There is a significant shift occurring in online learning—one that puts students and pedagogy into the driver’s seat, and colleges and universities seeking new ways to increase enrollment and revenue.

One barrier for colleges to capture this revenue has been the business model of the companies whose business it is to help them create and deploy online programs—they take approximately 50 percent of the program’s revenue as payment for their services (they typically handle marketing, recruiting, enrollment management, curriculum development, course design, support and technology hosting). These online program management providers (OPMs) have the benefit of reducing up-front investment, but the cost is prohibitive for many, effectively slowing down the movement to online learning.

However, a new fee-for-service unbundled model has emerged to fill this void.

As online degrees become more ubiquitous (Eduventures estimates that there are approximately 24 million students enrolled in higher education, 2.85 million of which are enrolled exclusively in online programs; enrollments in online graduate programs are expected to surpass 30 percent of all graduate students), simply offering online programs is no longer a differentiator.

And, while colleges and universities are looking for opportunities to offer more unique and engaging learning experiences, the baseline requirements remain the same—increased enrollment, revenue, student retention, and student satisfaction.

The Pedagogy-Focused, Unbundled Fee-for-Service Model

The new unbundled, fee-for-service model for online program development is emerging, and it focuses on pedagogy as the driver for technology decisions rather than the other way around.

In this model, colleges and universities take more control over the curriculum, student experience, marketing strategy and revenue model. Unlike the traditional, bundled, revenue-sharing approach in which the OPMs take 40 to 60 percent or more of online tuition, schools make the initial investment for services and then retain all of the tuition revenue.

(Next page: Why pedagogy is becoming online king)

Pedagogy as Differentiator

The requirements for the online computing environment for an online degree differ quite remarkably from that which supports a face-to-face program. Either adopting standard LMSs or working with OPMs whose very business model is based on reuse results in an online program having limited differentiation from its competitors.

It is hoped that a college has a clear vision of each of the following:

  • How its pedagogy or teaching methods differ from competitors;
  • How it envisions social interactions among its own faculty, staff, students, alumni, and the community; and
  • How services to students are provided both within the curriculum and in extra-curricular activities.

It would be surprising if unique visions of the above could be enabled by generic OPMs. On the other hand, this is the very reason for the emergence of unbundled providers.

In Action

Here is an example of how the above gets realized:

A school wants to make its unique pedagogy come alive while also ensuring the learner experience outside the virtual classroom is as seamless and engaging as possible.  A learner and faculty experience is created that integrates multiple third-party tools (where appropriate) through custom code that brings together user experience professionals, an instructional design team, and technologists who are knowledgeable about the latest tech stacks and coding techniques. This is done without revenue sharing —payment is based on time-and-materials with no long-term contract or residual payments.

While the traditional OPM model tends to be a better fit where resources are limited, the unbundled approach complements institutions that are seeking to take online learning to next level, are looking for a more unique and customized learning experience, and want to do it on a fee-for-service basis so they can pick and choose program elements that best align with their program goals and the overall academic brand.

Eduventures’ recent survey of 175 online learning leaders indicates that institutions currently engaged with OPMs are expressing a more nuanced set of goals and priorities for these engagements than they have in years past. Compared to results from a similar survey conducted in 2015, institutions continue to exhibit strong interest in marketing and recruitment services, but appear to have a greater expectation that their OPM provider will improve student performance metrics through better online course experience and enhanced support.

As the market for online learning continues to grow exponentially and vendors jockey for position, one thing is certain: colleges and universities, as well as their students, will be the beneficiaries.

About the Author:

Dr. Scott Moore is a Principal Learning Strategist at ExtensionEngine, a leading provider of custom learning experiences.  He leads the company’s practice for higher education and works with universities on strategies for creating strategic and differentiated online courses and programs. Prior to joining ExtensionEngine, he was a faculty member, administrator, and dean at Michigan Ross and Babson College for 20+ years. Scott holds a Ph.D. in Decision Sciences from Wharton.

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