The Future of Outsourced Online Education

How have agreements and terms with OPMs changed for institutions working with OPMs? How do colleges within a University and System forge agreements for joint participation in the larger online enterprise? What do institutions of higher education need to consider when developing programming agreements where one entity (an OPM or institution) provides online program management services for the other? As Universities continue building their own in-house capabilities in online program delivery, new questions around revenue sharing, shared services, incentives, and governance have all arisen. This session explores the issues involved in the changing nature of these agreements and offers several recommendations on ways to align revenues, incentives, and governance for partners that seek to work together to offer online programming.

The market for OPM services is changing, rapidly. The recent news from 2U about its own financial sustainability serves as some proof of this. As large, not-for-profit enterprises show that they can compete and win in delivering online education, others have taken notice. What many have learned is that developing in-house capabilities, as opposed to outsourcing some or all of the efforts involved in delivering online is typically to the university’s advantage. As economies of scale grow with more online programs, universities are able to increase the net tuition revenues they can bring in from online programs and outperform the expected returns from partnering with an OPM, especially on a revenue-sharing basis.

This revelation, that bringing more operations in-house can create substantial financial benefits for the institution, brings a new set of complexities for universities. In many cases, universities struggle with how to fund a new, centralized online operation and typically contend with having multiple decentralized online operations across a university. Even as multiple functions and schools realize that collaboration (and scale) would help in delivering online more efficiently, creating the right agreements between and amongst university partners becomes a challenge. Ironically, some of the same issues that arise in negotiating contracts with OPMs exist in trying to develop working relationships between schools, functions, and even other institutional entities.

This presentation highlights how careful analysis and planning can help to resolve some of the thorniest questions facing institutions that want to centralize/enlarge their in-house online educational delivery options. By developing strong contracts or MOUs that govern revenue-sharing, organizational governance, cost-sharing, use of technology, and the development (and sunsetting) of online programs helps to lay the groundwork for successful collaboration between and among university entities.

Download: The Future of Outsourced Online Education