I have two clients who are looking for new systems and want a “cost justification” for their acquisition to share with their management. Probably an issue that we should all be looking at. So with some background, I’ve got some questions.
First, there are often situations where we “have to” replace our current system – regardless of costs or expected $$$ benefits:
1. It does Direct Marketing but not Major Gift fundraising (or it does Major Gift fundraising but not Direct Marketing); we need support in both areas.
2. There are key components of advancement support missing in the current software (one of the two areas above, or Events management, or Volunteer management, or on-line fundraising, or Campaign Reporting, or…). This is an area of new or expanded emphasis for us.
3. The current software does not interface with our current/new technical environment (MS-Exchange and Office, or Google g-mail, calendar, docs, etc.). We cannot interface with other desired applications.
4. Our system is like the “roach motel” of data; the data goes in, but never comes out again. We need better tools for reporting, analysis, and business intelligence.
5. The current software will not support our “road warrior” fundraisers, or we cannot access it via the browser or devices that we wish to use.
6. Our current vendor has gone out of business, or has stopped supporting our current software. They have been acquired by another vendor and we are concerned about the loss of support.
7. The support from our current vendor is inadequate in XXX area or in general.
Even in the situations above, a ROI calculation may be appropriate.
Ok, when none of those “show-stopper” or “drop-dead” issues above has come up, we just believe that we want/need a new system. We want a more efficient, more productive, easier to use, more flexible, “you name it” system. So how do we justify that system to management (and perhaps our donors)?
As I share with my clients, a “system” is like a 3-legged stool; it has one leg of software, hardware and support, a second leg or infrastructure of resource budget, policies and procedures, management commitment, etc. and the third leg of people – trained, competent, available staff.
So if I acquire a new software product, how do I “cost justify” that without considering all the legs of the system stool? (We can’t.) The new software may enable my staff to do new things, but without the right people (# and training), upgraded/enhance policies and procedures, data conversion and new reports, etc. I cannot merely say “We raised XXX more dollars with software that cost $ZZZ.”
And when you install a new system (software, hardware, policies & procedures, training, etc.) when do you say, “As of this time, we are now raising $XXX more dollars than we did before – based on the new software?” Did you just ramp up for a new campaign which co-incided with the new system, but might have increased your returns without the new system?
Has anyone done a fairly complete cost justification or calculation of ROI, based on all of these items? When did you calculate the return on investment – right after implementation or a year later when it was “really humming”? And the final question, would you be willing to share it and all your assumptions with this Listserv?
These are not easy questions and the analysis may be complex/complicated. I would welcome replies either to the list or directly to me.
Here’s how I responded:
I’ve yet to see a published report that provided a convincing general argument that [insert any nonprofit name here] will raise more money by using [insert database name here]. When I’ve looked at ROI, my analyses have been client-specific, dealing with issues like:
- An inability to produce reports or time spent manipulating reports that should come straight from the system.
- Time spent manually entering or importing or synchronizing or deduping data that could be collected through integrated systems.
- How much time they’re spending doing manual tasks that could be automated or tasks that take many times longer than they would with better-designed software.
- For custom systems, the cost of programming time to build features that are available off the shelf, and of fundraiser and A.S. staff time to specify and test system enhancements.
- Or the cost of maintaining current hardware or paying current licensing fees vs. the cost a new system.
Charlie addressed these issues and more in his original message. Many other important issues are hard to put a price tag, like
- The cost of fundraisers refusing to use the current database because it’s not user-friendly, so their pipeline and contact history is in their heads, in spreadsheets or paper files, or has to be entered by an assistant (though you can put a cost on the last one).
- Opportunities that were lost due to an inability to store or share or integrate or report on or analyze data.
- An inability to hire staff who know how to use or support the database in question.
- Difficulties in training new staff or volunteers on the database
- The amount of time it takes for a new staff member (particularly in gift entry or reporting) to be productive on the system.
- The risk of staying on antiquated systems that could die soon.
- Frustration and low morale or high turnover due to the database (yes, I’ve seen staff quit because of this).
One of my maxims is that a database doesn’t raise money — people raise money. But the right database can help people with:
- Prospect management and tracking.
- Stewarding current donors.
- Identifying future donors.
- Managing staff.
- Measuring and forecasting.
- Asking the right person for the right gift at the right time for the right purpose.
In order for that to happen efficiently and cost-effectively the data needs to be captured in a database and be readily available to the appropriate staff.
But a big part of the analysis has to be “who’s the project sponsor?” If fundraisers (preferably senior or at least influential ones) don’t think there’s a problem, the organization is going to have a very hard time justifying a new system. And if fundraisers hate the current system, ROI may not matter.
If any of you have come up a generally applicable formula for calculating the return on investment from a donor database I’d love to see it!