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OPM Basics and Crossroads
312 Plays2 years ago
Phil Hill, Neil Mosley, and Glenda Morgan discuss the basics of the Online Program Management (OPM) market as well as recent trends.
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Transcript
Introduction: Cross-Atlantic Collaboration
00:00:11
Speaker
Welcome to our introductory podcast, our inaugural podcast of the cross-Atlantic collaboration between Phil Hill and Associates and Neil Mosley Consulting. And in the room today we have Phil Hill, the eponymous Phil Hill and the eponymous Neil Mosley and me, Glenda Morgan, and I go by Morgan. But perhaps we can start by first doing a
00:00:36
Speaker
a little intro.
Phil Hill's EdTech Journey
00:00:38
Speaker
So perhaps Phil and Neil in that order can give a really two minute thing about who you are and where you are. Sure. And I hadn't thought about the fact that you're the one that doesn't have your name on either one of these. So we'll have to figure that out. Or as I introduce myself at eduCores, I'm the ass in one of the asses in Phil Hill. Phil Hill associated.
00:01:01
Speaker
Yeah, that was actually good seeing that one time where, uh, Neil, there was, I forgot where it was. Maybe the way it showed up in social media and it truncated the logo and it said Phil Hill and ass.
00:01:15
Speaker
But yes, it's great to be here. I'm looking forward to this podcast. I'm Phil Hill. I've been working in edtech for more than two decades now. And most people know me from the blog that's gone through different names. I mean, I originally started working with Michael Feldstein at eLiterate, and then I blogged. Actually, I had a blog before that, but nobody read it.
00:01:38
Speaker
And that created Phil on EdTech and then now it's called On EdTech by Phil Hill and Associates. So love sort of looking at what's happening in the EdTech industry, trying to understand what are the underlying trends and figure out what's going on. Basically trying to bring some sense out of the chaos that we often see in the market.
00:01:58
Speaker
and hopefully presented in a way that's digestible by academics, by people who aren't, you know, spending the time to get into the real deep level stuff. And I've had a great experience knowing and working with Morgan in different capacities for, my goodness, it's coming up on 20 years now. So and it's great. Neil is somebody who
00:02:23
Speaker
It's one of these, oh, I've met you online from virtual, from Twitter responses and other things and reading blogs and got to meet Neil in London over some beers. And it's great to do this podcast, but I'll turn it over to you, Neil.
Neil Mosley: From EdTech to Freelance Consulting
00:02:40
Speaker
Awesome. Thank you, Phil. Yeah, I'm Neil Mosley. I'm calling in from Cardiff in the UK. And similar to Phil, I've kind of been working in the EdTech online learning design space for quite a few years now. I forget the exact number, but I worked in UK universities for a decent chunk of time in all of those areas. And then a few years ago, I made the step to go freelance and set up my own thing.
00:03:08
Speaker
still very much working in higher education and yeah I guess I'd echo a lot of what Phil said in terms of trying to I guess illuminate this area particularly in terms of kind of companies but just in general there's all kinds of things going on and I guess my hope in with this podcast is that we can provide something that's really useful in illuminating for
00:03:34
Speaker
for people out there in higher ed around what's happening, what might happen, and just a general understanding of this kind of weird and wonderful area of ed tech and online learning. By the way, in the US, we don't call it freelancing. We call it consulting, but using scare quotes. Oh, OK. OK, that's good to know. At least that's what my wife does.
Glenda Morgan: EdTech and Life in Salt Lake City
00:03:56
Speaker
What does Phil do, consulting? I fear we're going to have lots of translational moments here.
00:04:05
Speaker
So I'm Glenda Morgan. I've also been working in edtech for about 20 odd years, mostly at universities and then for about eight and a half years at the International Research and Advisory from Gartner and then left Gartner and came to work for Phil Hill. And
00:04:23
Speaker
covering all kinds of fun stuff, including learning management systems, online learning, proctoring for my sons, and a bunch of other things. And I live in very beautiful, right now, Salt Lake City. I guess I should have mentioned, I live in Arizona in the US, where Morgan lived until I moved here, then she promptly up and left for Salt Lake City. It was not personal, I promise.
00:04:51
Speaker
Earlier in our pre-discussion, we were talking about domestic harmony and the need to maintain domestic harmony. And one of the ways that I could maintain domestic harmony is by explaining things a bit better, because my spouse is always saying, I need a 101. I need you to explain the basic stuff. So without talking about it too much, perhaps let's talk about what is an online program manager or OPM, and what do they look like?
Understanding Online Program Managers (OPMs)
00:05:21
Speaker
Well, I'll start. I guess my trick, by the way, it's not harmony. It's a matter of if your spouse asks you a question and within five seconds of your answer, if you could tell they're thinking about something else and they've moved on, then you know that you didn't have a good answer. But for an online program manager, the biggest thing I try to define is it's when a nonprofit or a traditional university
00:05:46
Speaker
wants to develop or expand an online program. It's the primary partner they work with to make that happen. And I really emphasize the primary partner because schools have a number of vendors doing almost everything. For it to qualify as an OPM or an OPX or an OPE, some variation of the OPM language, it has to emphasize that public-private partnership
00:06:14
Speaker
even if it's a non-profit for-profit partnership, where it's like, no, this is the main company with the know-how in helping us move online or expand online. So in a nutshell, that's how I start out.
00:06:31
Speaker
Yeah on the subject of the kind of domestic issue my problem is that I'm a verbal processor so my wife often has to wait kind of five minutes in until she gets the succinct definition of anything but I'm going to try to hit first in but I mean the way I I guess the way I think about it and to Phil's point is public private partnerships
00:06:52
Speaker
And essentially, you know, these are companies who provide the financing, the capability that universities need to develop and deliver online education. I guess in its kind of most basic form, that's what I that's what I think an OPM, an OPM does. Yeah, it's I think you hit on and the both of you hit on a couple of really key things there, you know, the public private or the
00:07:17
Speaker
nonprofit for-profit, the primary partner part, I think, is keen. I think even just calling it an online program manager is a bit of a help. Years ago, I gave a talk on OPMs at Gartner, and in my practice talk, I got about 20 minutes in when somebody said, why are we talking about OPM?
00:07:37
Speaker
Like, is that even relevant? So I think sort of breaking it down a little bit there, but I think, you know, that's a useful thing. The other sort of part of it for me is where are the boundaries of the category? You know, I know, Phil, in your market guide,
00:07:54
Speaker
or your view of the market, you've got your large companies, small companies, you include employer pathway kinds of companies like Guild in there. But I don't see you separating out, say, bootcamps. So what's in and what's out? I'd be interested to hear from both of you about, you know, which of those companies are considered OPMs and which aren't?
00:08:18
Speaker
I guess I've always started from an inside-out perspective, and the core of the market was in higher education degrees, so degree-based work, and the companies that helped them do it. Now, from the US perspective, you quickly get into regulatory issues, where from a regulation standpoint,
00:08:41
Speaker
Marketing enrollment, helping find learners and students and getting them enrolled is the core of the market. There's no escaping that fact. I have trouble calling somebody an OPM if they're not doing marketing and enrollment management of some form.
00:08:59
Speaker
But in the US, you have to have a bundle of services for that to be legal if you're doing a tuition revenue share agreement. And so the other pieces historically, it was the technology infrastructure.
00:09:12
Speaker
20-some years ago, schools didn't necessarily have an LMS or a VLE, and they didn't have the analytics. So there's the core technology, although that's shifting. There's the know-how and instructional design on how to design online curriculum and online courses.
00:09:32
Speaker
So I start with that, but the core of it was higher education degrees. And then part of the reason I've done the landscape charts is I think that it's expanding. It's bringing in other areas. What about non-degrees? What about enterprise customers? So there's no clean answer, but the approach I've taken is start with a higher education degree and then expand out to a moving target. So maybe not a satisfactory or simple answer, but that's the approach I've taken.
00:10:02
Speaker
Yeah, I think it's just getting harder and harder to categorize companies in this space. And I've grappled with lots of different definitions around the different companies as they've evolved. But I guess the way that I think and define OPMs is a little bit around the particular model. So I typically would class
00:10:29
Speaker
an OPM is having those bundles of services that Phil talked about, you know, the marketing and recruitment, student support, the learning design, technical infrastructure, all those kind of bundled services. And those companies typically operating with universities around degrees and having a longer term arrangement that's usually centered around, you know, a revenue share agreement. I sort of tend to think about
00:10:57
Speaker
defining them on the basis of that model, which, you know, we know is kind of influx a little bit. But that's, that's kind of how I've approached that categorization. But increasingly, categorizations, I think, are getting blurred. And it's, yeah, harder
Universities Partnering with OPMs
00:11:15
Speaker
to know who sits where and what you call them. But that's all part of the fun of the fun of the space, I think.
00:11:23
Speaker
Yeah, I would agree with you. I sort of tend to go for a fairly expansive definition, you know, so I would throw resellers in there. And that's a category that's sort of somewhat interesting to me, you know, so things like emeritus, or Stafford Global in the UK companies that, you know, take already existing content or degrees and then resell them in a different in a different place. So I haven't seen those in many of the
00:11:52
Speaker
market maps or things like that, but I would definitely sort of include them there as well. But perhaps the other part of the one on one thing that I'd be interested in looking at is why do institutions work with OPMs? You know, why are they why? Why do they even exist as a thing? Yeah, I mean, I think for me, it comes down to a few different things, like it comes down to capability around being able to
00:12:21
Speaker
deliver online. I think if you think back probably to kind of years back, online education was more of a kind of a new way to deliver education. And so there's kind of the element of capability to be able to deliver that kind of modality well and seeking capability and expertise outside in order to do that. I think
00:12:45
Speaker
allied to that, there's always that degree of risk as well when you're doing something new and the financing and support that a company provides help alleviate that a little bit or help kind of deal with that. And I think the third thing for me really is that
00:13:03
Speaker
In a way, really, universities are reaching an audience that they've not typically known for through online education, and that kind of has impacts on how you market, how you reach people, how you design programs, all those kind of things.
00:13:20
Speaker
I think there's something around support for reaching a different audience, there's something about managing risk of doing something new, and there's something about capability to move into a way of teaching and a way of delivering education that hasn't traditionally been the core business of what the traditional universities do.
00:13:45
Speaker
To play off of that, I think that historical perspective is so important here because universities have changed over time. So the market, I think Bisk, I'll see if Morgan agrees with this, but Bisk claims to be the first OPM for back in the late 1990s doing a model. But back at the time, there were just a small handful of schools, certainly in the US, I believe in the UK and Europe,
00:14:13
Speaker
who were doing online education. In the US, the ones that were doing it more than just a course or two tended to be organized around the Sloan Consortium. And so there was a handful of schools studying online education. The for-profit sector realized what was happening, and they started jumping in and force. And they redesigned their companies around scaling online
00:14:40
Speaker
education. So the for-profits started growing very quickly. So the origin of the OPM market was, hey, how can non-for-profit schools, non-profit schools, how can they get into online education while all the for-profits are doing this themselves? Well, the answer to that came to some of the things you said, the
00:15:02
Speaker
the know-how, the financing, the things that nonprofit schools are not good at. They're not good at organizational change. They're not good at rethinking marketing and reaching students. And particularly with faculty autonomy and other issues, they're sort of set and have historically been set in their ways about how you design a course and what you do online needs to be different than what you do face-to-face. So historically,
00:15:31
Speaker
It was set up as we're a company that can help a nonprofit school do the things that those for-profit schools are doing. Let them compete. Over time, that's changed because schools are developing instructional design capabilities, a lot of universities developing their own online programs with their own know-how, and some are getting to the point of saying, I could do this myself.
00:15:56
Speaker
But historically, it came from that. And then there was a huge in 2011 regulatory issue in the US that clarified, at least for the time being, can you do a tuition revenue share, which is the way they do the financing that you referred to, Neil. And it sort of said, as long as you do this, have a bundle of services, yes, you can do it. Then the market
00:16:22
Speaker
I wouldn't say it exploded, but it definitely went into a new era in 2011 in the US. But where we are today is different than those two periods, one and two decades ago. A lot of schools.
00:16:35
Speaker
It's not a non-issue, but so many schools know how to do much more of this activity themselves. And the financial markets have changed. So that's part of the reason we started out talking about how all the categories are moving around. So historically, the definition has been or the need has been moving around.
00:16:56
Speaker
You know, as I wrote in the blog, I think it's not quite a life support situation. I see signs, you know, in terms of contracts and things like that. People, some of the OPM companies advertising for fairly senior kinds of roles. So I do see those kinds of things. But I think there's also a big structural change that even apart from the cost of capital that you mentioned and
00:17:22
Speaker
the pressure on profitability and then the regulations in the US. I think there's also a bit of a structural change. I was having a conversation with someone on a campus recently who has been working with an OPM and she made really interesting comment, which was that
00:17:39
Speaker
Increasingly, it doesn't sort of make sense for them to work with an OPM for their online programs because they're getting that switching back and forth. The course taking mode that students are working in, the way that students are functioning, they take a course online, they take a course
00:17:59
Speaker
on campus, they're switching back and forth, and the whole OPM business model and contract model doesn't actually make sense for them. So they're thinking of leaving their OPM, you know, just for that reason, they've been very happy, but just because of that. So I think there are also these sort of structural changes that are going on that point to a difficult future for the OPMs, even though I chastised you in the blog for that. Which I appreciated.
Internet's Impact on Distance Education
00:18:25
Speaker
Now Morgan, I'm really looking to see if, like your reaction on the BISC claims as well. I would concur that BISC was one of the, certainly the early movers there. I mean, you sort of pop up with, you know, if you go back to them, you know, they've got deals going back a long, long way. But, you know, the question is, when do you start doing that? Is it purely online?
00:18:52
Speaker
certainly there are places that have been doing distance education for a while. And were they seeking help from elsewhere? As you were talking about that, and when you challenged me, I suddenly realized that I've probably been in distance education longer than any of you. Because my first real job, if you'll indulge me in a little story, my first real job was at the University of South Africa, where I was a lecturer in development administration and politics in 1988.
00:19:22
Speaker
And it was a giant distance education. They had over 100,000 students at the time. Nelson Mandela was one of our students. They were not mine. And I used to get assignments with candle wax on them because students had written them by candlelight. It was quite something. So I go back a long way. Were those video based or were there any
00:19:49
Speaker
DVDs or CDs distributed? It's all written. And there was a giant production process, which is why I sort of thought about it, you know, in the sense of universities have been doing it for themselves on some levels for a while. You know, so there was this giant thing, which I have some other funny stories about, which I'll bore people with one day.
00:20:10
Speaker
But yeah, it was all written and it got sent out and then they'd send you back the assignments, you grade them and you send them back. And then once in a while you'd go and tour the country and maybe chat with people in real life, although not insignificant either.
00:20:25
Speaker
This was going on during apartheid and a not insignificant number of the students were both political prisoners in detention, plus also the guards, so it was interesting. They were all taking this opportunity to study online, so that's where I cut my teeth.
00:20:42
Speaker
Yeah. But so in that regard, it's the internet. So in other words, nonprofit schools have been doing distance education for a long time. But the nature of the internet changed the environment to the point that there was a need to rethink this. And I assume that would be the internet in terms of no, essentially zero marginal costs, the ability to scale
00:21:07
Speaker
much quicker than whatever your production process and your mailing process and getting physical assignments back. The internet now means it's digital, it reduces the marginal cost of each piece of component, and it expands where you can go it to. So really, that's what changed that created the need for the OPM. Would you view it that way?
00:21:30
Speaker
I would challenge that because if you go back to the Open University and the University of the Air and places like that, that were doing it on the radio and in television and those kinds of things for a long time, and they had that one-to-many scalability thing, but I think the internet does change it.
00:21:50
Speaker
And I'm not, you know, I think it brought a different kind of, maybe it wasn't so much in the lecturing part, it was in the interaction and feedback. It really scaled that. And so it became an ability for students to not have to send their papers in, but could interact with other students in an easier way.
00:22:14
Speaker
I think it's interesting around like audiences and reach as well around that, because I think in the UK, you know, you mentioned Open University, we have University of London as well, which I think was probably one of the first distance learning providers, like both of those, you know, resonate with kind of the methods that you were talking about. And in a way, I think there's a lot of respect for an institution like the Open University in the UK. But I think also,
00:22:43
Speaker
what happened and what has happened in the UK is that there's a sense in which kind of online or distance learning is for the group of people that they cater for who can't come here. And I think what the internet did to a certain extent is to make it less about reaching a group that are never going to come to university to kind of open it up to
00:23:08
Speaker
people who might have had the means, say for instance, or the qualifications to come to university, but just actually want to study in a different way and fit that around their lives. So I think that's one component of the change that the internet brought about in terms of kind of online. Suddenly, online and distance became probably a bit more reputable and something that can be done by everyone.
00:23:35
Speaker
But when did that happen in the UK from a reputation? Because in the US, I would argue that that transformation where the reputation of online and the fact that you're really now your target learner audience overlaps and it might be the same people, that didn't really happen until 2011 or 12. And in particular with 2U, their strategy to go with elite universities. So the internet might have enabled it.
00:24:05
Speaker
But it was a decade and a half before I think that really changed the mindset of the US. What was the time frame there? Yeah, I mean, it's always difficult to put a number on these kind of things. But I would say this probably is similar. And I would also even say that I still encounter
00:24:24
Speaker
I still encounter that attitude that says online distance education is what that group do. So even though attitudes have changed really significantly and probably around a similar kind of timeframe to what you're describing in the US, you still have that now. And even through COVID, people were
00:24:49
Speaker
referring to online education as if it was only really the thing done by the Open University, because it was so unfamiliar to them in terms of the way you teach and the way that you deliver it, but also just in general knowledge of what's actually happening.
00:25:07
Speaker
Sorry, we overtook your agenda. No, no, no, no, no, no. I was trying to sort of think about some of the issues that we raised. And I think there's things still fighting themselves out here in the US as well. I have a deeply held belief that some of the things going on about an effort to intensely regulate the space comes out of a hostility towards online learning.
Debates and Challenges in Online Education
00:25:35
Speaker
as much as a hostility to private enterprise operating and perhaps making too much profit in the space or a concern about student debt. So I think there's still some interesting battles being fought there.
00:25:50
Speaker
Did you see the Cal Matters report that came out this week? Yes, that was exactly in my head. Okay, sorry. There's a report in California that looked at online education and the way they framed it was this topic that Morgan's saying. It's like the hostility is really what framed this approach to online.
00:26:11
Speaker
The two examples which they use are the UC University of California system, essentially putting the Kibosh on online learning and Calbright College. I plan to write this in my newsletter post, but it's like saying, well, there was the Titanic and the bridge to nowhere, so we should be skeptical about transportation in general.
00:26:38
Speaker
It's interesting because we definitely have a sense of snootiness around online education still, but there's not the direct kind of antagonism, if you could call it that, from government around it. There's just the lack of
00:26:56
Speaker
It's almost like it's ignorance a little bit. There's a lack of actually the way in which the regulation works, the way in which student financing works. It doesn't really acknowledge online students in the way that it should. And so we don't have the kind of, it's slightly softer and quieter, but there's still that kind of degree of opposition. It's just manifested in a slightly different way, I think.
00:27:24
Speaker
I think that online ed, and this gets to so much of what's currently happening with OPMs, it's a proxy war that's being fought. There are real issues with OPMs and regulations and performance, but so much of the noise, it's really a proxy war of traditional education fighting back or being afraid of online education.
00:27:50
Speaker
And I would even argue it gets into that concept of who is a learner. It's really the higher education grappling with the fact of who should we be serving? And online education so much expands that. Well, that's uncomfortable. So to me, I think the OPM quite often is a proxy war for other subjects that are coming up. But in the US, it's unavoidable. That proxy war, this is our Vietnam.
00:28:20
Speaker
I don't know if we want to get political on this, Morgan.
00:28:25
Speaker
Yeah, I think I think these are interesting issues. But pulling it back a little bit to the OPM thing, you know, I'd be interested in hearing especially from Neil, but also, you know, there was this article that that a lot of folks are talking about in that that came out roughly a week ago saying, you know, OPMs are on life support. And interestingly, I got an email from a friend asking, you know, is this is this true? Are you hearing this even
00:28:54
Speaker
in the case of the of the uk so i'd be interested in your uh reflection i believe phil might might have coined the phrase life support so he is responsible for that phrase so yeah it's a good one and i i read that article of interest i mean i i think
00:29:12
Speaker
I think if I can zoom out a little bit, one of the things that I really find challenging and a little bit disappointing sometimes around the discussion around OPMs is that it can become quite dualistic, it can become quite simplistic, and the reality is it's just a lot more complex and varied in nuance than all of that.
00:29:30
Speaker
you know, our OPMs on life support, there are certainly OPMs experiencing challenging financial conditions here in the UK, definitely, and have difficulty around financing and increased costs, and greater competition. And, you know, there's been universities have ended partnerships, there's universities are not wanting to kind of enter into the kind of
00:29:57
Speaker
traditional model of revenue share and all those kind of things. And there's a greater kind of swathe of options around how those arrangements work. But there's still a lot of appetite in the UK around OPM partnerships and what that particular model that I sort of described
00:30:18
Speaker
as the way I kind of think about OPMs. There's still appetite for that. And OPMs are still in the kind of position to deliver on that and are delivering on that for some partners. So inevitably, there are challenges around that model. And there are changes afoot. And there are companies who are performing and doing better than others. And there's a general sense, I think, in the industry that things have to evolve.
00:30:49
Speaker
But I don't think it's as simple as saying that old model is done with now, and it's onto the new model. There's unique financial headwinds and geopolitical and global headwinds that also affect just companies and tech companies in general. So there probably are some on life support or in different levels of health. And I don't think that means that
00:31:19
Speaker
where we're calling time on them and the traditional model just yet. Well, it's the guilty party here. It's funny, when you do an interview in the media, more common, more often than not, part of what you deal with is you have a new reporter and I might spend 30 minutes, 45 minutes on a call with somebody and a lot of its background information helping bringing them up to speed.
00:31:44
Speaker
And then we also talk about the story at hand. And so I spend 45 minutes and then an article comes out and I get like a one phrase quote. And it's not even like one of the core issues I was trying to make. So typically with interviews, that's my frustration.
00:32:03
Speaker
But it's part of the game. And I don't mind trying to help bring people up to speed. This one was a little bit different because it's like, oh, wow. Yeah, I said that in the spur of the moment. That became the headline. And then that was the framing of the whole story. So I admit to a little bit of, oh, geez, I wish I had thought a little bit more about it. If I had to restate it, I do. I agree. Certain companies are on life support. I mean,
00:32:30
Speaker
Let's be honest, 2U edX, their market capitalization, separate from their debt, is $180 million, roughly. I mean, this is a company that at one point it was worth $6 billion US. That's the enormity of the change. Pearson used to be the largest provider. They sold it. It's boundless. They lost their top three customers. They laid off a huge portion of their staff.
00:32:57
Speaker
So there are companies absolutely on life support, and there's questions about what's going to happen to individual companies. I think a better description would probably be that we're at an inflection point right now. It's just like in 2011, with the bundled services exception, that really was an inflection point that changed the trajectory of OPMs and the core business model.
00:33:26
Speaker
I push back when people argued that fee for service was getting rid of revenue share. I argued the same thing you said, Neil. No, it's just more options, more complexity. But today, if you combine the macroeconomics of inflation and therefore the cost of money and therefore what investors are looking for out of companies,
00:33:48
Speaker
And you add in the competition, how many schools are competing in their programs, and you add in regulations. Altogether, it's like, I don't think the market in two years from now is going to look very much at all like the 2019 market.
Future of OPMs: Saturation and Profitability
00:34:03
Speaker
So it doesn't mean there's not a need, but I think there's a pretty significant inflection point that we're going through right now. Yeah, and if I can just jump in on that, I almost think as well, maybe tying up some of the historical stuff, is that I think one of the big questions now is, you know, what do we do once everybody's online? You know, we talked about kind of the economics of OPMs, but there's also that kind of, you know, if we were saying in the past, online was more niche,
00:34:33
Speaker
Less well respected and now more are online. There's also kind of just a general The general sense in which that market is, you know very very different irrespective of the companies that are operating within it So Morgan, what was your initial reaction seeing that article in the framing of it?
00:34:51
Speaker
Yeah, I thought that was a bit of a, you know, an overgeneralization and an extreme point, you know, like certainly, as you said, some companies are having a rough time. And generally, the space in the US is a little fraught. But it's, you know, I remember reading Neil had a had a good blog post from March or so about, you know, there's a steady
00:35:14
Speaker
a steady flow of deals. But even right now, just looking in my inbox, all campuses have signed a number of different schools within the last few months. Cal Lutheran, Missouri St. Louis, Indiana Wesleyan, Tulane, Southern Methodist, and expanded a few others. Academic partnerships have signed St. Cloud States, and you think BISC, who we mentioned before, signed another
00:35:37
Speaker
partner in Eastern Connecticut State. So you're getting all this new business. What we don't get a sense of and what's nobody's mentioned and is interesting to me is, is who's leaving on the other side, you know, in the sense of either breaking contracts or, you know, something that has emerged sort of or that I knew on some level, but is hit B over the head.
00:35:59
Speaker
a little bit was the extent to which a lot of these deals are not actually profitable for some of these companies, and some of them are leaving them, and to quite a shocking level in some cases. I think that's a side of the debate that needs some thought about. For me, it's like, how can these OPMs actually have these deals on the books for this length of time and they're not being profitable? What's going on? Are they not picking well? What's going on there?
00:36:29
Speaker
I would argue it's free money. This is the same environment that's caused other run-ups well outside of education that while you have essentially zero interest rates, the market rewarded the story of growth. You never had to hit profitability. It was always how big could you become?
00:36:52
Speaker
And there was no pressure to go. This is why I would say it was a free market economy that was driving that. So every earnings call from to you was always talking about, we'll be profitable in the future, in the future, and we're growing this much.
00:37:11
Speaker
Once you get to the point of saying, well, but the cost of money is changing things, and so therefore, will you be profitable in two years the way you promise or are dangling in front of us? The simple math makes that change.
00:37:27
Speaker
And then investors changed on a dime. I mean, within a 12 month period, they suddenly change from a growth mindset to you have to be profitable and it has to be profitable this year or next. So the entire investment community around technology changed their mindset.
00:37:46
Speaker
And I would say the biggest driver was inflation. So there are other factors. But to me, that's the core reason that OPMs could keep unprofitable programs on their books for so long. It was a growth story. Yeah, I think to that point as well, like,
00:38:05
Speaker
I guess we talk about OPM university partnerships as if they're all equal. They are unique partnerships with their own flavor for each institution. And to your point, Morgan, around when those partnerships come to an end, there's a whole range of different reasons why those things happen. And they're usually things that you can glean, but they're not usually publicly available.
00:38:33
Speaker
They can range from the OPM not delivering to the university not really managing the partnership and leveraging it for their benefit. There's a whole range of different reasons.
00:38:48
Speaker
completely accept Phil's point. That's like a whole different kind of economic environment that kind of enabled a lot of this stuff. But also, you know, under the hood of the partnership, there's all kinds of things going on. You know, I think for universities, you know, they need to manage that partnership and get the most out of those partnerships. As much as the company, often the focus is on the company as either the villain or
00:39:14
Speaker
as you might put it. But actually, when you know and see the insides of those relationships, some of the reasons why they're not successful are a little bit more nuanced than a private company coming into education and not delivering.
00:39:33
Speaker
I have a question for Neil. When I think about what the future of an OPM might look like, or what a future of companies that support universities going online might look like, one of the things I think about is specialized marketing agencies. And increasingly, even schools that haven't worked with OPMs are working with multiple of these. So recently, I did a bit of a deep dive into one institution that's been doing online since the early 2000s.
00:40:03
Speaker
pretty successful program. They don't use an OPM, but they work with five or six external marketing agencies just for the online programs. And I see less of that in the UK, but it's probably I'm not looking in the right places or things. Do you see that as well? Is that a big industry there?
00:40:22
Speaker
Yeah, good question. It's hard to know definitively. I'm not sure how many are working with that number of agencies. I think that's an outlier. Yeah, yeah. I mean, it's certainly happening.
00:40:39
Speaker
I think, as I said earlier, universities in the UK are just looking for all different means of diversifying income at the moment because inflation means that their income from student fees has dropped to third. You mentioned about the politics of
00:40:59
Speaker
US regulation where we are at in our political cycle is that we're a year or maybe less out from a general election and there's going to be no appetite from the residing party or the prospective party to do anything around university finances. So I think
00:41:17
Speaker
I think what I see more manifested is a moves into online education and moves into transnational education. Those are the kind of things around basically international audiences. But I think that is an interesting element of potential evolution where it becomes about these kind of set of unbundled services.
00:41:38
Speaker
I think in order to be able to manage all of those kind of marketing agencies that you're talking about, you have to have a certain degree of capability and expertise on the university side to do that, and I think that's sometimes what gets
00:41:51
Speaker
lost in this kind of debate and discussion that, you know, partnerships are successful because of both parties being, you know, kind of driving a successful partnership.
Managing Successful OPM Partnerships
00:42:04
Speaker
So, you know, I think there's also the element of universities being able to essentially kind of manage those partnerships and know what they need and know how they kind of go about achieving and knowing where they need help.
00:42:17
Speaker
And I think I just wanted to pick up on something that Phil was saying around the kind of enrollment side of things as well. I think I also wonder a little bit how much the culture around return on investment on the university side played into what you were talking about because
00:42:36
Speaker
certainly I've found on occasions that universities aren't necessarily so strong on cost versus income of programs and managing that and being aware of it and some wonderfully british understatement yeah yeah look that this is what i'm here to do i think you know provide provide the understatement um but bloody awful that's what
00:43:01
Speaker
But you know, OPMs have kind of often clear targets and clear baselines around numbers of students for programs. And in a way that universities often don't, or they may be very happy with a number that an OPM would be squirming at, at the kind of how small the numbers are. So I suppose
00:43:21
Speaker
I'm always keen to have a look at both sides of these things as well. And I think that's an element of the program performance. And I think that's an element of being able to manage a more of an unbundled kind of approach, really. I think that requires a different type of maturity. In a way, it's a lot easier to just outsource everything, right? And kind of have a very light management of that partnership. But when you kind of
00:43:49
Speaker
deliberately going for specific services, you've kind of, I don't know, you've made a bit more of a judgment of what you feel you need and the capability and what you want to try to achieve. So in a way, you're saying the OPM was the general contractor, and now you're going to a situation where you maybe don't have a general contractor, you've got to handle the electrician and the plumber and the carpenter and all these kinds of different tradespeople by yourself, and it's a whole different skill set.
00:44:13
Speaker
Yeah and I've certainly heard of instances where universities have kind of been wanting to do that but haven't necessarily managed it in the kind of interests of the companies because you know maybe tenders haven't been
00:44:28
Speaker
you know profitable enough for companies to um to kind of you know go for them really so it's yeah it's all well and good kind of talking about that but there's there's factors on the university side that influence the success of of that side of things um but i i do think it comes down to maturity and i've always been of the impression that perhaps in the u.s you're a little bit further ahead in general terms than well well
00:44:59
Speaker
But we are, I'm not just saying that because there's two of you and one of me.
00:45:04
Speaker
Just on the issue of skills and managing it, I think that's a key issue. And actually, in the past couple of weeks, one of the things I've read is Maria Spies from Holland IQs dissertation, PhD dissertation, where she talks about some of the skills involved in managing it at OPM. And it's worth a read or worth getting in touch with me to give you the Cliff's Notes version of it.
00:45:30
Speaker
Well, I was just going to put that came back to me. You just described what I mean by a proxy war is I do think there's an inflection point. It's driven by competition. It's driven by inflation. It's driven by in some pretty fundamental changes with the companies and regulation. But what you read about is the proxy war. And now you have a weak industry with some weak players and people are leveraging that to make their other
00:46:00
Speaker
This is what happens when you have evil for-profit companies coming into education. So, yeah, there's a lot of noise and a lot of using the real situation to make some other point that's going on right now.
00:46:16
Speaker
Yeah, and I think that's sort of a component, isn't it, of the whole OPM discussion that generally there's a lot of kind of divisiveness, there's a lot of polarisation in terms of people's views, and that colours the debate and the discussion
00:46:35
Speaker
I think I would think I would say usually in unhelpful ways. I say that respecting people's right to take different positions on it, but it does sometimes cloud the reality, I think. But I think this has been a really great level set in terms of what are OPMs? What's going on right now? How do they fit into that broader trajectory of the growth of online learning? That was a nice little side route that I think we went down there.
00:47:05
Speaker
We should wrap up and take it up in our next discussion. There, I had to do some outro music. Please send money to our sponsors.