Can US OPM 2U succeed in UK higher education amidst financial turmoil?

The online programme management (OPM) company space has undergone significant turbulence in the last few years. The influences behind this are varied, causing changes among many of the companies in this market.

As of 2020, the biggest players in the OPM world were Pearson Online Learning Services (POLS), Wiley Education Services, Academic Partnerships, and 2U. However, all four have been involved in mergers and acquisitions that have fundamentally changed the landscape.

Pearson decided to exit the OPM market and sold POLS to the private equity firm Regent. Since then, this OPM has been rebranded as Boundless Learning. Similarly, Wiley divested its OPM arm, which was acquired by Academic Partnerships, leading to the merger of two large OPMs. To add to the confusion, Academic Partnerships recently changed its name to Risepoint.

So, we have gone from the aforementioned companies in 2020 to Boundless Learning, Risepoint, and 2U in 2024. On the surface, this updated formation might suggest that of those four companies, 2U has seen the least change. However, while the name has remained the same, they have arguably experienced more turbulence than the others.

Acquisitions and financial turmoil

The most significant milestone in 2U’s recent history is their decision to acquire edX in 2021 for $800 million. To a certain extent, this came as a surprise, with edX being the non-profit online course platform set up by MIT and Harvard back in 2012 when MOOCs were a big deal. This was not the first significant 2U acquisition; in 2017 they acquired the South African online course company GetSmarter, and in 2019 they acquired bootcamp provider Trilogy Education.

However, the edX acquisition, coupled with more challenging conditions for the OPM industry as a whole, has led 2U to the extremely difficult financial position it currently finds itself in. There have been very few positive indicators over recent years, which have seen multiple rounds of layoffs, long-term CEO Chip Paucek standing down, persistent student enrolment declines in their degree programme segment, a plummeting share price, and key US university partners ending their relationships with 2U.

We have essentially witnessed the decline of the company over this period, and they now find themselves in a perilous financial position. In February this year, the company announced:

“The company expects that if it does not amend or refinance its term loan, or raise capital to reduce its debt in the short term, and in the event the obligations under its term loan accelerate or come due within twelve months from the date of its financial statement issuance in accordance with its current terms, there is substantial doubt about its ability to continue as a going concern.”

The company remains bullish on its ability to turn things around and describes its current strategy as “shrink-to-grow”. However, it has some distance to travel to tackle the $900 million debt it is saddled with.

Portfolio management

Their attempts to turn things around have centred on a few areas, one of which is their degree portfolio. They have been undergoing what they call “portfolio management”—which is corporate speak for stepping away from degrees that aren’t financially viable or lucrative. Incidentally, 2U has actually gained income from universities by virtue of exiting certain degrees, which has added a positive gloss to some of its financial results.

Going forward, they are focusing on degrees that they can price competitively, that don’t require too much capital investment, and that have what they describe as “strong organic appeal”. Essentially, they’re looking for degrees with strong market demand that require minimal investment in development and marketing. They’ve also stated that the majority of the new degrees they’ve launched are under their flex model, which is a tiered revenue sharing model that starts at 35%.

Their degree segment is a critical area, and their strategy makes sense given their current situation. However, one wonders whether, in an increasingly competitive market, this reliance on organic appeal over traditional OPM strategies will generate sufficient student enrolment numbers.

This has been one of the key questions ever since 2U bought edX and adopted a platform strategy, which in some areas like marketing is essentially about achieving the same or better results for less. When combined with a reduced staff headcount and resource base, this further challenges the notion that they can achieve the results they need with the financial and staff resources they have available.

Negative reviews

Clearly, some universities are questioning 2U’s continued ability to deliver. A recent Wall Street Journal article cited internal communications from one of their partners, the University of North Carolina at Chapel Hill. These communications hinted at a decline in the services now offered, with one excerpt stating:

“2U’s marketing plans were vague, enrollment projections were overly optimistic, and the quality of its course production was on the decline.”

This is far from the only negative feedback on the company's performance that has come to light recently, but this time it is from the UK and from Ofsted.

We’re accustomed to Ofsted reviews in the UK, but not reviews of OPM companies. However, Ofsted recently reviewed the company’s online bootcamp provision. This was in respect to a £4.8 million contract awarded in 2022 by the Department for Education (DfE) to deliver online bootcamps to over 1,000 people in front-end web development.

According to the Ofsted report, their performance has been far from impressive, as the following excerpts make clear:

“Leaders were too slow to take action to tackle the poor outcomes for learners on their courses. To date, the proportion of learners who pass their courses is low. At the time of the visit, too many learners had dropped out or were making slow progress on the course. Leaders and managers do not have sufficient oversight of the progress that learners make. They do not use the data relating to learners’ performance and progress that they collect on a weekly basis effectively. They do not analyse data about when learners withdraw from the course to identify any patterns. They do not scrutinise delays in the submission of work to identify learners who may be falling behind with their studies, so that they can support them and prevent them from leaving before the end of the course….Very few of the learners who pass their courses attend the job interviews set up for them.”

This is quite the rap sheet, and the scrutiny of their performance seems to be one factor in their decision to wind down these bootcamps and exit this deal. There have also been reports of a whistleblower contacting the DfE, citing that 2U’s management displayed minimal concern for students achieving outcomes via this provision.

These are far from promising signals for 2U in general, but especially in respect to its increasing involvement in the UK. The Ofsted report also highlighted how their online bootcamp operation was based on their US model and was not adequately adjusted to the UK context.

An increasing UK HE footprint

This all comes at a time when 2U is gaining partners in the UK and establishing a much greater footprint than in the past. Until recently, 2U was not considered a significant OPM player in UK higher education and was largely viewed as a US-centric company. Several of the few partnerships it had with UK higher education institutions (HEIs) were inherited through the acquisitions of GetSmarter, Trilogy, and edX.

The other more direct 2U partnerships stem from a time when things were much rosier for 2U. For example, in 2019 they entered into a partnership with University College London (UCL) to deliver an online MBA, but this partnership has now ended. In 2019, they also announced a partnership to deliver online undergraduate degrees with the London School of Economics (LSE). Although LSE had a long-standing partnership with the 2U-acquired GetSmarter to deliver short courses, this took the partnership into OPM territory. This partnership still exists, and LSE is now one of 2U's biggest university clients.

However, what’s been notable recently is 2U focusing much more heavily on UK higher education. In the last nine months, partnerships have been announced with King’s College London, University of Surrey, University of Birmingham, and I’m expecting an announcement of a partnership with another large UK university soon.

The company plans to launch a Master of Professional Studies and 12 professional certificate programmes with King’s College in law, technology, business, and healthcare. They plan to launch seven online master’s degrees with the University of Birmingham covering subjects such as data science, digital media, and marketing. Lastly, they plan to launch 15 online master’s degrees and 15 professional certificates with the University of Surrey in technology, business, healthcare, communications technologies, and sustainability.

One interesting component of the University of Surrey deal included in the announcement was that the online curriculum of the degrees will be developed in partnership with LearningMate. This is an Indian company that has been operating in the UK for some time, offering a range of services. This is not exactly the clearly demarcated subcontracting relationship it might seem. 2U has been a client of LearningMate for some time and essentially took on a decent number of 2U’s learning division staff who are now working on 2U programmes but as employees of LearningMate, not 2U.

It has been fascinating to observe 2U’s growing footprint in UK higher education against the backdrop of very transparent and widely publicised financial turmoil. Obviously, 2U is a much bigger name in the US than the UK, and the overwhelming majority of the reporting on the company has been from across the pond.

However, you can’t help but wonder about the risk appetite of UK universities that have entered into partnerships or are exploring them. It is entirely possible that 2U will turn things around, but because of their known financial difficulties, there are risks here. These don’t simply relate to the company continuing to operate, but their ability, as they “shrink-to-grow”, to deliver for their partners.

Questions such as: does the reduction in headcount influence their ability to deliver as they have in the past? Similarly, their platform strategy and flex model is still relatively new—is it fully proven? In a UK context, how well equipped are they to deliver in a UK higher education context as opposed to the US? There are obviously similarities between the two geographies but also significant differences, and although it was a different type of provision, the Ofsted report hints at this being a potential issue.

Time will tell…

It’s difficult not to be somewhat surprised by 2U’s recent successes in instigating partnerships with UK HEIs given the state they are in, however, time will be the true judge here. The hope for these types of partnerships is that they deliver for students and for both parties, and no one can say for sure that this won’t be the outcome.

It’s also certainly the case that in the US especially, 2U has been subject to some unfair criticism and as one of the poster children of the OPM space with more transparent mechanisms of reporting, it is more susceptible to the type of scrutiny that others are also due.

For these types of partnerships, there is always an inherent risk vs reward calculation that needs to be made. These are judgements laced with uncertainties but nevertheless require a decision to be taken. There are plenty of examples of injudicious decision making from HEIs in respect to these partnerships over the years, which have led to negative consequences.

Whether that will be the case here or with any number of partnerships that are being instigated with a range of different online education companies is impossible to say at this stage. However, in the years to come, time will judge how successful the flurry of moves being made by UK HEIs into online education will be and whether things could and should have been done differently.