carroll-Glover agreed. She said institutions are increasingly becoming more comfortable designing and delivering online programs. 

“They’re beginning to understand the nature of an online student, how they’re different and how to support them,” she said. 

Institutions that want to establish small programs and have the infrastructure to do so can likely manage everything in-house, Otter said. However, institutions that aim to enroll high numbers of students in in-demand programs might find it difficult to differentiate themselves. 

“It becomes quite expensive and requires a high level of expertise,” said Carroll-Glover. 

She cautioned that internal investment can be tricky and that institutions need to take a close look at their internal capabilities before severing OPM partnerships. 

“It’s a multi-year plan that they need to strategically fold into their institution and funds as they consider stepping away from partnerships,” she said. 

Data and examples about institutions that have partnered with OPMs but have later developed their own models are scarce, she said. 

“I fear that without those examples institutions will be fearful to make a change and/or make a change and aren’t successful,” Carroll-Glover said, adding that a playbook of sorts needs to be developed.

Consolidation Among Players

“The OPM space has been undergoing tremendous change,” Carroll-Glover explained. 

She said increasing institutional savviness is contributing to the need for those in the OPM space to think differently about their services and products, which is leading to acquisitions, mergers and exits. 

OPMs are built on a volume. They don’t make money if you have fewer students and you’re charging more…. They want a program that’s a quality program that they can register a lot of students that’s not expensive.

She pointed to the close monitoring of the OPM space that Phil Hill & Associates does as proof that the market is changing. An April post on the firm’s On EdTech Blog noted that market valuations of publicly-traded OPM companies are dropping. “We still get a picture of a chaotic market that is not for the faint of heart, and one that is seeing consolidations and category changes, and these changes will continue,” the post noted. 

The Future of OPMs

The COVID-19 pandemic likely impacted the OPM space because many institutions looked for new ways to serve students online, for which many didn’t have the capacity. 

“COVID has changed everything,” said Otter. “It’s changed what they really want for the future and how online learning plays within their portfolio.” 

She anticipates institutions will continue to need support, which OPMs have consistently provided in recent years. 

“Will it be the same as it is today? I think not. I think there will be a number of regulatory changes that will impact the complexion of the OPM industry itself,” Otter said. “I imagine it will be more towards discrete fee-for-service types of services needed by institutions in certain areas.” 

Graham cautioned that many institutions are relying on the revenue share model to prop up enrollment at a time when institution after institution is closing. Taking an enrollment tool away, he said, is shortsighted. 

Otter agreed, “If that were to go away and we have to provide the upfront funding, that would put a lot of institutions in a very precarious position because they just don’t have the cash flow to pay for big-ticket items like marketing.” 

If the revenue share model eventually dies, Graham anticipates another model will take its place because the need for marketing and enrollment in higher education isn’t going away. 

On the other hand, although fee-for-service OPMs often stress that they aren’t incentivized to drive enrollment, institutions may start to reevaluate their utility if they aren’t performing well enough. 

“Their model may change as well because their costs probably aren’t going to be matched by their enrollment,” Graham said. “I think the whole industry is probably going to change. I just don’t know what that’s going to look like next.”

Otter added that institutional skepticism of OPMs goes hand in hand with skepticism about online learning. 

“They tend to be longstanding, old institutions that tend to have traditional, conservative elements. This whole field of marketing I would argue is quite new to education. It’s not new in other sectors,” she said. “We’re in a world now where higher education has to do the same. Our learners are increasingly in need of hybrid and online models. These OPMs are marking a pivotal moment within higher education, which is signaling change.”