The Eduventures Market Guide to Online Program Management (OPM) Executive Summary

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1 The Eduventures Market Guide to Online Program Management (OPM) Executive Summary

2 TABLE OF CONTENTS Executive Summary...1 About This Report...2 Definition of Online Program Management (OPM)...3 Industry Context...5 Online Gains Acceptance as Adult Participation Rises...5 Increased Competition...6 The Race for Revenue...6 Focused Media...7 The MOOC s Impact on OPM...8 The Online Program Management Business...9 Four Core Services and Ancillary Options...9 Buiding an Online Degree Program Versus Partnering...11 Marshalling the Resources and Know-How to Be Successful Online...11 Anatomy of the Full-Service OPM Partnership Model...12 The Revenue-Share Option...13 The Fee-For-Service Option...14 The OPM Providers...15 Counsel for Institutions Looking to Go/Grow Online...26 Building an Online Degree In-House Oers Some Key Benefits...27 To Renew or Not to Renew...27 Advice From Peer Institutions...27 Selecting an OPM Provider...29 Looking Ahead...29 Appendices...30 f f Appendix A: Research Methodology and Exclusions...30 f f Appendix B: OPM Providers and Partner Details...31 f f Appendix C: Evaluation Rubric for Evaluating OPM Providers...51

3 The Eduventures Market Guide to Online Program Management (OPM) By Scott H. Levine, Ph.D., Senior Consultant And Eric Bassett, Vice President And Practice Leader With Richard Garrett, Vice President And Principal Analyst December 2012 EXECUTIVE SUMMARY Higher education faces numerous challenges, including rising costs, calls for more accountability, increasing regulation, significant and ongoing reductions in state funding for public universities and colleges, and a rapidly rising cumulative student debt load of $1 trillion. Against this backdrop, a large and growing number of institutions are turning to online education to generate enrollments and revenues with good reason. Eduventures projects in its annual Online Higher Education Market Update that online remains one of the strongest growth areas in higher education. Many colleges and universities opt to partner with an Online Program Management (OPM) provider to move quickly and eectively into this increasingly competitive market. 1 Following are key findings of this research about OPM: Our research counts 200 to 300 U.S. institutions that have formally engaged with OPM providers, and we anticipate that 500 more will consider engaging in the next 12 to 24 months. The OPM market predominantly focuses on new graduate education programs at non-profit institutions, although options for undergraduate and proprietary education also exist. In many fields, the online market has become so crowded that marketing is increasingly decisive in driving enrollments, causing many institutions to seek OPM provider support. OPM providers can clearly help an institution accelerate online growth; however, the choice to partner or not should follow a clear delineation of growth strategy and objectives. A lack of capital to invest in growth is the primary driver of institutional OPM relationships, and it has resulted in revenue-sharing partnerships as the norm. 1 Please see the pages immediately following for Eduventures formal definition of Online Program Management.

4 Industrywide, the most typical revenue-share split appears to be 60:40, in favor of the OPM provider. However, we see a trend toward 50:50 as competition increases. For the same reason, fee-for-service arrangements will become more common. We have segmented the growing OPM provider landscape into four categories, as follows: 1. The Big 4 (now, technically, the Big 3 after the recent Pearson acquisition of EmbanetCompass) of larger, diversified providers 2. The Challengers, or seven firms that oer services to a wide array of institution types and seek scale 3. The Targeted Players, or seven organizations that oer services to targeted segments of the higher-education market 4. The Vertical Specialists, or two companies that define their business according to academic/professional discipline namely, healthcare Despite the high stakes implicit in OPM contracts, the business has evolved informally; few institutions have used RFP processes to identify partners although this is changing. We sought examples of partnerships that were either not renewed or (more rarely) terminated midcontract, and our conclusion is that the conditions that led to a partnership in the first place tend to persist, implying that renewal is the most likely outcome. On the other hand, more institutions and providers are questioning the OPM business model in terms of the dependence it fosters in institutions. As a result, while revenue-sharing arrangements will remain the norm, we expect to see more options for shorter contract terms and fee-for-service contracts going forward. The market has seen two major acquisitions in the past two months; we project more new acquisition activity, as well as new entrants, in the years ahead. ABOUT THIS REPORT Eduventures frequently receives inquiries from and oers guidance to colleges and universities seeking to go online or to grow their current online footprint. Likewise, we receive inquiries from companies looking to enter the OPM market, as well as from investment firms looking to fund businesses in this sector. To complete this study, we first developed a complete list of providers according to the market definition applied (see section immediately below), and then sought interviews with senior leaders at every provider. In the end, we interviewed 15 service providers that agreed to participate. We also interviewed an academic partner of each provider s choosing in order to oer a well-rounded exploration of the dynamics of these partnerships, including benefits, drawbacks, and lessons learned. Providers that we were unable to interview are represented here through information we were able to gather via secondary sources published and unpublished based on our years of experience in the field. The Eduventures Market Guide to Online Program Management explores the OPM providers and the services they oer. The Guide also oers a thorough examination of the benefits of partnering with an OPM provider versus the benefits of managing the development, launch, and ongoing support of online

5 degrees internally. It explains the financial models upon which these partnerships are based and oers information about alternative pricing models for savvy institutions to consider. We also oer a deeper look at the four core OPM services, as well as ancillary services that some, but not all, providers oer. Definition of Online Program Management (OPM) For the purposes of our study, Online Program Management (OPM) is defined as an end-to-end bundle of services provided to colleges and universities to enable them to oer online degree programs often, although not always, on a revenue-sharing basis. The four core services in the full-service bundle include the following: 1. Marketing/lead generation 2. Enrollment management 3. Student services 4. Course development and delivery Throughout this report, we refer to OPM as a set of at least these four core services, plus a variety of ancillary services that some OPM providers oer. For a graphical representation of the OPM model, see Figure 1 immediately below. Also included for reference is a list of the 20 providers we include in this market that are featured in this report. Figure 1: Core Online Program Management Services Market research and program assesment PPC/SEO/DM/ broadcast lead generation Marketing/ Lead Generation Enrollment Management Phone/ contact with prospects Bookstore services Financial aid services Compliance Assistance Phone/ contact with current students Helpdesk Persistence guidance Student Services Course Development and Delivery LMS Instructional design Faculty/sta training Faculty recruitment

6 EDUVENTURES SERVICES If you would like to purchase copies of this report, please contact John Hope, Director of Consulting Services at or Eduventures has assisted institutions, providers, and investors with a wide variety of strategic services related to the Online Program Management market, including the following: For Institutions State Authorization Services for Distance Learning: To ensure regulatory compliance Strategic Planning for Distance Learning Programs: To develop eicient and eective online programs Advising for OPM Provider Selection: To facilitate partnerships aligned with institutional strategy Identification and Verification of Marketable Online Degree Programs: To launch profitable programs For Providers and Investors Report Licensing: To distribute to prospective customers OPM Market Analysis and Development Support: To assess and develop market position and opportunity Identification and Verification of Marketable Online Degree Programs: To enter into profitable partnerships Eduventures Annual Conference Sponsorships: To underwrite a key event for institutional leaders

7 ABOUT EDUVENTURES For the past 20 years, leaders of higher education have turned to Eduventures as they make critical business decisions. A research and consulting firm in higher education, Eduventures draws from deep practitioner expertise, a diverse network of colleges, universities, and businesses, and a rich set of data you won t find anywhere else. Our analyses and recommendations enable leaders of institutions to meet and exceed their goals, demonstrate thought leadership, and achieve their full potential in a complex and evolving landscape. FOR MORE INFORMATION To find out how Eduventures can realize your potential, visit or info@eduventures. com. For more information about our Research Library, Insights reports, events, and research agenda, ClientServices@eduventures.com.

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