The State of EdTech: OPMs, Risk Planning, and Generative AI:

Changing Higher Ed Podcast 189 with host Dr. Drumm McNaughton and guest Phill Hill

Table of Contents

Changing Higher Ed Podcast 189 The State of EdTech- OPMs - Risk Planning and Generative AI | with Drumm McNaughton and Phill Hill
Changing Higher Ed Podcast | Drumm McNaughton | The Change Leader

January 9, 2024 · Episode 189

The State of EdTech: OPMs, Risk Planning, and Generative AI

45 Min · By Dr. Drumm McNaughton

In this episode of Changing Higher Ed podcast, listeners will gain an overview of how technology is reshaping the EdTech arena and the potential risks of the current state of OPMs.

In this episode of Changing Higher Ed podcast, listeners will gain an overview of how technology is reshaping the EdTech arena and the potential risks of the current state of OPMs.

Dr. Drumm McNaughton discusses contemporary EdTech trends and predictions with Phil Hill, publisher of Phil on EdTech Blog and partner at MindWires LLC. They explore topics ranging from the recent changes in the OPM market due to enrollment, regulations, and cost of money, the potential transformations brought about by generative AI in higher education, to how universities can navigate the existential changes impacting the industry, underscoring the importance for institutions to develop effective risk management strategies.

Technology’s Role in Enabling Enrollment Growth

Franklin University exemplifies how technology can be leveraged to enhance enrollment and streamline educational processes. The university has established over 1,300 articulation agreements with community colleges across the country. These agreements are not just on paper; they are integrated into a sophisticated technological system. When a student from any of these community colleges applies to Franklin University, the system can instantly inform them about the transferability of their courses into their desired degree program. This efficient use of technology enables prospective students to get immediate clarity on their credit transfers, significantly enhancing the enrollment experience.

During the pandemic, this technological edge contributed to Franklin University’s enrollment growth of 4-5%, a notable achievement in a challenging period. Post-pandemic, the university’s enrollment numbers have surged into double digits. This success story underscores the crucial role of technology in not only supporting administrative functions but also in driving institutional growth.

Sculpting World-Class Education Through Technology

The rise of online education, especially during the pandemic, has led to an increase in the supply of programs, intensifying program-to-program competition. This competition drives institutions to not only offer quality education but also to find their unique selling proposition (USP) – something that distinguishes them in a crowded market. For example, an institution known for forensic science might develop an online MBA program with a specialization in that area, leveraging its unique history and specialization.

This trend highlights the importance of institutions knowing their strengths and using technology to develop niche, world-class programs. The competitive landscape in higher education is pushing institutions to not just be another “plain vanilla” entity but to utilize their unique attributes to serve students effectively. Technology plays a pivotal role in this scenario, helping institutions to navigate these competitive dynamics and strategically position themselves in the market.


Breaking Down Silos with Technology Integration

Technology’s influence on higher education is leading to a significant shift in institutional structures, breaking down traditional silos between departments. This change is driven by the need to address enrollment challenges more effectively. In the past, when enrollments were more stable, it was common for individual schools or departments to handle issues independently, often without considering the broader impact on the institution.

However, the escalated trend of declining enrollments has necessitated a more integrated holistic approach. Institutions are realizing the importance of collective impact and are thus being compelled to foster collaboration among departments that historically operated independently. This shift towards a more cohesive operational model is essential not just for improving enrollment but also for retaining students by providing the necessary services, such as effective advising and course selection support. Therefore, technology is playing an important role in addressing these broad megatrends and reshaping the landscape of higher education.


Generative AI and Its Implications

Generative AI is being viewed as a potentially transformative technology in higher education, marking a significant departure from previous trends. Reflecting on the emergence of Massive Open Online Courses (MOOCs) like Udacity and Coursera around 2011-2012, there was initial hype about their potential to fundamentally transform higher education. However, this transformation didn’t materialize as expected. While MOOCs had an impact, particularly in helping schools transition online and making higher education administrators take online learning more seriously, they weren’t transformative in the way initially anticipated.

Generative AI, on the other hand, is considered the first technology since the World Wide Web with the potential to fundamentally change and transform education. Its capability to generate content could revolutionize how educational content is created and delivered. This technology might simplify content creation to meet academic standards while keeping faculty in control of what’s taught. It could potentially eliminate many intermediaries in content creation and enable the development of more specialized educational content tailored to individual students or programs. This could also lead to changes in the cost structure of education.

The potential of generative AI in education is still in its early stages, with business models and capabilities yet to be fully realized. However, the transformative nature of AI in education is expected to be a major story in the next 5 to 10 years. 


Generative AI, Personalized Learning, and Accreditation Challenges

The personalization of the educational experience, including teaching and content, raises complex challenges, particularly in terms of accreditation. As educational instruction becomes increasingly personalized, it presents a significant dilemma in accrediting colleges for their programs.

This level of personalization complicates the process of ensuring quality and consistency, leading to potential disruptions in fundamental operations and quality assurance. The dynamic and real-time nature of content specialization makes it difficult to standardize what is taught and how it is assessed, opening up challenging questions about maintaining academic standards and integrity in a highly personalized educational landscape.


Significant Changes in the OPM Market

The Online Program Management (OPM) market is undergoing significant changes, primarily driven by three mega-trends: enrollment and program-to-program competition, regulatory changes, and the cost of money. In a previous podcast, Phill Hill broached the OPM’s risky model.

Prominent providers are facing significant challenges. Notably, Pearson sold their OPM business for just $1, and intriguingly, their stock price increased following this sale. Wiley agreed to sell their OPM business to Academic Partnership for a modest sum, considering the market standards. Additionally, 2U, a major player in the market, is grappling with financial difficulties. The co-founder and long-time CEO of 2U stepped down amidst concerns about potential bankruptcy if the company fails to refinance its debt.

These changes reflect a broader market shift and highlight the need for adaptability and strategic rethinking within the EdTech sector.


Risk Planning: OPM Disruptions to Institutional Operations

Approximately 20-30% of higher education institutions rely on OPMs for their online offerings. This heavy dependency raises concerns about the institutions’ readiness to handle certain functions in-house should the OPM market collapse. OPMs play a crucial role in providing services like 24/7 response systems for prospective students, something that many schools are currently not equipped to handle independently.

The potential upheaval in the OPM market, especially with changes in bundled services exceptions and regulations around third-party servicers, could lead to widespread chaos across online higher education, necessitating immediate attention to enterprise risk management planning. This situation underscores the importance of having robust processes and skillsets in place to manage the challenges posed by these three mega-trends in the EdTech market.

Three Key Takeaways for Higher Education Presidents and Boards

  1. Embrace Existential Change: Recognize the current challenges as opportunities to innovate and reach new student groups.
  2. Humility in the Face of Generative AI: Acknowledge the transformative impact of AI and be prepared for continuous learning and adaptation.
  3. Breaking Down Silos: Foster collaboration both within and outside institutions to develop comprehensive solutions to emerging challenges.


Final Thoughts

This episode offers a rich and comprehensive overview of the current state and future prospects of EdTech. The insights shared by Phil Hill are invaluable for higher education leaders seeking to navigate the rapidly changing landscape. Understanding the trends, challenges, risks, and opportunities discussed should be an addition to strategic planning and risk mitigation for institutions aiming to stay ahead in a technology-driven educational environment.


About Our Podcast Guest

Phil Hill, publisher of Phil on EdTech Blog and partner at MindWires LLC. Phil has been a market analyst and consultant in EdTech for over two decades. He is most notably recognized for writing his blog, On EdTech.

Phill on LinkedIn →


About the Host 

Dr. Drumm McNaughton, host of Changing Higher Ed® podcast, is a consultant to higher education institutions in governance, accreditation, strategy and change, and mergers.



The State of EdTech: OPMs, Risk Planning, and Generative AI

Changing Higher Ed Podcast with Host Dr. Drumm McNaughton and Guest Phil Hill


[00:31:05] Drumm McNaughton: Thank you, David. Our guest today is Phil Hill, publisher of Phil on EdTech Blog and partner at MindWires LLC. Phil’s a lifelong learner who transitioned from educational technology consulting after working in the engineering field for many years. He’s the go to expert in EdTech and has the ability to spot trends in the EdTech market. And he’s not afraid to ruffle a few feathers in the process. Phil’s worked with the who’s who of online education institutions, and with EdTech in the news more and more, Phil joins us today to talk about the state of EdTech, where it’s going, what university presidents need to know to take advantage of current market forces. welcome back to the program.

[00:31:54] Phil Hill: Well, thank you. I’m looking forward to the discussion.

[00:31:57] Drumm McNaughton: Yeah, me too. You know, I don’t have a lot of techies on the show. Probably purposefully because they make me look woefully inadequate, but I always enjoy having you on because we have such great conversations about what’s going on in higher ed tech. Last time we talked about the OPMs and we’ll talk about that a little bit, but today let’s focus on some of the mega trends that you’re seeing in higher education technology and do a little prognostication about 2024.

[00:32:32] Drumm McNaughton: How’s that sound?

[00:32:33] Phil Hill: That makes a lot of sense to me. And tech is definitely touching more and more. So part of what’s good is it’s integrated. You get into the broader subjects, just not the tech itself.

[00:32:42] Drumm McNaughton: You certainly hope so. I know when I work with clients, it’s not technology for technology sake, it’s tech for business sake. How can we use technology to solve business problems? So for me, you’ve got a fascinating background. If you wouldn’t mind sharing a little bit of that with the guests? Blow me away as you always do.

[00:33:04] Phil Hill: Well, so speaking of technology, I am an engineer by trade, if you will, engineering background, but I always fit between the engineering and the business that was being done, whether it was when I was in the military or out. out. It was always, how does technology get used? So I was doing that for a while and I guess I got tired of having a respectable job. So I tried a hostile takeover of a company, back in 2000 and, that failed. And that’s where I discovered the lesson that if you try a hostile takeover and it fails, you tend to lose your job. And that put me into consulting. And consulting, I needed to pick a market and education was the one I enjoyed the most. And there was a great need for how do you effectively use technology and education.

[00:33:54] Phil Hill: So, just over two decades ago really started focusing on educational technology and mostly in higher education, but somewhat in K -12 and other spaces as well.

[00:34:05] Phil Hill: And essentially what I do is focus on how do you use it effectively? And it’s at the intersection. Sometimes it’s helping schools understand markets. You know, why is the technology do what it does? And what can I expect in the future? Who can be my best partner? A lot of times it’s the reverse. Technology companies wanting to understand why do higher education institutions work the way they do.

[00:34:31] Phil Hill: and lately,

[00:34:33] Drumm McNaughton: I can’t help but laughing on that one.

[00:34:34] Phil Hill: yeah, well, and it’s, yeah, it almost becomes a marriage counselor in a dysfunctional marriage. And, that’s the challenge. But lately, there’s been so much significant change in academia, that I’ve fallen much more into a role of looking at the bigger, broader trend. Enrollments, regulations, finances, because these broad, macro trends, even outside the control of education, they’re impacting education.

[00:35:04] Phil Hill: And so a lot of the role that I’ve really, been doing over the past five or six years has been getting in to understand these broader trends. broader movements and what it means and how it’s impacting and likely to impact not just educational technology, but how it is deployed in colleges and universities.

[00:35:23] Drumm McNaughton: Mm-Hmm. , what does a typical engagement look like for you? Or is there such a thing?

[00:35:27] Phil Hill: Well, by usually we do shorter term engagement, particularly if there’s a defined thing, we need to develop a virtual lab strategy so that we can do, you know, wet labs in an online course. And a typical one with the school, it might be a couple of months of working with them on how to pick a vendor, but realizing the real problem is, do you know what your strategy is in the first place? Do you know what’s unique about yourself? Now, you’re ready to pick a vendor. Having said that, our biggest client, we’ve been working with the Colorado Community College System for over three and a half years as they’re transforming how they’re doing online education across the state.

[00:36:10] Phil Hill: So I guess a short answer, going back to your question, no, there’s not really a typical per se, but with universities, it’s how do you make technology enabled change can be three to six month engagement can be multi year engagements. And then with market analysis, that’s getting much more into the newsletter is a key part of it. But we also do a lot of analyst briefings. So if somebody said, Hey, we want to be able to bring you in and talk about a specific topic for an hour or two, or speak to the board, you know, we do those types of brief market analysis engagements as well.

[00:36:46] Phil Hill: I wish I had a more concise answer for you there.

[00:36:48] Drumm McNaughton: Oh, no, that, that makes a lot of sense. It, it sounds a lot like my firm where, you know, you focus on technology. A lot of it has to do with online, we focus on governance, whether it be board, whether it be faculty, accreditation, strategy and change and we’re getting into mergers as well, but the types of schools we work with, they’re all over the map, public, private, for profit, it, it doesn’t really matter. It’s more of, in your case, we know technology, we know how it needs to be. Let’s apply that broad knowledge that we have to your particular situation to make it work.

[00:37:32] Phil Hill: Yes, exactly. And yeah, and it’s, so many of the challenges we face, they’re not unique to one sector or the other. It’s, they might have a different language behind them, but there are a lot of common issues that all schools are dealing with.

[00:37:46] Drumm McNaughton: Oh, absolutely. Technology, governance the same way. I’m a board leadership fellow from the National Association of Corporate Directors. And you can’t believe the number of things I see working with higher ed boards that I go, yeah, there’s a tool that I have from the corporate background that would work here.

[00:38:06] Phil Hill: One anecdote, and this is how things have changed. It was like 18 years ago, I was working with a public state university flagship, and I was applying that same type of rationale. Hey, I’ve seen the problem you guys are going through. You could learn a lot from the corporate world and apply it and solve your problem.

[00:38:26] Phil Hill: And I had a CIO pull me aside and said, listen, Phil, just say it’s your idea. Even if you learned it from others, we don’t want to learn from the corporate world. And so it was, there was a active desire to not learn from others. I think things have changed. You still have a little bit of that insular mindset, but I think that, most institutions now are much more willing to look at outside sources for lessons learned.

[00:38:53] Drumm McNaughton: They have to be, yeah. they have to be, but they need to relate to the giver of the information. And that’s something that’s something that you do very well. And I like to think that we do very well

[00:39:06] Phil Hill: Oh, thank you. Yeah. Well, it’s probably part of the reason we like talking to each other as well.

[00:39:12] Drumm McNaughton: Mutual admiration society, got to love it. So let’s get down to mega trends. What’s going on in technology that’s affecting higher ed?

[00:39:26] Drumm McNaughton: Or what’s not going on might be an easier podcast episode to do. Well, we want to have, we want to have at least, 20 minutes rather than just three minutes. Thank you very much. What are the three takeaways?

[00:39:39] Phil Hill: So, well, one of the broader contexts for this whole discussion comes down to enrollments. Particularly in the U. S., higher education enrollments have been going down for over a decade. And the pandemic made it worse and added noise to the system, but now it’s early 2024.

[00:39:57] Phil Hill: We’re into a new status quo, but we’re still dealing with reduced enrollment. So that makes an existential problem for institutions on how do we serve new student groups? What do students need? What about working adults? And how is this different than the mission I had two decades ago? And so that’s so much of the megatrend that’s driving technology adoption.

[00:40:24] Phil Hill: So much of why are you doing technology in the first place comes down to helping a school deal with enrollment challenges, which quite often come down to, we’ve been serving the wrong student group based on their current needs. And right now, particularly in, community colleges, that problem is very severe and challenging what they do.

[00:40:47] Phil Hill: And so schools are looking for things such as, do we go below the degree? You know, do we offer, do certificate programs or do we need to do multiple starts per year or purely online so that we can serve more of the working adult who can’t come to campus and do traditional education?

[00:41:06] Phil Hill: So if you look at those problems, that’s where so much of technology fits in. How do you develop an effective online education program, including all of the support services to help those students succeed?

[00:41:20] Drumm McNaughton: One thing that I’ve seen is, and technology is changing this to some degree, is colleges are not working as much in silos anymore, and to be effective in enrollment, you’ve got to have people talking to one another.

[00:41:37] Phil Hill: Yeah. And I chalk a lot of that up to the existential nature. It used to be when enrollments were more stable you would take a lot of these topics and say, that school or that department deals with it. It doesn’t affect us holistically. And I think part of what’s happening now is people are realizing, no, it impacts everybody in the institution. And one of the main reasons is enrollment challenges. So, part of the good news is silos are breaking down just by necessity. And so you’re being allowed or forced to get people working together who historically have not worked together. And, you know, if you go back, if you deal with enrollment, the best way to improve your enrollment is to improve retention, keep the students you already have. Well if you’re going to keep the students you already have, well how are you actually providing the services they need are you giving them advising that answers their questions helping them pick the right courses etc? So yeah actually to a certain degree i would say it’s a great time to be working on these subjects because people are willing to break down silos and it’s important topics.

[00:42:51] Phil Hill: So that’s where technology is dealing with those challenges from a broad megatrend.

[00:42:57] Drumm McNaughton: Mm hmm. I heard another, speaking of enrollment, I had a conversation with David Decker, who’s the president at Franklin University. I was blown away. They have well over a thousand, it’s like 1, 300 different articulation agreements with community colleges across the country. They’re online or, you know, 90 percent online.

[00:43:24] Drumm McNaughton: But not only do they have these agreements, they also have the prerequisites and the credit stuff programmed into the computer. So when somebody applies from XYZ Community College, they can tell that student within five seconds, these are all the courses that are going to transfer into your degree. I mean, that is a super use of technology.

[00:43:50] Phil Hill: It certainly is. I would guess, however, that if you really jumped into it, the more difficult decision was not on the technology per se. It was getting the permission or the way to standardize the courses taken and how that maps to the schools that they have the articulation agreements with to be able to do that type of mapping.

[00:44:13] Phil Hill: So, yes, I, that’s definitely a great usage of technology, but there’s a huge human component that I’m sure went along with that.

[00:44:20] Drumm McNaughton: oh, absolutely. But without the technology, it would have been all human. And what would that do to your transfer rate? I mean, during the pandemic, they grew as a institution, their enrollment grew, you know, 4 or 5%, but you know, that’s huge during a pandemic. Now they’re back up over double digits.

[00:44:44] Phil Hill: Yeah, that’s a great service and you know, there’s a challenge on the other side with reducing enrollments, but a recognition that we need to meet students in a different level which often leads to online education. Another impact is an increase in the supply of programs. So particularly with the pandemic, you now have more and more academic institutions offering online programs, which are therefore in competition with each other. So there’s more and more competition. And so you’ve got the supply and demand challenge. So, even if the demand, the number of students wanting to do online education, is growing, they have a greater number to choose from, but then that makes it more difficult for each individual program to get to the scale where it’s self sustaining, break even financially, and can meet the, whatever the institution’s needs are.

[00:45:42] Phil Hill: And this one, I haven’t seen this discussed a whole lot, but this program to program competition is driving a lot of the dynamics that we see right now as schools try to figure out how to change their mission and their operations.

[00:45:57] Drumm McNaughton: I fully agree with you. I mean, I’ve heard multiple mergers happening. With programs like this that the acquiring institution wants the acquired institution to create a world class program in X, Y, Z, and this same thing goes for marketing, and it goes for a whole other host of reasons. That’s the fact of life. If you’re not offering world class, whether it be on the ground or online, why bother

[00:46:31] Phil Hill: And there’s sort of an element of world class and a niche market. Like, we’re doing what’s unique to us. Our institution has a unique history, a unique specialization, so we’re not just going to build any old MBA. We’re going to build an online MBA that specializes in forensic science that our school is known for.

[00:46:53] Phil Hill: So there’s sort of a competitive, you need to be world class, but you also need to be you. You need to recognize you’re not just a plain vanilla institution, but here are our strengths and here’s how we can really serve students in the market. So that competition is another general trend that’s driving the usage of technology as well to help solve these problems.

[00:47:18] Drumm McNaughton: And it does go back to, at least I think, it goes back to institutions knowing who they are and what their USP, their unique selling proposition or their value proposition is. If you don’t know that, then you know, it’s like, if you don’t know where you’re going, any roads going to take you there.

[00:47:36] Phil Hill: Yes, and part of what I think you see is I mean instant academics, in particular faculty, are not used to discussing things in these business terms, even though in today’s environment you need to have a real strategy behind it and one of the impacts is that faculty quite often are saying, okay, I’ve been hearing we need to do online education for years and ten years ago. Somebody told them, you know, it’s a whole new world. Okay, I agree, let’s do it. But they don’t realize, yes, but the environment today is very different than 10 years ago, and it’s much more important to have this unique selling proposition. It’s much more important to understand you’re in competition, in a way that you wouldn’t have been if you had done it 10 years ago. It’s an interesting and challenging moment that we’re in right now.

[00:48:27] Drumm McNaughton: Absolutely, and with this oversupply of online education providers and not as many students, you really need to focus on knowing what your USP is and being able to reach out to the appropriate demographic students who would want it.

[00:48:47] Phil Hill: Yes. And I’ll throw in another trend that’s happening right now that’s technology related. The cost to reach out to those specific students is going up. Google AdWords is what most people think of. How do you do a targeted digital marketing approach to reach students that keeps going up and up, partially because there are so many people bidding on the same words.

[00:49:09] Phil Hill: But then that makes marketing, which is more important, gets more and more expensive. And there’s a legitimate question of how much higher education money should go into marketing. And that dynamic of how do you cost effectively reach prospective students and target the ones who could succeed in your school, that’s becoming a major challenge for schools to deal with, both from a financial standpoint, but also a regulatory standpoint, because the Department of Education is really asking some tough questions in this area as well.

[00:49:45] Drumm McNaughton: I remember, I wouldn’t say a friend, but a guy I had on my podcast who I really respected a lot. He came out of the business community and he ran his college like a business. One of the first things he did was he stopped doing blanket marketing out to multiple states and started focusing on his state and within a hundred mile radius of the college.

[00:50:13] Drumm McNaughton: His enrollment went up. Which, makes perfect sense. You’ve got a targeted audience instead of using a shotgun.

[00:50:20] Phil Hill: yeah, no, it’s a very good point. The University of Florida Online that I’ve written about several times, when they first came up with the program to develop UF Online at the University of Florida at Gainesville. Their initial idea is our brand is going to reach us throughout the country.

[00:50:36] Phil Hill: And the tuition rates paid, obviously out of state is much higher than in -state. And so they had these grandiose ideas of, I think they said their initial mix would be pretty close to 50 /50 in -state and out of state. Well, the very nature of what students are doing is they’re choosing, even when they choose online, they choose schools near them, with a few exceptions.

[00:51:00] Phil Hill: And so, UF Online just had a whole bunch of wrong assumptions. But to their credit, they refocused, similar to what you’re describing, they refocused and said, listen, this is who’s coming to us. It’s mostly from our own state or maybe close around us. That’s all we’re going to market to. And we’re going to provide the services based on those students. And now it’s got a sustainable, successful program. I think they got rated number one in the U S News and World Report for online bachelor degrees. Which I know that’s a fraught topic, the ratings, but but it’s an example of a school that, who recognizes this changed environment and makes a change because of it.

[00:51:39] Drumm McNaughton: I remember Carol S. Lanyon years ago saying you got to break students out into two groups. Traditional, you know, your 18 to 24 year olds right out of high school, et cetera. And then your non trads, and your non trads are the ones who are going to be looking more at online education. But, the interesting thing is they will normally enroll at a college or university within 40 to 50 miles of where they live.

[00:52:09] Phil Hill: Yeah, it’s counterintuitive, but you see it in research after research that that’s the case. But that’s also the opportunity for local schools to say, let’s build on the fact that we’re in the community. And, you know, build on that advantage, if you will.

[00:52:25] Drumm McNaughton: Absolutely. You mentioned regulation. You know, we can’t have technology without regulation. So talk to me about that.

[00:52:34] Phil Hill: Well, this is, probably the part of the work in ed tech that’s changed the most over the past year, even more than enrollments. And that is the U. S. Department of Education has come out with a very strong regulatory agenda. And one of the themes has been looking at student debt. There’s too much student debt, students graduating with debt they can’t afford to repay.

[00:52:58] Phil Hill: But that’s been translated, along with this view of consumer protection. And the department and their allies saying, we need to protect students from predatory actors. You hear the word predatory all the time. And so they’ve enacted regulations, well, not always regulations, but regulatory guidance, which doesn’t even go through the same channels. Such as the third party servicer or TPS guidance expansion they did last February. And the intention was primarily in the online program management market. They want to know what’s happening and make sure that they’re not driving up student costs, etc. But they’ve crafted this regulatory guidance in a way that it would have impacted the entire ed tech industry, whether you’re OPM or not.

[00:53:47] Phil Hill: And so, there’s other actions going on, but that’s very indicative of the environment that we’re in. The Department of Ed ended up pulling back on that, based on massive pushback and public comments, but they’re still talking about, sometime in 2024, editing and re releasing the guidance.

[00:54:07] Phil Hill: At the same time, they’re also reviewing whether to get rid of the bundled services exception, which we talked about last time. It underpins tuition revenue sharing models for OPM companies. And that, so much of what the Department of Ed is they’re convinced that’s where bad actors live, or so many of the bad actors. And so they’re really trying to rein in that market, and it is possible that they will rescind the guidance from 2011 that allows revenue sharing. That would be an existential change for a market, not just for institutions, but for OPM providers. And it’s got, you know, it’s the combination of tps guidance And the review of the bundled services exception has really brought federal regulations to the forefront of ed tech discussions.

[00:55:05] Phil Hill: Now, it’s not, you know, trying to find bad actors, but it’s also dealing with the things we’ve already talked about, student debt being too high, but also how much money should be going into marketing. If you look at the rev share and the amount spent on marketing, it’s extremely high rate.

[00:55:23] Phil Hill: There’s a legitimate question of how much of our public fund should be going, whether it’s through a school or not, into marketing. And that’s a very legitimate question. So we have a environment that’s changing, and those are sort of the drivers. One of the impacts is, particularly for OPMs,

[00:55:44] Phil Hill: OPM companies they’ve changed significantly, since we last talked even. So out of the what used to be known as the Big Four, 2U, Pearson, Wiley, and Academic Partnerships, they were the biggest OPM providers with the broadest customer base. Of those, Pearson sold their OPM business for $1, and their stock price actually went up, too. Wiley they’ve agreed to sell their OPM business to Academic Partnership and for a fairly small amount, if you look at the multiples. 2U, the co founder and long time CEO, stepped down, and at the same time, if you look at their balance sheet, they’re facing potential bankruptcy next year, if they don’t refinance their debt. So they have a real financial crisis they’re going through, so they might pull through. And even if they go bankrupt, they’ll keep operating. But think about that. Three of the biggest four OPM providers either said, we’re out of the market, the parent company said, we don’t want piece of this market, or they’re in financial crisis and that’s a big change to the market right now that’s happening and one of the two drivers, I’d say two of the three drivers we’ve already talked about. One is the enrollment and the program to program competition. Another is regulations, and then a third which we can get to if desired gets into the cost of money. That because of inflation, the cost to borrow money, it’s changing the underlying investment picture for companies. Here’s a market that’s in turmoil right now. And even just, even in the time period since you and I talked last.

[00:57:31] Drumm McNaughton: Yeah. Well, it’s interesting because OPMs provide, what percentage of programs, online programs do you think OPMs provide to institutions?

[00:57:43] Drumm McNaughton: 30%?

[00:57:44] Phil Hill: Yeah, 25, 30%, somewhere in that neighborhood.

[00:57:48] Drumm McNaughton: Okay. So right there, you’ve got, yeah, just for argument’s sake, you’ve got 25 percent of the institutions depend on the OPMs for their online offerings.

[00:57:59] Drumm McNaughton: Some of these folks are going to be hurting, some of the colleges and universities hurting if this market collapses.

[00:58:07] Phil Hill: Oh, absolutely. But yeah, there are reasons that OPMs exist, and there are reasons that the revenue sharing model underneath OPMs exist, and part of it is that schools, for the most part, don’t have the capabilities needed in this space, and one of it is simple as outreach to prospective students. Well, so many students who are interested in online, they might be researching your school Friday night at 11 p. m. Well, if they have a question, they’re not going to wait until next Tuesday or Wednesday to get a response. They need 24 by 7, they need to have a response in a matter of hours or even minutes sometimes, not in a matter of days or weeks, which is how schools traditionally handle that type of feedback with prospective students.

[00:58:58] Phil Hill: OPMs provide that type of real time feedback, customized to what students are asking for. They know how to follow up with them. And a lot of schools that have partnered with OPMs, they say, okay, you guys are solving that problem. Thank you. But what happens if that arrangement has to go away or change? It’s not like the majority of the schools say, oh, we can handle it now. The majority of schools still don’t have the processes and the skill sets to take over this work that the OPMs are doing. So there’s still a very real need. And you’re right, if the market blows up, you know, particularly with the bundled services exception, if they change that, that will mean hundreds of schools that are having to renegotiate contracts and figure out, can they provide these services or do I get it from somebody else? So it would be chaos across all of online higher education, not just with specific vendors.

[00:59:59] Drumm McNaughton: Well, I’m gonna, you know, put out a big hint, hint, hint. If you do not have enterprise risk management planning going on at your institution, now might be a good time to start thinking about it.

[01:00:14] Phil Hill: Or five years ago might have been a good time to start thinking about it, right?

[01:00:18] Drumm McNaughton: Yeah. You know, Yeah. Yeah, absolutely.

[01:00:22] Phil Hill: I’m 100 percent on board. That is one of the biggest areas is, yeah, risk management and asking yourself these tough questions now and not waiting until there’s a change. So, so this is a market heavily relying on technology. It’s got a real service, a real reason it exists, but it’s in turmoil for these big, the three big megatrends we mentioned, enrollment, regulations, and the cost of money. You Know, how, how you finance a company.

[01:00:52] Phil Hill: You know, there are other markets going through challenges, but this one is the, biggest public face of turmoil on the ed tech market. And it comes at a time, it’s not like demand for online education it’s going down. It’s just how you provide it is where the big challenge is..

[01:01:10] Drumm McNaughton: I wonder, I just read something this week about a couple of colleges, Kentucky State being one of them, that are currently outsourcing their Title IV financing and all of their advising under that. I wonder if there’s an opportunity here for businesses to start picking up the advising enrollment piece of what OPMs provide.

[01:01:40] Drumm McNaughton: I wonder.

[01:01:41] Phil Hill: so the third party servicer, regulations that have mentioned are the guidance. The original intent of TPS regulations was to regulate entities that directly administer Title IV financial aid. So there is a sub market that deals with that, but ironically OPMs have stayed away from that. Like, they will advise students on applications and enrollments, but not directly handling financial aid. Well, by changing the TPS guidance to encompass OPMs, if that’s what they come back with next year, one of the ironic parts of it is, you’re getting treated the same way as a TPS provider that handles financial aid. So, maybe they end up doing that.

[01:02:30] Phil Hill: But I guess the point is, that is the origin of the TPS guidance in the first place, is dealing with companies that touch Title IV financial aid in the first place.

[01:02:41] Drumm McNaughton: Well, and if we had a higher education act passed since 2006, 2008, maybe we wouldn’t be doing these things, but that’s a whole different kettle of fish. And we probably ought not to go down

[01:02:58] Phil Hill: Yeah, that’s another entire episode to talk about that challenge.

[01:03:02] Drumm McNaughton: Yeah. And this conversation would not be complete without us talking about generative AI.

[01:03:09] Phil Hill: Yes, yeah, I think we need to in the same language that we’re talking about these other trends, and I’ll take a step back. If you look at, when the massive open online courses came on, the MOOCs, Udacity, Coursera started out in 2011 and 12. There was incredible hype behind them. “This changes education.” Now world class universities can teach students for next to nothing. It breaks down barriers. And there was discussion back then about, this fundamentally transforms higher education. Now we know that’s not what happened and that was not a good way to look at it. It was overhyped from the beginning. Coursera certainly has had an impact. They’ve developed a business model, partially as an OPM, to really help schools go online. And they’ve gotten higher education administrators to take online seriously. So it’s been real, but not transformative.

[01:04:08] Phil Hill: When I look at generative AI, this is probably the first technology, at least it’s the World Wide Web that I think has the potential to cause a fundamental change and transformation moving forward. And in particular, with the ability to generate content. And I don’t think we’ve seen the business models and the capabilities yet. I think we’re just starting to dabble in them. But if you get to a world where it’s so much easier to create content and find a way to do it that meets academic standards, keeps faculty in the role of being in charge of what’s taught. It might cut out a lot of middlemen in how you create content. It might open up the ability to much more specialized educational content based on individual students or individual programs. Might change the cost structure. So I don’t know where it’s going to go. But I’m glad you brought it up because I do think there’s a transformative nature of AI that we haven’t seen for decades, and there’s a mad rush of companies to say we’re already doing it. We’ve added AI. That’s good that they’re working on it, but I don’t think we’ve begun to see the potential transformation from AI yet. I think it’ll be a major story over the next 5 to 10 years in education. It will not be hype. It’s, you know, Thomas Friedman talks to somebody in his cab ride in Egypt, and then it goes away.

[01:05:42] Phil Hill: I think this is going to be something that sticks and we’re going to be grappling with for years to come. So, I wish I knew the answers of how it’s going to hit, but I just really believe that it’s going to be transformational much more than previous movements, such as MOOCs.

[01:05:58] Drumm McNaughton: Well, you brought up an interesting point. As you said it, I cringed because everyone, you know, people are looking at personalizing the educational experience. This is great. Personalizing the teaching is great as well. Personalizing the content. Okay, now we’re starting to get into accreditation issues.

[01:06:26] Drumm McNaughton: How do you accredit colleges for their programs, et cetera, when the instruction is so personalized? It’s one heck of a big kettle of fish.

[01:06:41] Phil Hill: Yes, it is. And I should clarify when I say transformational, I don’t mean it in terms of, you know, I, I don’t want to have a Pollyanna connotation. Oh, everything’s going to be great. It solves all of our problems. What I’m saying is it’s going to disrupt a lot of the fundamental operations that we do. And a lot of that’s going to be very negative, such as, Oh my gosh, how do we ensure quality through accreditation? So I agree with you. I think that’s going to, particularly because the ability to do it dynamically, the content specialization, very dynamically and in real time, that’s going to make it extremely difficult to say, well, what was taught? How do we compare versus, you know, the assessments? I think it’s going to open up questions that really going to be difficult to grapple with. So I definitely agree with you.

[01:07:37] Drumm McNaughton: yeah, for sure. When I think back to some of the strategic planning that we’ve done with clients, and we go through the future environmental scanning, trying to project 10 years into the future, what’s going on. You look at things like PC didn’t take off until Lotus 1, 2, and 3 got built, and every manager wanted a PC on their desk because they could take care of their own budgets without having to go to the mainframe.

[01:08:06] Drumm McNaughton: The worldwide web changed everything. I think generative AI is gonna change things to the same degree, if not more, than the web did.

[01:08:16] Phil Hill: Yeah, and some of it will, you’ll see a lot of, I think we’re already seeing a lot of this; you mentioned everybody wants a PC on their desk. When I was in the Air Force, my boss, I won’t use his name, not that he’s listening to this right now, but yeah, he was famous for any email that came in, he would immediately call his secretary and go print this out so I can read it, and then make copies for people. We see some of that that’s already going on. Generative AI is big. Let’s apply it to our mental model of what we do today. And that’s part of what’s led us into the whole plagiarism and AI detection debate. Yes, I care a lot about accurate academic integrity, but to try to shoehorn AI into an issue of students cheating or can we detect it really misses what’s going to be happening moving forward. And it’s a distraction to be quite honest. So I think we haven’t figured out how the changes happened. And there’s one other as long as I’m on a soapbox. You hear a lot of discussion of, Oh, AI is gonna get rid of everybody’s job, including faculty. It’s not going to be getting rid of jobs. It’s going to be rethinking jobs. It’s going to be, how do you, you know, reach students in a different way? And so, there will be change, but it’s not going to be simplistic; oh, we have this technology; we no longer need these people. So, I had to add a soapbox reflection right there.

[01:09:51] Drumm McNaughton: Please. And now, let’s continue on that soapbox and give presidents and board members three takeaways that they really should not forget about in the next five years.

[01:10:05] Phil Hill: Well, the next five. Yeah, if I had to say three takeaways, one is the fact that you know, we’re hitting existential change, which is scary, particularly around enrollments and finances. I mean, there are other ones adding it, but this is the opportunity to make some changes that we have known about for years.

[01:10:25] Phil Hill: So, in other words, there may be something that you wanted to do five years ago as a president or on a board, and it just there was no way to do it. With existential change, there might be a better way to reach a student group that you wanted to go after in the past but couldn’t do. So it’s like, embrace the chaos as part of the takeaway. It’s not going to go away, the chaos. And there are some real opportunities if you stick to thinking about what we should be doing. And then, what is humility? Like we’re talking about generative AI. And that it’s there, but don’t think you can wrap your hands around it and understand, you know, do a quick briefing paper of how it’s going to hit academia. Just recognize that it will be transformational, and be prepared to learn from organic experiments and usage, many of which will come from your own school. So have humility that you don’t know how all it’s going to impact you moving forward.

[01:11:27] Phil Hill: And the third is the fact of the idea that you mentioned about breaking down silos. We’ve started breaking down silos in education but only started. And so a lot of the solutions to the challenges we face are going to involve a level of collaboration that has not been done in the past. Whether that’s an institution-to-institution collaboration or working with vendors, not just as people are selling stuff to you, but as partners that you can come up with joint solutions. So be willing to break down silos that you used to take for granted. And like I said, a lot of the changes, it’s not going to be good. You know, we got things to watch out for, but manage that change moving forward is the mindset I think they need to be in right now.

[01:12:20] Drumm McNaughton: I think those are three great takeaways. It’s just like the web; when you have a transformational time product, it’s going to be able to be used for good or bad. So how do we use it for the good that it’s needed?

[01:12:34] Phil Hill: And how do you recognize, when good ideas come up, that you need to invest in and, bring them forward to more, to more learners?

[01:12:44] Drumm McNaughton: Absolutely. So, Phil, what’s next?

[01:12:46] Phil Hill: What’s next? Well, the beginning of the year, I think, enrollments and regulations and getting clarity on what they really look like. I’m teeing myself up to be prepared to get a lot of news in those two areas and help schools figure out what this means moving forward. But first, hopefully, a week or two off.

[01:13:07] Drumm McNaughton: Well, I look forward to having that same time as well. I know my team has got me a whole laundry list of things they want me to get done. So, we’ll see how much vacation I get. They usually drive my agenda a lot of

[01:13:19] Phil Hill: Yeah, well, good. Well, it’s great talking with you again.

[01:13:24] Drumm McNaughton: You too, my friend. I look forward to the next time.

[01:13:26] Phil Hill: Okay. Thank you

[01:13:29] ​



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