Public universities regain control of their online programs from OPMs

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When educational services company Zovio sold its online curriculum management business to the University of Arizona’s Global Campus in August, it came as no shock.

Zovio’s business model is seen by many industry observers as a holdover from the University of Phoenix era, before companies like 2U floated the idea of ​​helping colleges both manage online programs and to finance their creation in exchange for a reduction in tuition fees. Some predict the sale of its assets means it may not have long to survive as a business – with one observer commenting that ‘the blood is in the water there’.

The announcement that Zovio would sell its OPM came during an earnings call in which Zovio’s management reported losses of $4.7 million in the second quarter, and the company dumped other assets, including her popular tutoring business, TutorMe, which she sold to GoGuardian for $55. million in May.

Two years ago, Zovio sold the University of Arizona for-profit Ashford University, which was facing a lawsuit from the California state attorney general for misleading students. That year, Arizona converted Ashford into the University of Arizona Global Campus.

When the latest deal was announced, University of Arizona Global Campus President Paul Pastorek wrote in an open letter that the sale would ensure the people who run its online program were “aligned to a single objective”. Pastorek considers marketing, recruitment and financial aid to fall into the category of core functions that universities should keep in-house, the statement said.

This fits a pattern of universities reasserting control over functions previously outsourced to OPMs, says edtech analyst Matt Tower, director of Workshop Venture Partners.

Other public universities have also integrated their business programs online. For example, the University of Massachusetts system took over Brandman University in Chapman last year. And the University of Arkansas system announced it was absorbing for-profit Grantham University this summer.

Red herring or canary?

Zovio’s situation is partly unique.

Its deal with Arizona’s Global Campus was a little different from the typical OPM deal, though it was made under the same policy used to cover traditional OPMs, says lead researcher Stephanie Hall. at the Century Foundation.

Still, selling can hold lessons for the market.

As universities were able to run more services themselves, they became more willing to review their revenue-sharing contracts — the type that gave OPM companies a 60% revenue share — says Benjamin Kennedy , founder and managing partner of the educational consultancy Kennedy. and Company.

In general, Kennedy adds, there is a greater awareness of what is feasible in the market, an increased ability to negotiate with OPMs, and a better understanding of the costs of expensive long-term contracts of the type that 2U has been awarded. the pioneer.

Almost every university now understands that it’s hard to compete nationally without a huge brand and big marketing budget, but there’s almost always room to compete regionally, Kennedy says.

For companies like Zovio, that means changing course.

The smarter OPMs are now doing things like cutting their revenue shares – sometimes significantly – to keep universities interested. They are also becoming more flexible in their offerings, allowing universities to do more in-house.

For example, 2U, one of the big names in the OPM space, recently made major policy changes, allowing universities more choice in the services they want to purchase, and also advocating for universities to reduce fees. tuition – a common criticism of space.

But for companies whose portfolios are filled with institutions that have signed long-term, high-revenue-sharing contracts, this can be an existential problem, suggests Kennedy.

Some for-profit colleges from an earlier era are doing well, such as Chamberlain University and the Grand Canyon, says education technology consultant Phil Hill. But ITT Technical Institute, Inc. and Corinthian Colleges, Inc. closed.

The future of OPMs

OPMs once gave university leaders a way to grow without having to impose cultural change on a campus, says Clay Shirky, vice provost for educational technology at New York University.

They treated online education “like a side hustle,” says Shirky, allowing them to chase after the profits of online marketplaces without having to win over professors on campus who would likely oppose online expansion.

It is significant that the latest sale came after the COVID pandemic made online teaching mainstream in higher education, he says.

Some who have long opposed the OPM model hope that Pastorek’s recent comments signal that university leaders are catching up with critics of OPMs. They see the decision to limit profit-seeking in UAGC’s online program as perhaps a sign that it will be more focused on the health of the educational institution.

And it’s something they want to see more of.

“I think every public college in the country [that’s] outsourced to other OPM companies could probably look at the level of control they have over things like marketing and registration, in particular,” says Hall of the Century Foundation.

But not everyone is convinced that giving public colleges more control over their online programs would be better.

Companies like 2U have spent billions of dollars on these online degree programs, and it’s still a tough business, Tower says. It’s unclear why university leaders think they’ll be more successful, he adds.

Public universities have also recently shown sustained interest in public-private partnership agreements, including for the expansion of online programs, although these new arrangements are likely to be different from older OPM models.

NYU’s Shirky says public universities have cultures in place that prevent them from focusing on profits.

He is skeptical that the takeover of OPM services will solve the problems facing colleges. But he notes that the desire to stay in business is much more motivating than the desire to make a lot of money. In other words, even if a public university’s online global campus isn’t profitable, executives may think it will help them avoid bankruptcy or a merger.

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