The Rise of ‘Anti-OPMs’

When Marc Austin was tasked with launching Augusta University’s online programming, he knew he had his work cut out for him: He’d been hired after a survey revealed an appetite from students and faculty for an internally run online program rather than one run by an outside firm. But Austin was a team of one.

“There was no way an individual starting from zero was going to be able to build all the capabilities of an OPM,” Austin, the dean and associate provost for Augusta University Online, said.

The university turned to Archer Education, an education-technology company, to help with AU’s strategic marketing and enrollment management—but with the ultimate goal of ending the contract sooner rather than later.

“Every university would like to build growth engines, and they’re beginning to increase their confidence in doing it themselves rather than relying on third parties,” Austin said. “It’s just building the playbook.”

Augusta became part of a shift from away from an age-old OPM model that was once hailed as a potential savior for higher education. The change was in part driven by industry needs, in part by universities’ changing attitudes toward OPMs and partly by state legislation and pending federal regulations that crack down on their traditional model.

When higher ed officials typically discuss OPMs, they’re referring to the industry behemoths—2U, Wiley, Pearson (now known as Boundless Learning)—in contrast with large universities launching their own programs, like Arizona State University or the University of Southern California.

But a growing subset of online program enablement companies (OPEs) is sometimes overlooked. Dubbed by some “anti-OPMs,” the entities contract out services like instructional design and help a college build up the infrastructure to eventually run the online programming itself— following the age-old “teach a man to fish” adage.

John Katzman, a founder at 2U, was one of the first to create an OPE with the launch of Noodle Partners in 2010. In a 2018 interview in Inside Higher Ed, he said his job was to “decimate the OPM industry.”

“A program needs instructional design, marketing, recruiting, funding, technology and support services; we’re just comfortable with helping a school build capacity rather than use outside providers exclusively,” Katzman said.

OPEs—which now include Archer, Collegius Education, Carnegie and Education Dynamics, among others—have found a niche in a market that is increasingly turning away from traditional OPMs.

“Every institution has a decision to make as it relates to their capabilities in enrolling students in online programs: ‘Do I build the capability in-house, do I partner or rent it, or do I acquire it?’” said Gates Bryant, a partner in Tyton Partners’ strategy consulting practice. “And the build/buy/partner decision is one every institution needs to make and is making in the current environment.”

Some institutions will always turn toward the larger OPMs. With their legacies comes the value proposition of a wider reach and bigger budgets that can be used for marketing aimed at greater numbers of potential students, according to Wally Boston, a general partner at the private equity firm Green Street Impact Partners, which focuses on education and workforce technology companies.

They also come with a built-in safety net, since OPMs pay the up-front cost to launch a program. The program, once launched, typically splits its tuition revenue in half between the OPM and the institution. That revenue-sharing model has been incredibly contentious and has drawn ire from higher education officials and legislators alike who say it incentivizes servicers to use aggressive, dishonest recruiting methods to pull in more students.

“If I were a school, I would be very wary of signing a rev-share agreement given the attention to it, but it is the lower-risk model because it puts the risk on the OPM,” Boston said. “They sign these contracts with their eyes wide-open. And there aren’t many schools, in my opinion, that are willing to make the marketing spend you have to make to get enrollments in the hundreds or thousands.”

Some industry experts, including Bryant and Archer’s CEO, Brian Hartnack, think there can be room for both OPMs and OPEs in the market. Hartnack was quick to say he is not “anti-OPM.”

The true benefit of the older model is that the companies “come in, invest widely in getting programs off the ground and growing them,” he said. “When an institution feels they’re not served, or there is a lack of transparency or control—that may be when they say, ‘We have to find the capital ourselves, because this is not sustainable; we’re not getting any smarter.’”

Some opponents of traditional OPMs believe the OPE alternatives “pose less risks to consumers and institutions,” said Bob Shireman, a senior fellow at the Century Foundation who has long been a critic of what he has called the predatory nature of OPMs.

OPMs have also begun offering more fee-for-service offerings, allowing universities to pay a flat rate for specific services.

“There are OPMs that distinctly saw the potential writing on the wall, or even the threat of the writing on the wall, and moved toward that,” said Chris Gardiner, a senior analyst at Eduventures, a research and consulting firm.

The so-called anti-OPM companies have a similar model, but AU’s Austin said the key difference is their ultimate goal of helping institutions become self-sufficient.

“There was a very explicit understanding that we were operating this rent-to-build strategy,” he said, adding that exit provisions were baked in to the contract with Archer. “It was always a partnership designed to get us launched with staggered peeling-off as you got going. With a traditional OPM you wouldn’t be able to transition after a year, which is what we did.”

Regardless of what type of entity an institution ultimately decides to go with, Bryant advises being more aware than ever of the contracts—whether they’re one-year stints with OPEs or decade-long partnerships with OPMs.

“One piece of advice we give to institutions is once they make the build/buy decision, regardless of where they fall, they need to have a capability within the institution to monitor and proactively manage the health of the partnerships,” he said. “In light of shorter contracts and increased competition, institutions have to take a much more proactive approach to measuring the health of vendor partners than they did in the past.”

Impact of Pending Regulations

The OPM world has had a national spotlight on it over the past year, with federal regulators eyeing new restrictions on both the revenue-sharing model (in what they call incentive compensation) and third-party servicers, the companies—including OPMs—that many colleges hire to administer online courses, financial aid programs and more.

The Education Department announced earlier this month that new regulations on third-party servicers will undergo a lengthy rule-making process to change them. Those changes won’t be finalized until 2025. And that’ll only happen, observers say, if Democrats win the presidential election in November.

New revenue-sharing guidance will be published “no sooner than late this year,” according to the department. The department could radically alter the OPM model by effectively banning revenue sharing and forcing colleges to use a fee-for-service model.

Because the regulations have yet to be finalized, it’s largely unknown how, or if, OPEs could be impacted.

“I could see there being a continued emphasis on [the need for] fee-for-service, ‘teach them to fish’ models both in companies like Archer and Noodle and consulting groups advising institutions,” Gardiner said. At the same time, “I just know there are institutions out there that need that rev-share model, sometimes to make ends meet.”