Nonprofits represent a challenging market for channel companies.
On the one hand, there are lots of potential customers under the nonprofit banner. The National Center for Charitable Statistics puts the population of tax-exempt organizations in the United States at 1.4 million. This population includes public charities, private foundations and other groups, such as fraternal organizations. In terms of headcount, the nonprofit sector ranks third after retail and manufacturing, employing 10.7 million paid workers in 2010, according to the Johns Hopkins Nonprofit Employment Data Project. That's twice the size of the employment rolls in finance and insurance, the project noted.
We are definitely seeing people move toward trying to run their nonprofit like a business.
director, Amanino LLC
"The whole pie is smaller than if we were in natural gas or oil," noted Chris Cannon, president of strategic services at Zuri Group, a Bend, Ore. company that offers strategy and technology services to nonprofits. "But we love the missions of the organizations we support."
Nonprofits may not have a huge IT appetite, but organizations do invest in technology for an efficiency edge. Consultants, integrators and service providers are finding technology opportunities among cash-conscious nonprofits. Cloud-based nonprofit software, which minimizes upfront spending, has become more popular. Accounting, membership and donation management systems are also in demand. Nonprofits also are edging into analytics technology, where they significantly lag behind commercial enterprises in adoption.
The nonprofit landscape
Cannon referred to the nonprofit sector as a $300 billion-a-year philanthropy-generation machine. It's a machine of wide-ranging components. At the high end of the market, a handful of organizations bring in $1 billion or more in donations. The largest nonprofits operate sophisticated fund-raising infrastructure and have technology needs commensurate with that level of sophistication, Cannon noted.
At the opposite end of the spectrum are numerous, unsophisticated nonprofits that are managing their operations on Excel spreadsheets.
Tal Frankfurt, founder and CEO of Cloud for Good LLC, a Memphis, Tenn. company that creates and implements cloud-based nonprofit software, said his company works with a variety of clients, from small organizations to large nonprofits with multiple chapters. He described his company's sweet spot as mid-market organizations in the $2 million to $50 million range.
Nonprofit customers aren't obsessed with technology, he said, but want to have better tools to track and evaluate the services they offer.
"They want to focus on their mission," Frankfurt said. "They don't want to focus on technology."
But nonprofits do want to tighten up operations. Charitable giving continues to face economic pressure, and traditional sources of large donations have become less of a sure thing.
Cannon said donors capable of nine-figure gifts are opting to launch their own nonprofits, as opposed to donating to existing groups.
Nonprofits must also deal with shifts in donation patterns. People who do all of their charitable giving online might exhaust their annual budget for donations before an organization makes its annual fund-raising telephone call, Cannon noted.
Market forces have compelled some nonprofits to adopt a different approach to running day-to-day operations.
"We are definitely seeing people move toward trying to run their nonprofit like a business," said Dean Quiambao, director at Armanino LLP, an accounting and business consulting firm based in San Ramon, Calif.
Cloud and other software
Nonprofits increasingly look to the cloud when they automate for a more business-like footing. Quiambao said clients are asking whether their accounting software can be moved to the cloud.
"A lot of people are thinking ... that it doesn't have to be hosted on their own servers," he said.
Quiambao said accounting in the cloud helps organizations trim server costs.
The push to the cloud is broader than for accounting purposes, however. Cloud for Good, for example, deploys Salesforce.com for its nonprofit customers. Salesforce offers a nonprofit edition of its Software as Service (SaaS) offering. Frankfurt said nonprofits can use Salesforce to track donors and volunteers, as well as manage constituent cases, among other things. One client uses Salesforce to track all the trees it plants and cares for in the San Francisco area, he noted. Friends of the Urban Forest, for instance, works with residents and neighborhood groups to plant and maintain street trees and sidewalk gardens, according to the organization.
Salesforce offers the flexibility "to adjust the system for their mission," Frankfurt explained.
Tools such as Salesforce occupy one stratum of nonprofit IT --fundraising and constituent relationship management. Such systems store data on donors, such as contact information and donation history. Nonprofit software players include Abila Inc., Blackbaud, Ellucian and Salesforce.
While the smallest nonprofits can get by with little automation, their larger counterparts find fundraising software a must-have item.
"The biggest organizations … have got to have someplace to store constituent information," Cannon said.
The constituent relationship management system serves as a nonprofit's database of records. Transactional systems, meanwhile, leverage the database to bring in donations. Some systems in this category let organizations take gifts online, while others help manage telephone-based fundraising campaigns, Cannon said.
Another IT layer is interactive systems that help organizations market themselves via email and social media. Many transactional systems include interactive elements such as email marketing, Cannon said.
Zuri offers implementation and project management services to help nonprofits install software, Cannon noted. A vendor's solution might meet 80 percent of the customer's needs, so the company also provides development services to fill the gap. Zuri's service portfolio includes management consulting and business process improvement, as well as software implementation.
The various software components involved in a nonprofit solution have led some companies to seek partnerships. NonProfitEasy, which makes data management software for small to midsized nonprofits, entered a partnership with Bluefin Payment Systems last month. The latter company provides cloud-based payment products for independent software vendors. The arrangement lets NonProfitEasy's customers process credit card payments online, according to the company.
Gretchen Barry, director of marketing and communications at NonProfitEasy, said the company is also partnering with a company that will provide an advocacy module for the NonProfitEasy suite.
Room for improvement: Analytics
Quiambao said analytics dashboards have begun to surface in the nonprofit sector. Board members who join nonprofits from the for-profit world are accustomed to running their operations on efficiency metrics and are adopting this practice in their new organizations.
The degree of sophistication varies across organizations.
"For the most part, a lot of nonprofits right now are still trying to identify the KPIs [key performance indicators] to measure," Quiambao said.
Cannon said nonprofits could do a better job leveraging the information they possess, but he noted that they don't have much to spend in the field of analytics. He said he believes nonprofits lag 15 years behind the for-profit world in analytics technology.
"We don't adopt and leverage the kinds of tools the for-profits have been using for years," Cannon said, adding that most nonprofits are in the first round of establishing an analytics capability.
John Moore asks:
Do you consider nonprofit organizations good potential customers?
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