OCTOBER 27, 2015
By Sarah Brown
When the University of Florida announced last week that officials were terminating a big contract with Pearson Embanet to run the institution’s online academic programs, it stirred further questions about the for-profit companies at the heart of these partnerships, known as “online-education enablers.”
Some colleges that have enlisted enablers to move degrees online have seen success. Examples include Arizona State University and Georgetown University. But that’s not the case everywhere. Some institutions have not met enrollment targets, while others have drawn criticism from professors and other observers about outsourcing too much and paying a high price.
The Chronicle examined some of the partnerships that have not sailed entirely smoothly, and found some common themes.
1. There are inherent tensions between for-profit and nonprofit entities.
Nonprofit colleges are more interested in educational quality than for-profit companies are. That’s according to Steven Filling, chair of the Academic Senate of the California State University system. Enablers, Mr. Filling says, are more focused on “generating returns on investment for their shareholders. There are different motivations there.”
Mr. Filling used to be a board member for Cal State Online, the system’s ambitious online-education effort that involved a partnership with Pearson. Cal State Online, which began enrolling students in 2013, was drastically downsized after failing to meet enrollment targets, and Pearson no longer plays a major role in its operations.
The partnership didn’t work well, Mr. Filling says, because the university and the company had “disparate end-games in mind.” He doesn’t have high hopes for similar agreements elsewhere.
These conflicts are often more pronounced at selective colleges, which don’t necessarily share enablers’ aspirations to get the highest possible enrollment numbers, says Chris Ross, a managing director at Parthenon-EY, a business-strategy firm.
“An institution might say, We want to increase enrollment,” Mr. Ross says, “but when they are presented with a bunch of leads, they don’t accept those students.” The enabler, which often controls the marketing, “then struggles with what types of students to send their way,” he says.
At Florida, UF Online was plagued by low enrollment of out-of-state students. Pearson “did bring in a large amount of out-of-state leads,” says Evangeline T. Cummings, assistant provost and director of UF Online. The challenge, she says, “is how do you grow and build online programs that still adhere to the admissions standards on campus?”
Representatives of two prominent enablers, Pearson and Academic Partnerships, denied any such tensions.
2. The contracts between colleges and enablers tend to favor the latter.
Enablers’ contracts to run online programs might lock colleges in for 10 years or more and give the companies a lopsided share of the overall revenue — as much as 80 percent in some cases, at least at first, Mr. Ross says.
Enablers often contend that such long-term, high-revenue contracts are necessary because the companies assume much of the upfront risk of putting a degree program online. Todd Hitchcock, senior vice president for online solutions at Pearson Learning Services, says that it takes two to three years to adequately prepare an online program to enroll its first students, and then several more years to secure sustainability.
College officials are often willing to make those deals because they don’t have the upfront capital or resources to handle many essential services, such as marketing and recruitment, says Paul J. LeBlanc, president of Southern New Hampshire University, which is known as a pioneer in online higher education.
Mr. Filling says that, in his experience, major enabler companies also have “some really sharp lawyers” who are adept at negotiating contracts. The Cal State Online agreement, he says, “included a lot of stipulations that if we didn’t meet growth targets, Pearson could walk away.” Once California State officials decided to reduce Pearson’s role, he says, it took a year for lawyers on both sides to scale down the contract.
The contracts are changing, though, Mr. Ross says, in part because colleges “are driving a harder bargain.” As institutions become more savvy in online education, they are able to handle some services that used to be turned over to a third party. In such cases, the contracts are shorter, and revenue splits tend to be closer to half and half between the colleges and the companies.
Colleges are also more sensitive about contracts, Mr. Ross says, because the expansion of the enabler market has given them more choices.
3. Once colleges enter into a partnership, questions can arise over who controls what.
Jack Zibluk, a former president of the Faculty Senate at Arkansas State University, says the institution ceded too much authority to Academic Partnerships when it contracted with that company to help run its online-degree programs. Faculty members at Arkansas State still have questions about their intellectual-property rights, he says: “If you teach a course, do you own it, or does Academic Partnerships own it?”
Mr. Zibluk, who is now a professor of mass media at Southeast Missouri State University, says he is also concerned about the company’s instructional model. He cites the Academic Partnerships “coaches” who work with students, noting that “we had no control over who was hired and what kind of work they did.” That uncertainty is exacerbated by private companies’ lack of transparency, he says, as they don’t have to disclose “their financial models, or personnel, or procedures.”
Daniel Smith, a spokesman for Academic Partnerships, says the company “does not have any control over academic matters,” including “assessments, delivery of instruction, and intellectual property.” College administrators and professors manage the curriculum and course design, he says by email.
Thilla Sivakumaran, executive director of Arkansas State’s global initiatives office, says that Academic Partnerships “is solely a marketing firm” for the university and that it helps Arkansas State achieve a national reach that it otherwise wouldn’t have.
Mr. Hitchcock, of Pearson, says that his company also has a solid working relationship with professors. “It’s always their program,” he says. “We just kind of bring it alive for them.”
Still, questions about control might have implications for colleges’ accreditation, Mr. LeBlanc says. Under federal regulations, less than half of the work associated with recognized academic programs can be outsourced to nonaccredited providers, including enablers. “It’s unclear to some of my colleagues how much is too much — what can I hand over and what can I retain control of? And how does my accreditor feel?” he says.
4. Sometimes, enrollment projections don’t pan out.
Both California State and the University of Florida were in a hurry to go online due to pressures from state lawmakers. Officials crafted online-education business plans based on the assumption that tens of thousands of students would enroll within a few years, and they contracted with enablers to make it happen. But it didn’t.
Cal State Online had been projected to enroll nearly 17,000 students by 2013 but attracted only 138. Members of its advisory board later complained that the quality of Pearson’s marketing “was not adequate.”
The contract Florida signed with Pearson was based on projections of enrolling high numbers of online out-of-state students, who would pay more than four times as much as in-state students. Pearson’s failure to meet that target was a big part of why Florida officials terminated the contract, says Ms. Cummings, of UF Online.
In response to that criticism, Mr. Hitchcock emphasizes that deficient enrollment is not a problem for “the vast majority of our launches” at colleges. He says Pearson staff members engage officials at a college in discussions about the potential marketability of its programs before even signing a contract. Later on, Pearson recommends resources and support services that institutions should have in place, he says, and sometimes when colleges don’t follow the suggestions, “it can inhibit their ability to bring students in.”
Crafting a viable online program in seven months, as Florida tried to do, is a major undertaking, says Phil Hill, a partner at MindWires Consulting, which works with educational institutions. “I’m not sure that’s feasible, even with an online-service provider,” he says.
Ms. Cummings stops short of saying that Pearson’s marketing shortfalls were the sole problem. The company’s initial support, she says, was critical. Still, she says, Florida is now ready to handle most of UF Online’s components on its own.
A Growing Market
Despite some observers’ criticism of the partnerships, the enabler market is likely to continue to expand, says Mr. Ross, of Parthenon-EY. He estimates that it now includes 40 to 50 companies. In the future he expects more financially strapped small colleges to look to online programs as a fresh source of revenue. And since they do not have big endowments or much capital, he says, it is particularly attractive for them to share the risks and upfront costs.
Mr. LeBlanc, of Southern New Hampshire, predicts that the companies will also become major players in competency-based education, a concept that promotes academic flexibility by allowing students to complete degree requirements at their own pace, outside of the traditional structure of courses and semesters.
Still, Mr. LeBlanc has spoken with a number of college leaders, and some of them remain skeptical of the partnerships. They wonder, he says, whether they will be “giving up a lot of dollars” that they “may or may not have to.”
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