Competition Spurs New Software to Meet a Wide Variety of Nonprofit Needs

The drive toward mobile applications and cloud-based data is creating greater competition and spurring a wave of new fundraising software products for nonprofits.

Salesforce last month announced new software designed for nonprofits, in what industry observers say is a bid to wrest market share from Blackbaud, which has dominated fundraising software for decades. Days later, Blackbaud announced that its Luminate CRM software was available on Salesforce’s application exchange, melding the competitors’ products.

Venerable vendors and start-ups are offering new products to fight for their share of the hundreds of millions of dollars that nonprofits spend every year on technology to manage donor relations, promote their causes, and run social-media campaigns.

“A couple years ago, when Blackbaud acquired Convio, I think there was a fear that the space was contracting,” says Elizabeth Pope, director of research and operations at Idealware, which analyzes software for nonprofits. She says a lot of new players are entering the market because companies no longer need to build products from scratch but can instead develop applications to run on top of other platforms, such as Salesforce.

“It’s not just Blackbaud vs. Salesforce,” says Ms. Pope. “There are tons of vendors out there offering great solutions for all kinds of needs.”

Improved Products

A recent white paper Ms. Pope co-wrote details dozens of applications and relationship-management systems that work on top of the Salesforce platform, many of them developed by competing vendors.

The software announced by Salesforce and Blackbaud are new versions of management systems that have been available for years, making the news more about improvements than revolution.

Salesforce.com Foundation, the charity arm of the provider of customer-relations management services, pitched its Salesforce1 for Nonprofits in late May. Nonprofits can use the platform to manage fundraising, social-media campaigns, and day-to-day operations and access the database through mobile devices.

In line with its past practices, the foundation offers 10 licenses free and 80-percent discounts on additional user licenses for qualifying nonprofits, or roughly $360 a year per user.

“This really, squarely goes at Blackbaud, I think,” says Steven Jacobson, chief executive of a technology consulting company that works with nonprofits. “They’re trying to go after the whole market, which is kind of ambitious.”

Executives from the Salesforce.com Foundation demurred when asked about their competitive strategy and Blackbaud, but pushed a message of market dominance.

Rob Acker, chief operating officer of the Salesforce.com Foundation, says his goal is to serve all nonprofits. “The Salesforce.com Foundation is singularly focused on putting the best technology in the hands of those seeking to change the world,” he says.

Chris Krackeler, a vice president at Blackbaud, offers a similarly altruistic explanation for the company’s addition to the Salesforce application exchange.

“Two leaders in their respective industries coming together to help nonprofits raise more money and deliver their missions and programs, I think that’s a big deal,” Mr. Krackeler said. “It’s like peanut butter and chocolate. Apart they’re both very good things, but they’re even better together.”

Blackbaud, which reported $503.8-million in sales in 2013, has long been the dominant provider of software and technology solutions for nonprofits. It says it has 30,000 nonprofit customers.

Salesforce generated $4.1-billion in sales to commercial customers in its most recent fiscal year, and the Salesforce.com Foundation has provided $65-million in grants to nonprofits.

Focus on Mobile Devices

More and more charities are choosing cloud-based options, with data hosted on off-site servers instead of on in-house hardware, note technology experts.

Mr. Jacobson says software vendors tell him that 75 to 80 percent of new software licenses are cloud-based: “You don’t have to buy a server or servers, or maintain them, or manage all of the maintenance with the database.”

The drive to make donor relationship tools and operations management accessible through mobile devices is a key reason for the growth in new products.

“More options are always great,” Ms. Pope says. “The nonprofit community has lagged behind the for-profit community in using mobile devices and tablets for back-office needs and management operations.

“The fact that is front and center says to me Salesforce has analyzed this market, found a gap, and they’re going to go after the nonprofit mobile app market,” she says.

Pencils of Promise started using the Salesforce constituent-relationship system in November 2011 and upgraded to the mobile platform of Salesforce1 late last year. The New York charity has built 217 schools and trained teachers to serve impoverished children in Africa, Asia, and Latin America.

The mobile tools allow workers in poor regions of the world to share progress on building projects and give managers up-to-date information for scheduling and marketing.

“We have teams on the ground, scouting new communities, sending that information through Salesforce, pushing that out through marketing, and raising money on the build,” says Jackie Roshan, the group’s data-operations manager. “It’s completely changed our business and made us much more efficient. I run our entire organization on my phone.”

Before subscribing to Salesforce, Pencils of Promise kept data “spread all over the place,” on spreadsheets as well as Google and Word documents, Ms. Roshan says.

Four Oaks, a human-services group in Cedar Rapids, Iowa, switched to Blackbaud’s Luminate CRM in December 2012, upgrading from Raiser’s Edge.

Run on a Salesforce platform, the management system made it easier for Four Oaks staff members to track volunteer activity and access more information about donors from a database of about 16,000 people, according to Anna Patty, development and communications coordinator.

“I have this fully rounded, 2014 picture of my donor and am able to talk to that donor about the right things,” she says. “Twenty years ago, I didn’t have that information.”

The ability to customize and expand the Luminate system were key selling points that convinced Ms. Patty that the new platform would be “future proof,” she says.

Varied User Needs

Analysts reviewing the new software offer a note of caution to nonprofits making difficult choices to fill their needs in the coming years.

The key, they say, is for charities to carefully analyze their mission, what technology they need to achieve it, and the capability of their staffs to implement new systems.

“Just because this is the shiny new thing doesn’t mean that it’s the solution for you,” Ms. Pope cautions. “Does it make sense to employ this tool if you’re a five-person nonprofit? You need to assess your own needs before jumping in feet first.”

Technology experts say some of the new software products are relatively easy to adopt right away but lack robust features and the ability to generate sufficient data to help nonprofits hone their message and increase fundraising. While the products may seem affordable, the added cost of hiring consultants or outside services to customize a system must be considered.

“An organization will download it and get it up and running, and they don’t even know where to begin,” Mr. Jacobson says. “If you’re at the low end of the market, you may not have the resources to implement the product.”

The add-ons necessary for donation processing, social-media management, and email communication will likely add to the cost and complexity. Added costs can reach into six figures.

“The thing about nonprofits is they really only have one shot to get it right,” Mr. Jacobson says. “They can’t afford to make a mistake and have to redo it.”

The impact of the new offerings from Salesforce and Blackbaud will be subtle but significant, say industry observers.

“Even if Salesforce isn’t the right fit, it is moving the industry,” says Robert L. Weiner, who has helped nonprofits select fundraising technologies for nearly two decades. “Other vendors are looking at the new technology and flexibility and the interface and making changes in their own products.

“I hope it will drive innovation and competitiveness in the market, but I don’t see this or any other product to be a slam dunk, the last vendor standing in the nonprofit world,” he says. “Blackbaud hoped to do that, and they didn’t quash all their competition.”