Outsourcing Online Programs: The Shape of Things to Come or a Bad Moon Rising?

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Recently I was on a panel at the LearnLaunch Across Boundaries conference. The panel — titled “Outsourcing Online Programs: The Shape of Things to Come or a Bad Moon Rising?” — was moderated by Howard Lurie, Principal Analyst at Eduventures and author of a soon-to-be-released research report on the state of the Online Program Management (OPM) market.  

On the panel with me was Michael Croft, CEO at Volute, Greg O’Brien, CEO at Noodle.com, and Elliott Visconsi, Chief Academic Digital Officer at the University of Notre Dame.

In this interactive discussion, we covered many strategic questions facing institutions as they thinking about going online.

I confess I didn’t take notes. So, here are my thoughts and responses to the questions Howard and the audience posed — either what I actually said or wish I had said!

Moderator Question: We hear a lot of concerns from institutions, especially faculty, about the prospect of yielding control over how online courses are developed and delivered when an outsourced partner is involved.  How real are these concern? As providers and clients, how do you deal with this problem?

No institution, whether they build in-house or outsource to an online program manager (OPM), can be successful without the involvement and, yes, control of faculty. It’s just the way governance is set up at universities.

The conflict between OPM vendors and faculty typically spills over into public discussion when a “traditional” revenue-share, bundled service OPM has forced a take-it-or-leave-it deal on faculty.

We’ve seen this at Eastern Michigan University (EMU), where Academic Partnerships “preferred requirements” included lowering admission standards, removing enrollment caps, and using coaches provided by the OPM — leaving EMU faculty concerned about the quality of the education.

At Extension Engine, we work in a fee-for-service model, putting institutions — both administration and faculty — in the driver's seat. We are not revenue and profit partners, we are innovation partners — this is a big difference.

Our clients are often launching an online program for the first time, so they haven’t gone through this process. When we work with universities, we develop a close partnership to coach then, guiding them on key decisions and counseling them on what’s coming next. And when we work in close partnership, we’ve always succeeded in eliminating concern.

Since every one of our clients is a true partner — working side-by-side with our team — we’ve never seen this kind of conflict.

Moderator Question: Schools love their brand and want to protect their uniqueness — every school is a special snowflake. Is outsourcing a riskier venture for schools with high brand sensitivity? Is there a danger that online programs developed by an external partner will look and feel and perform all the same?

We work a lot of universities with well-established brands, and we are advocates for building brand into the learning experience to create a differentiated offering. The key for us is to demonstrate that we are good and trustworthy custodians of that brand.

A lot of our new clients are comforted by seeing the work we’ve done with amazing institutions, like Harvard, MIT, and Notre Dame. Even still, we need to earn that trust with every new client.  

For example, when we begin marketing a new program, it’s not uncommon for all of our copy and marketing collateral to be reviewed by our client. Over time, as we build trust, we earn the ability to make some of the decisions autonomously.  

I think a lot of brand mistrust can come from the revenue sharing model, which creates a conflict of interest for admissions. When you have an OPM partner with a revenue-sharing deal, they may put pressure on the university to lower the admissions standards, for obvious reasons, and that’s a huge threat to the brand.

Moderator Question: Many of the decisions schools have to make come down to money.  With enrollments (some sectors and modalities) declining, what's the logic behind making the decision to pay upfront fees and hire an external provider versus going the traditional revenue sharing route? Will outsourced OPMs contribute to a greater divide between "haves" and "have not" schools?

Did you know that there are 282 online MBA programs in the US? The funny thing is that I looked at this number yesterday and there were 281 — and when I looked three months ago, there were 251. That means 31 new online MBA programs were launched in the past three months!

A university that chooses a traditional OPM to launch a degree is akin to buying a McDonald’s franchise, but because it’s online, it’s like all of the restaurants are right next to each other.

The facts on cost are clear: an unbundled fee-for-service contract is less expensive than a 10-year-plus revenue-share deal — see for yourself.

In the long run, universities who use fee-for-service providers will pay less and will either have more money to reinvest in their programs and faculty or will be able to pass along the lower costs to students.  What’s more, I would argue that a custom learning experience, as opposed to “cookie-cutter courses”, is going to provide a better product for the students.

There are institutions paying 2U and other OPMs tens of millions of dollars per year, and they could build a custom learning experience for a fraction of the cost. The challenge is that there are 7-figure startup costs to doing it, but I think we’ll see institutions separate from each other by whether or not they can find a way to fund a differentiated offering.

The only risk I see is that universities will pay more for an undifferentiated product using a traditional OPM. Caveat emptor!

Moderator Question: We're at a conference discussing terms like "beyond boundaries" and "transforming learning".  As a provider of OPM services, what's the evidence that an outsourced model will help improve student outcomes, transform the learning process, or transcend traditional boundaries? Put another way, why has an industry sprouted and taken root around the things that schools are supposed to do?

A lot of it comes down to governance. Universities have a governance structure that tends to favor the minimization of change and the reduction of risk.

There are a lot of good reasons that they were originally set up that way, but the current changes driving online learning are a transformational wave changing the industry — just like it’s changed many other industries like travel, retail, and entertainment. If you think back 10 or 20 years when those industries went through changes like this, they too brought in outsourced vendors. Does anyone remember Scient, Viant or MarchFirst?  

Over time, the travel companies, the online retailers, and entertainment companies built out their internal capabilities and now much (most?) of it is done in-house. The same will happen in education.

Moderator Question: As follow-up, can you share a concrete example, perhaps at the course level, of an outsourced learning innovation that has accelerated student learning at scale in a new and important way?

Harvard Business School’s HBX is a custom platform which we helped build and maintain. They have a course called Negotiation Mastery — it is the best online class I have ever taken.

Very quickly, learners find themselves in a set of negotiations with a computer simulation. Following that, they are broken into cohorts and then must conduct a series of negotiations with each other. Plus, there are great real-world case studies.

This is a nearly ideal learning environment. It’s social. It’s constructivist. It’s contextual. I think our collaboration with HBX (as an outsourced provider) enabled this innovative learning experience.

Moderator Question: What assurances, if any, can (or should) an outsourced partner provide an institution that a particular innovative learning technology or technique remain unique to that school?

For Extension Engine, we make this simple: our client owns 100% of the intellectual property that we develop.

Keep learning

A Financial Model for Online Programs: Revenue Sharing vs. Fee-for-Services Engagements

Learn about the advantages and disadvantages of each engagement model, which one is best suited for your institution, and how you can receive a custom-tailored financial model for your institution.

[WHITE PAPER COVER] A Financial Model for Online Programs: Revenue Sharing vs. Fee-for-Service (Higher Ed)*


Furqan Nazeeri

Furqan Nazeeri is a Partner at Extension Engine. He regularly speaks on innovation in online learning and has 20+ years of experience building and managing high-performance teams. Prior to Extension Engine, Furqan was a founder/CEO of VC-backed Pivot Inc. (acquired by NASDAQ:CME) and EIR at Softbank Capital. He has a BSE in aerospace engineering from the University of Michigan and an MBA from Harvard University.

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