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1 CONTINUING AND ONLINE EDUCATION FORUM Development of Vendor Partnerships to Support Online Programs Custom Research Brief Research Associate Laura Nickelhoff Research Manager Joe LeMaster November 2012

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3 3 of 12 Table of Contents I. Research Methodology... 4 Project Challenge... 4 Project Sources... 4 Research Parameters... 5 Key Observations... 6 II. Executive Overview... 6 III. Development of Vendor Partnerships... 7 Motivation for Vendor Partnerships... 7 Logistics of Vendor Partnerships... 8 Vendor Services IV. Outcomes of Vendor Partnerships Enrollment Growth Student Retention... 11

4 I. Research Methodology Project Challenge Leadership at a member institution approached the Forum with the following questions: What motivates administrators to partner with external vendors to offer distance learning programs? What processes do administrators use to estimate the value of a potential vendor partnership? What companies do other institutions partner with? How long have partnerships been in place? 4 of 12 How do the organizational models of extended studies units impact the effectiveness of vendor partnerships? In which organizational models are vendor partnerships most effective? Which services (e.g., recruitment, marketing, enrollment management, coaching, etc.) do institutions outsource from distance learning vendors? Which services do administrators choose to offer internally? Which services can be most effectively outsources from a vendor? Are there any services administrators never choose to outsource? What factors do administrators consider when deciding which services to outsource and which to offer internally? What methods do administrators use to evaluate the impact of vendor partnerships? What are the primary advantages and disadvantages of outsourcing various services to a distance learning vendor? Have administrators renewed their contracts with distance learning vendors? If so, what were the primary successes of the vendor partnership? If not, what aspects of the partnership were dissatisfactory? Can distance learning vendors adequately staff various functions (e.g., recruitment, marketing, enrollment management, etc.) during periods of high online enrollment growth? Do administrators observe enrollment growth as a result of the formation of vendor partnerships? What impact do vendor partnerships have on online student retention? How effectively do vendor partners maintain frequent contact with students enrolled in online courses and encourage online student engagement? Project Sources The Forum consulted the following sources for this report: Advisory Board s internal and online research libraries ( o o Administration of Online Student Services: Determining Services to Provide In-House or Outsource.. December Considerations for Outsourcing or Providing Online Student Services Internally.. September o Providing Distance Learning Programs through Partnerships with External Vendors.. September National Center for Education Statistics (NCES) (

5 5 of 12 Research Parameters The Forum interviewed online program administrators at institutions with longstanding vendor partnerships and consulted previous research. A Guide to Institutions Profiled in this Brief Institution Location Type Approximate Institutional Enrollment (Undergraduate/Total) Classification University A Midwest Public 21,000/25,000 University B* South Public 9,600/14,500 University C* South Public 47,500/56,000 University D* Mountain West Public 26,500/32,500 University E* Midwest Public 18,000/23,000 Research Universities (high research activity) Doctoral/Research Universities Research Universities (very high research activity) Research Universities (very high research activity) Research Universities (high research activity) *Institutional information was compiled from previous research. Source: National Center for Education Statistics A Guide of Vendors Profiled in this Brief Organization Description of Services Organization A Organization B A for-profit company that partners with higher education institutions to support degree programs by assisting with the recruitment and retention of students. A consulting firm that provides marketing solutions and technology to improve student recruitment, enrollment, and retention.

6 II. Executive Overview Key Observations 6 of 12 Administrators commonly develop vendor partnerships to promote enrollment growth in online programs or to increase staffing flexibility. Partnerships commonly result in rapid enrollment growth in target programs, and administrators at several institutions developed partnerships with the intention of growing underperforming programs or combating sudden enrollment declines. However, contacts caution that rapid enrollment growth carries several associated costs, including those of maintaining internally operated services for greater numbers of applicants and admitted students. Additionally, distance learning administrators benefit from the flexibility afforded by vendor partnerships. Vendor organizations provide specialized staff to meet the temporary needs of partner institutions, which eliminates the need to hire or fire staff members as the organization and scope of units change. Vendor partnerships exhibit the most success at institutions with small, centrally managed distance learning units with goals of rapid enrollment growth. Although partnerships can succeed at institutions with decentralized online program operations, administrators in a central distance learning unit can more effectively manage vendor relationships and ensure that vendor materials present a unified view of the institution. Similarly, smaller distance learning units that lack specialized staff members need vendor services more than larger units that already employ knowledgeable and specialized staff. Administrators most commonly outsource marketing, recruitment, and enrollment management services to vendor organizations. Vendors employ staff members to conduct specialized marketing and recruitment functions (e.g., search engine optimization), expanding the scope of marketing efforts and reaching previously untapped populations of potential students. However, contacts across institutions caution against contracting course design services from vendors, who commonly request shared intellectual property rights to sell course materials to other entities. Regardless of the contracted services, contacts emphasize the importance of carefully reviewing vendor materials to ensure that vendors disseminate accurate information to prospective students. Vendor partnerships commonly result in rapid program enrollment growth and can indirectly improve student retention by offering students more flexible scheduling options. Vendors offer administrators access to course platforms that facilitate shorter term lengths and employees who can help redesign courses for five- or eight-week terms. Shorter term lengths improve retention by affording students more flexibly to withdraw for a single term in the event of financial difficulty. In addition to improving retention, vendors marketing services can increase enrollment in programs with easily identifiable target students (e.g., Master s of Education programs that can be marketed to teachers in regional school districts), Contacts recommend limiting contract lengths to three to five years and avoiding revenuesharing payment models in favor of a flat fee model. Short-term contracts allow online program administrators to more frequently evaluate outcomes of partnerships to ensure that the institution continues to obtain value. Additionally, state regulations may prevent public organizations from signing lengthy contracts with vendors and contractors. Contacts stress the difficulty of revising established contracts, and recommend limiting the terms of initial contracts to the most necessary services. As vendor relationships develop and administrators identify new opportunities for value, they can develop separate contracts for additional services or programs.

7 7 of 12 III. Development of Vendor Partnerships Motivation for Vendor Partnerships Vendor Partnerships Stem from Goals of Growth and Flexibility Administrators typically decide to outsource online program services to vendors with two primary goals in mind: to support rapid program growth and to allow greater staffing flexibility. 1 Support for Growth Increased Flexibility Vendors employ dedicated staff members to support their marketing, recruitment, and enrollment management services, allowing partner institutions to benefit from the specialized knowledge and experience of vendor personnel. Additionally, vendors can rapidly allocate additional staff members to manage services for partner institutions, allowing programs to scale more quickly and with fewer obstacles. Vendor organizations can add staff members and services to support programs at partner institutions, supplying administrators with an agile team of employees. Administrators face difficulty replacing or firing proprietary staff members, and vendors can provide access to temporary or short term workers to meet a program s changing needs. Contacts caution that although vendor partnerships offer the flexibility to add services to existing contracts, administrators cannot easily renegotiate contracts to reduce the scope of outsourced services. Contacts recommend limiting the scope and length of initial contracts to ensure the ability to alter contracts as units grow. Many administrators decide not to outsource recruitment and marketing services out of fear that vendors will misrepresent programs. A centralized distance learning unit allays this challenge because one individual manages all vendor relationships and can present a more unified face of the institution. Administrators Consider Institutional Characteristics to Determine the Effectiveness of Partnerships The success of vendor partnerships depends in part on the organizational structure, size, and mission of distance learning units Organizational Structure: Vendor partnerships are more likely to succeed at institutions with centralized a distance learning unit. Administrators in a centralized office can more effectively manage and negotiate vendor contracts for multiple programs and ensure that vendor marketing and recruitment materials accurately convey institutional mission. Unit Size: Smaller distance learning units benefit more from the resources of vendor organizations because they generally lack expert personnel to manage specialized marketing and recruiting tasks. As units grow, they can afford to employ proprietary staff members to manage previously outsourced functions. Mission: Contacts across institutions emphasize that vendor partnerships typically result in rapid enrollment growth in online programs because of expanded marketing and recruitment efforts that reach previously untapped markets of potential students. However, administrators at University C decided not to pursue vendor partnerships out of concern that the vendor might compromise the institution s image as a regional university dedicated to its local community. 1 Administration of Online Student Services: Determining Services to Provide In-House or Outsource.. December

8 8 of 12 Questions to Evaluate the Likely Effectiveness of Vendor Partnerships Are online programs at your institutions offered through a centralized distance learning office? Does the distance learning unit at your institution employ a small team of personnel who lack specialized recruitment and marketing knowledge? Is rapid enrollment growth in online programs a primary goal of your institution? If you answered YES to most of the above questions, vendor partnerships are more likely to succeed at your institution. If you answered NO to most of the above questions, vendor partnerships are less likely to succeed at your institution. Logistics of Vendor Partnerships Approach Contract Term Negotiation with Caution Contacts at University A recommend thoroughly evaluating the impact of contract terms to ensure that vendor partnerships offer the greatest benefit in the long-run. Many vendor organizations ask partner institutions to sign long-term contracts (lasting 10 to 20 years) and request revenue-sharing payment models. However, online program administrators must negotiate away from these terms to ensure that they comply with state regulations, create opportunities to renegotiate partnerships as their units grow, and reap financial benefit from partnerships. Long-Term Contracts Conflict with Regulations and Limit Flexibility to Alter Contracts State Regulatory Conflicts State regulations prohibit administrators from engaging in long-term partnerships. Many states require public entities to limit contracts to three years to provide other companies opportunities to bid on contracts. Reduced Flexibility to Alter Contracts Lengthy contracts prevent online program administrators from reevaluating contracts regularly to ensure that they continue to benefit the institution. As online program grow, units typically hire additional staff members to support more specialized functions, reducing the need for vendors services....therefore, Limit Contracts to Three to Five Years Three- to five-year contracts allow online program administrators to regularly reevaluate outcomes of the relationship to ensure that the institution continues to derive value. Particularly when first establishing partnerships, administrators face uncertainty determining which services should be outsourced and which should be offered internally. Short-term contracts reduce the risk involved in initial contract development by reducing the institution s commitment to the vendor. In contrast, administrators at institutions with lengthy contracts may find themselves ten years into a 20-year contract with no opportunity for cancellation.

9 9 of 12 Revenue-Sharing Models Threaten Program Profits and Conflict with Regulations that Prohibit Sharing of Title IV Funds Reduced Program Profits Vendor organizations typically request a significant portion of program revenues (commonly more than 50 percent) in exchange for their services. Although a revenue sharing model can improve relationships by creating a shared vested interest in program success, it reduces profitability to the institution. Vendor contracts commonly include terms that allocate 60 to 80 percent of profits to the vendor organization. Regulatory Conflicts Recent regulations prohibit institutions from sharing Title IV funds (which include federal student aid) with third-party organizations. As a result, extensive revenue-sharing contracts may conflict with regulations. Therefore, Negotiate Flat-Rate Payments to Vendors Contacts at University A emphasize that although vendors argue that they provide bundled services to partner institutions, many partnerships are limited to recruitment services. In these situations, contacts recommend negotiating a flat-rate, per-student payment to vendors for recruitment services. Limit Initial Contracts and Expand Scope as Needed Contacts recommend limiting initial contracts with vendors to maximize the profitability of partnerships. Online program administrators can add terms to contracts much more easily than they can remove terms, so by initially outsourcing only services that an institution cannot offer internally, administrators can avoid situations where externally administered services are not optimal. Negotiate Individual Contracts for Each Program Even if programs are administered through a central distance learning unit, contacts recommend developing unique contracts for every outsourced program. Individual contracts allow administrators to alter the terms as necessary depending on the needs of each program, as some programs benefit from vendor services more than others. For example, contacts at University B suggest that vendors can market and recruit for programs that serve welldefined populations of potential students more effectively than for programs with broader scope. 2 For example, the University s partnership with Organization A (a company that partners with higher education institutions to support the recruitment and retention of students to online programs) yielded significant enrollment growth in the Registered Nurse to Bachelor of Science in Nursing program because Organization A s staff members could easily expand the scope of marketing efforts to health systems across the region. However, the partnership was less successful for the Bachelor of Applied Arts and Science program because potential students are more diverse and difficult to identify. 2 Providing Distance Learning Programs through Partnerships with External Vendors.. September

10 10 of 12 Alternative: Hire Consultants to Provide Marketing Services Online program administrators at University D and University E purchase marketing outreach services from Organization B, an education consulting firm that provides marketing services, in lieu of a partnership with an educational vendor. Organization B s employees work on behalf of these institutions to develop online advertisements and to reach new populations of potential students (e.g., international students). In contrast to traditional vendors, Organization B provides more targeted, short-term services. 3 Vendor Services Vendor organizations can reach large populations of potential students and typically have larger marketing scopes than partner institutions. For example, Organization A can market Master s of Education programs to potential students employed at school districts across the surrounding region. Vendors Most Commonly Provide Recruitment, Marketing, and Enrollment Management Services 3 Contacts suggest that vendors can provide recruitment, marketing, and enrollment management services effectively, but caution against outsourcing course design services to prevent conflicts overs intellectual property rights. Many vendors request to share intellectual property rights for course content developed in partnership. Although vendors typically informally agree not to share content with other entities partial copyright ownership grants them the right to sell content as they choose. Regardless of contracted services, administrators greatest concern about partnerships is the potential misrepresentation of programs. 4 Considerations for Internal versus External Administration of Student Services Comparative Benefits of Outsourced and In-House Services External Administration External marketing vendors offer greater expertise and dedicated personnel, allowing administrators to reach previously untapped populations of potential students. Marketing Internal Administration Internally-operated marketing services afford administrators greater control over the representation of programs and ensure unified and consistent messaging. Externally-operated recruitment services expand the number of potential students and typically result in rapid increases in enrollment in target programs. Recruitment Administrators at several institutions choose to maintain internal recruitments services to avoid misrepresentation of program requirements or characteristics. 3 Providing Distance Learning Programs through Partnerships with External Vendors.. September Considerations for Outsourcing or Providing Online Student Services Internally.. September

11 11 of 12 Vendors can effectively manager individual facets of enrollment management (e.g., call centers) and can provide cheaper around-the-clock services. Enrollment Management Administrators have more control over the quality and consistency of internally operated services and can ensure that staff members align with institutional mission and culture. IV. Outcomes of Vendor Partnerships Enrollment Growth 1,000 Enrollment Growth During the first year of the partnership with Organization A, enrollment in the online Master s of Education program at University B grew by over 1,000 students. 6 Vendor Partnerships Typically Result in Extensive Enrollment Growth Contacts across institutions observe rapid enrollment growth following the development of vendor partnerships, and administrators commonly engage in partnerships with the intention of growing underperforming programs or combating enrollment declines. For example, administrators at University B initiated their partnership with Organization Ain the wake of two hurricanes that seriously We don t really staff up or grow up in areas; we can t do it quickly to meet the demands of especially rapidly growing programs, and that s something a third-party vendor can do better than we can. Forum Interview damaged the campus and caused significant enrollment declines. The partnership yielded a significant increase in online student enrollment and helped mitigate the financial losses caused by student withdrawals. 56 Anticipate Increased Administrative Costs as a Result of Enrollment Growth Rapidly increasing enrollment places additional pressure on internally administered services, including admissions, financial aid, and registration offices. As a result, online program administrators must hire additional staff members to manage the increased workload. Contacts emphasize the importance of considering these increased administrative costs before engaging in vendor partnerships. Student Retention Vendors Afford Increased Scheduling Flexibility, Improving Retention Vendors can provide technology to facilitate greater scheduling flexibility for partner programs, allowing administrators to adopt a cohort model or shorten course cycles from 16 weeks to five or eight weeks. Vendors provide course management systems and frameworks that accommodate shorter terms and employ staff members who can help faculty members redevelop courses for various term lengths. Although contacts cannot provide quantitative 5 Providing Distance Learning Programs through Partnerships with External Vendors.. September Ibid.

12 12 of 12 evidence that these measures improve student retention, they suggest that cohort models and shortened course cycles benefit student completion rates. 7 Cohort Model: Students enrolled in cohort model programs complete all courses with the same set of students, forming a more complex peer network that can support them in times of difficulty (academic or otherwise). Shortened Course Cycles: Shortened course cycles typically consist of five- or eightweek courses that students complete in succession. This model benefit students who need to withdraw temporarily due to personal reasons (e.g., financial difficulty, family obligations). Rather than withdrawing for an entire semester and missing several courses, students can temporarily withdraw for one course cycle, resuming class the following five- or eight-week cycle. 7 Providing Distance Learning Programs through Partnerships with External Vendors.. September