Why Nonprofits Struggle With Technologies
What makes nonprofits unique among other types of organizations is that many different groups of people (donors, volunteers, staff, the board of directors, beneficiaries, etc.) must collaborate without the strict hierarchical structure of conventional organizations. The grouping of these people must also be fluid. One person, for instance, could be a donor, volunteer, and board member at the same time. In the nonprofit sector, the magic happens by facilitating these collaborations efficiently. Even the smartest, most talented and motivated people will achieve nothing without effective coordination. This is why web applications, which can be accessed by anyone from anywhere, are seductive for nonprofits. Many participants are donating their own time, so the flexibility to contribute at their own pace and timing is essential.
If you Google “nonprofit software,” you will get a seemingly endless list of products, but no solution exists that can address even half of the needs of each nonprofit. If you ask which one is the best, you will get, “It depends,” and nobody is thrilled with any of them. Many nonprofits switch from one product to another only to find that they lost the features they needed in exchange for gaining the features they wanted. Why is this?
Part of the problem is that each nonprofit organization tends to be unique because the market is not driven by competition. In a conventional market, there would be many competitors offering the same products or services vying for their market share. In the nonprofit sector, if there is already an established player doing what you want to do, you are more likely to join this organization rather than starting your own to compete with it. This makes each nonprofit unique. In this sense, the nonprofit sector is similar to the startup world where you would not start one if there are already many competitors. The whole point of a startup is to try something new.
In contrast, there are countless restaurants in every city, and they all do practically the same thing except for the food they serve. It is, therefore, possible for software developers to create one product (e.g., Seamless/GrubHub, OpenTable, Micros POS system) and sell it to thousands of restaurants. And, because the majority of what each restaurant does is the same as what all the other restauratns do, they can be satisfied with the off-the-shelf solutions.
Most nonprofit software products have the same basic features like member application, event registration, donation, membership fee processing, and bulk email, but these basic features cannot cover the core mission of each nonprofit. For instance, let’s take one of our projects, Women’s Mental Health Consortium, a group of licensed mental health professionals. The fact that all their members are licensed is what makes them unique, and allows them to discuss relevant issues and organize specialized events. Because what they offer is unique, they couldn’t find an off-the-shelf software solution that has the feature to verify and keep track of their license statuses. So, we built a custom system that handled everything (and nothing else) they needed: license verification, automated reminders for license expiration, automatic cancellation of membership upon license expiration, online payment for membership fees, web-based email list that can target any sub-groups, a directory of members with pieces of data specific to mental health professionals and filtering criteria specific to mental health, polling and survey system, and 1-click RSVP for their events. This custom system allowed them to eliminate all different systems they had been using and consolidate all the data. The new system now automatically takes care of the tasks that took three volunteers to manage all year around.
Another project we worked on is for an elementary school which needed a database of students, applicants, teachers, parents/guardians, and alumni which is capable of grouping the students into classrooms and achieve the classroom data every year. It also had to be capable of associating students with parents/guardians. You can’t find an off-the-shelf nonprofit application capable of doing. You can find a solution specific to managing a school database but then such a system would lack other features you would need like crowdfunding, online auction, photo sharing, document sharing, PTA committee management, donation, donor management, etc.. For our project, we built these features into a single system, so that one login/password can be used for all of them.
Most nonprofit organizations are using a patchwork of multiple software products to get by. For instance, Salesforce for managing contacts, MailChimp to send emails, Fundly for fundraising, Microsoft Excel to keep track of membership fees, SurveyMonkey to survey their members, Shopify to sell products online, etc.. The problem is that none of these products talk to each other, so each product requires the same set of users to create new accounts. Since they cannot share the data with one another, in MailChimp, you could not send an email to a group of people who donated more than $500 in the last six months on Fundly, or answered yes on a specific question on SurveyMonkey, or bought a specific product on Shopify. Moreover, trying to keep the contact information in sync on all these different platforms is nearly impossible. You would need a few full-time employees to manage all these disparate components.
Some nonprofits have someone technically savvy and can figure out how to use the so-called “API” (Application Programming Interface) available on many of these software products. An API allows one product to talk to another, but the common problem you would run into is that each product can talk to only a limited number of others. So, if you are using five products, the chances of them being able to talk to all the others would be slim to none.
This is also the advantage of having your custom application because you can always make yours talk to any of them. Your application becomes the central piece that can coordinate all the other applications. If you do not have full control over any of them, this is not possible. You are at the mercy of these software vendors listening to your request.
Building a custom system ultimately becomes cheaper because juggling all these pieces of technology becomes just as technical as building a custom system. In many ways, the latter is more straightforward because you have full control over your own system and know exactly how it works. You would not need to figure out the mechanics of someone else’s product in order to add a new feature.
Furthermore, because each of these third-party systems has many features you do not need, over time, the complexity can overwhelm your staff and members. Because each software designer has a different philosophy and style, the experience of using them is different for each application. The time and resources required to train your staff and members become expensive.
The worst of all, when you rely on multiple third-party products to manage your day-to-day operation, the probability of one vendor going out of business and collapsing the fragile web of dependencies increases exponentially. This can also happen when any of the vendors decides to change the design of their system dramatically, introducing incompatibilities with the other systems you use.
Another factor to keep in mind: Every application is designed optimally for a particular size of organization. Some are good for small organizations while others are good for large ones. If you reach the limit in one of the applications you use, it becomes the bottleneck preventing your organization to scale, as you won’t be able to tell the third-party vendor to modify their design. If your system cannot scale, you would have to add more administrative employees as you add more donors and volunteers. Your organization would become less efficient as it grows.
To most nonprofits, the cost of building a custom system may seem too high but this is partly because they are not used to thinking about technologies as long-term investments. In contrast, they can easily justify hiring full-time employees because they are familiar with what they can get for what they pay in human resource. If the system can do what one full-time employee can do, and if this employee costs $50,000 (fully loaded) a year, over five years, the system is already worth $250,000 at the minimum. It’s worth a lot more because 1) the system can allow your organization to scale without adding more full-time employees, 2) it would last more than five years, and 3) the system won’t leave your organization ever.
The less appreciated aspect of a custom system is that, over time, the design of it begins to distill what your organization is ultimately about. You give a tangible form to the process that makes your organization successful. Eventually, the cause and effect flip, and learning how to use this system will teach people how to do their jobs effectively. Think, for instance, of QuickBooks. You don’t need to have a degree in accounting to use it. By learning how to use it, you learn the best practices of accounting in your industry because they have been incorporated into the design of it over time. In this way, your system begins to reflect the best practices of your organization, and to function as the force that aligns everyone in the same direction. It becomes more than a cost-saving investment. This is an aspect of a proprietary system that startup entrepreneurs fully appreciate. Given that the value of a nonprofit lies in its uniqueness too, there is much to be learned from the startup world to have the similar type of impact on the world.