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July 19, 2018

Success in the Evolving Online Program Management Market

MHT Partners  | Education Investment Bank

Technology adoption, digital disruption, distance learning, positive student outcomes, enhanced revenue opportunities…. As an education investment bank, we have heard a lot from online program managers (OPMs) that seek to change the long-time, ivory-tower model of higher education. Ten years ago, barely a handful of providers were addressing the needs of universities to take their courses online, widening the ‘moat’ of students who could benefit from distance learning. With the myriad of providers now competing in the online market, the question we ask ourselves is, “which providers will stand the test of time?”

This isn’t a question based on market demand. On-campus enrollment at U.S. universities is flat or declining, but online enrollment is increasing. Further, opinions about the quality of online education are more favorable, and now approximately 30 percent of students studying on campus take at least one class online. Colleges currently offering online education which are steadily increasing their digital course selections, coupled with institutions just entering the online game (who will likely need assistance to gain success), will ensure demand for partnerships with revenue-sharing OPM companies for the foreseeable future.

A recent report published by Eduventures suggests there are alternative providers serving different needs of university partners:

  • Full, Upfront Investment (Revenue Share) – tailored to those universities that lack resources to develop a complete online course offering
  • Fee for Service – caters to the ‘a la carte’ needs of universities (e.g., online marketing, enrollment, course design).

Among those groupings, experts note there are new models emerging from the likes of Kaplan and Bridgepoint Education, both spinning off their degree-granting units into non-profit institutions, suggesting specialized OPMs will endure more so than diverse providers.

The implications of a highly competitive, fragmented market suggest that some providers will not survive over the long term. Further, some leaders of OPMs note that it’s getting harder to find new institutional partners, and the cost of launching online programs is rising as student acquisition costs increase. With organic growth proving to be protracted and costly, M&A could be the preferred route for many.

Will consolidation in the OPM market be the answer? Probably. There are 35+ OPMs providing disparate degree types, sectors’ focus and revenue models. That being said, it is too soon to tell which OPM providers will go-it alone, consolidate or be targets.

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