Outsourced Ed: Colleges Hire Companies to Build Their Online Courses - Technology - The Chronicle of Higher Education 8/31/10

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July 18, 2010

Outsourced Ed: Colleges Hire Companies to Build Their
Online Courses
By Marc Parry
Michael Tricoli was a middle manager looking for a leg up in his
career, so he got an online M.B.A. from Northeastern University.

Well, not only from Northeastern. Much of his college experience

was outsourced to a private company.

The company, Embanet, put up millions to start the online business

program. Its developers helped build the courses. Its staff talked
Mr. Tricoli through the application. It even pays—and, in rare
cases, refers for possible hiring—the assistants who help teach
students.

In exchange, Embanet gets what Northeastern's business dean calls

"a sizable piece" of the tuition revenue. He won't say how much.
But Embanet's chief executive says its share can swell to a
whopping 85 percent.

As more colleges dip their toes into the booming online-education

business, they're increasingly taking those steps hand-in-hand with
companies like Embanet. For nonprofit universities trying to
compete in an online market aggressively targeted by for-profit
colleges, the partnerships can rapidly bring in many students and
millions of dollars in new revenue. That's becoming irresistible to
an increasingly prominent set of clients. George Washington
University, Boston University, and the University of Southern
California, to pick just three, all work with online-service
companies.

But the new breed of online collaboration can tread into delicate
academic territory, blurring the lines between college and
corporation. Derek C. Bok, a former president of Harvard
University and author of a book on the commercialization of
academe, questions companies' encroachment into teaching. He

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worries that bottom-line thinking will drive decisions about how

colleges deliver courses. They might choose exam formats that are
easier to grade, for example, to keep costs down.

"You're creating a whole set of temptations to make the choices

that will increase profits rather than improve education," Mr. Bok
says.

Embanet says its college partners retain academic control. And

despite Mr. Bok's worries, the practice of contracting out parts of
online education seems likely to expand.
A Small but Growing Industry

At least three new online outsourcing options have emerged in

recent years: 2tor Inc., headed by John S. Katzman, founder of the
test-preparation company Princeton Review; Colloquy Inc., a
subsidiary of Kaplan Inc.; and Total Online Program Service, from
SunGard Higher Education. Other online service firms—Embanet,
Bisk Education, Compass Knowledge Group—have been around
longer. Altogether, roughly a dozen companies, most of them
privately held, compete for clients in this small but growing
industry, says Richard Garrett, managing director at Eduventures,
a consulting company.

Mr. Garrett frames the rise of these vendors in the context of a

larger debate about the disaggregation of higher education.
Companies are now playing a role in academics through course-
management systems like Blackboard, tutoring services like

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Smarthinking, and grading assistance like Virtual-TA. Now vendors

are taking part in the creation and delivery of courses as well.

This outsourcing of instruction represents a "new and controversial

frontier in higher education," a phenomenon that was "virtually
unheard of a decade ago," according to a policy paper published
this month by the American Association of State Colleges and
Universities. The arrangements can trigger faculty blowback, like
the strife caused when one company, Higher Ed Holdings,
attempted to develop online programs at the University of Toledo.
Faculty resistance drove the company to pull out of discussions.

Colleges' budget pressures are driving these deals, but so is

something else: investment capital.

Online companies that work with nonprofit colleges are benefiting

from a surge in investor interest at a time when the government is
scrutinizing the publicly traded for-profit colleges that have
gobbled up so much of the online market.

Investors believe that traditional nonprofit colleges will eventually

play a much larger role in online education than they have so far,
says Trace A. Urdan, an education-industry analyst with Signal Hill
Capital Group. At the same time, he says, they're more
apprehensive about investing directly in proprietary colleges. The
for-profit industry's underbelly has been on display recently, with
the U.S. Education Department tightening its regulatory vice and
Senate Democrats promising to crack down on "bad actors" to
protect federal financial aid from being wasted through fraud and
abuse.

Mr. Urdan points to another online partnership, between National

Labor College and Princeton Review, as a significant example of
how money is moving in "this new regulatory environment."

Investors, he says, are "looking to try to extract value from the

growth in online education and working-adult education without
having to be directly in the sights of the regulators."
The Marketing Spider Web

A closer look at Mr. Tricoli's experience offers a case study of what

happens when selective colleges join with online outsourcing
companies.

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Mr. Tricoli was a manager at a medical-device company several

years ago when he started thinking about getting an M.B.A. The
suburban Boston resident was 35 at the time, with a young child
and a job, so the flexibility of online classes was attractive. Like so
many prospective students, he turned to the obvious first stop:
Google.

The search engine steered him straight to the University of

Phoenix. But, he says, its reputation left "a bad taste in the mouth."
So he kept on Googling and soon struck a more attractive option:
Northeastern. Here was a familiar name from Boston, a university
endorsed by the leading accreditor in business education, AACSB
International: the Association to Advance Collegiate Schools of
Business. Mr. Tricoli filled out an online form requesting more
information.

He got it, quickly—from Embanet.

One of its representatives called him within 24 hours. It's the kind
of snappy response you'd expect from a for-profit college. But while
Embanet's pitch was confident, it was nothing like the predatory
approach that has gotten some proprietary colleges into trouble.

"He wasn't one of those aggressive salesman that's just like, 'You
gotta get in today because somebody else is waiting behind you and
we have limited slots,'" Mr. Tricoli says. "That's one of the
customer-service things that made me say, 'OK, this is going to be a
good experience.'"

It's an illustration of how these companies can quickly convert a

curious Net crawler into a tuition-paying student. Some companies
veil their recruiting agendas in the guise of informational Web
sites. Take Certificationmap.com, for example. The site, created by
2tor, explains the steps needed to become a teacher in each state.
It's one of the first things you find by Googling "teacher
certification." But the box seeking contact information reveals the
site's other aim: to generate leads for the online graduate-
education program that University of Southern California created
with help—and $15-million—from 2tor.

Once inquiries come, companies have call centers to pounce on

them. Shift workers like police officers and nurses can call at 2 a.m.
and get a human being on the line, says Kathleen M. Burke, dean of

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George Washington University's College of Professional Studies,

which has hired both Embanet and Colloquy. Private colleges have
been slow to move into distance education, she says. For colleges
that built their reputations serving undergraduates, she says,
vendors offer the infrastructure to support the nontraditional
students attracted to online courses.

"There's not the investment nor yet the will at many private
institutions to plunk down millions of dollars to build a call center
to support a group of students that many at the university still
don't think of as the core group," she says.

For Mr. Tricoli, the personal service continued once he was

admitted to Northeastern. An Embanet student-service adviser
became his primary contact for questions. Books. Technology
issues. Scheduling needs. Whenever Mr. Tricoli had an issue, he
contacted the Embanet adviser—and always got a reply within 24
hours.
Crossing a Line?

What he didn't know was that Embanet touched his instructors,

too.

Northeastern's business program uses a "master teacher" model.

Professors prepare all the content, like lectures, syllabi, and exams.
They meet with Embanet's developers, who make
recommendations about designing the online courses and take care
of most of the technical work needed to build them. Then the
professors teach with help from "instructors" or "facilitators," sort
of an online version of graduate-student assistants. Each facilitator
works intensely with 15 students, checking homework, managing
discussions, reviewing case studies. Mr. Tricoli says he had the
most contact with these facilitators and with other students.

The facilitators, however, are on Embanet's payroll, not

Northeastern's, says Thomas E. Moore, dean of the College of
Business Administration.

This was news to Mr. Tricoli: "To me they were just another
adjunct professor at Northeastern."

In fact, instructors mostly do come from "the Northeastern family,"

Mr. Moore says, meaning people familiar to the university because
they are alumni or have taught the course before as lecturers. But

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on "one or two occasions," he says, the university has needed

someone, "and Embanet has provided an instructor for us." In such
a case, if Embanet recommends someone, Northeastern interviews
that person and decides whether to make the hire, the dean says.

Embanet's financial reach extends beyond teaching assistants. The

company even pays Northeastern for the salaries of tenured
professors who teach online courses. "Embanet reimburses us for
both the cost of course design and faculty teaching," Mr. Moore
says.

Harlan D. Platt, a finance professor who has been at Northeastern

for 30 years, compares Embanet's role to the DVD service Netflix.
"Embanet has nothing to do with the education I deliver—nothing
to do with the education my facilitators deliver," he says. "It's me.
I'm the studio. I'm the actor. I'm the director."

In a short period, Embanet is helping to transform Northeastern's

business college. The online programs have grown to 1,000
students and could reach 1,700 next year, meaning more graduate
enrollment online than all the college's traditional graduate courses
combined. Despite Embanet's cut of the tuition, the programs
returned more than $2-million to the university in the past year,
Mr. Moore says. In other words, that's how much Northeastern
took in after expenses were covered, cash the college is using to
reinvest in faculty.

But where some colleges see opportunity, Mr. Bok sees a

"dangerous trend." Even though campus officials insist that they
control hiring decisions, he doubts that a college would veto a
company's recommendation in a situation in which students were
waiting for a class, and time to find a teaching assistant was
limited. Mr. Bok emphasizes that he is speaking generally, not
about any particular institution. But as a matter of principle, he
says, "you have crossed the line" by using a private company to
recommend teaching assistants.

"You have now delegated an essential academic function, which is

choosing who will assist in the teaching function, to a company," he
says. "You could say it's not very important. But of course, the way
principles break down is because the first thing is not very
important."

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Pulling Back

Some colleges that have used online-education companies have

pulled back from outsourcing, at least to a degree, out of concerns
over both academic principles and high prices. Although Embanet's
chief executive says deals that cost colleges 85 percent are
increasingly not the norm—at one conference, he characterized the
company's cut as anywhere from 50 to 85 percent—Boston
University came to see the price of outsourcing as too steep in the
long run.

When Boston started a master's-degree program in criminal justice

in 2003, it hired Embanet as a one-stop-shop for course hosting
and design, marketing, and student services. Outsourcing was seen
as a way to jump-start distance education at a university seeking to
expand nationally beyond the academically congested local market.
But faculty members grew frustrated working with external
instruction designers. And the cost of outsourcing instructional
design was greater than that of handling it internally, says Jay A.
Halfond, dean of Metropolitan College and extended education at
the university.

Over time, Boston decided to set up its own course-design shop,

enabling the technicians to familiarize themselves with faculty and
programs. It also took control over hiring and paying facilitators.
The university still uses both Embanet and Compass for recruiting.

"We couldn't let an outside party be responsible for the quality of

our instruction—that was just too problematic on a long-term
basis," Mr. Halfond says. He added, "We didn't want to be
dependent on a for-profit company in terms of our academic
reputation."
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