Lots of people have already weighed in on Blackbaud’s purchase of Convio (two of my favorites: http://www.frogloop.com/care2blog/2012/1/18/blackbaud-buys-their-rival-convio-now-what.html and http://nonprofit-force.org/2012/01/20/the-convio-blackbaud-merger-one-customers-perspective/). Here my perspective. Disclosures: I have clients that use both companies’ products, as well as products from their competitors, open source products, and homegrown solutions. I don’t invest in these or other companies that I advise on. I have no inside knowledge about what the merged company will look like.
Mostly I have lots of questions and concerns that the firms won’t be able to address until the merger is completed — if then. My main questions are about product strategies. (How) will this affect Convio’s online marketing suite? Common Ground? Luminate? NetCommunity? Sphere? Raiser’s Edge? eTapestry? (How) will this affect Blackbaud’s plans for, or ability to build, implement, and support Enterprise CRM? Will Blackbaud continue to develop on both the Salesforce and Infinity platforms? Will they really be willing and able to maintain all of these products and codebases?
While I generally think vendor consolidation is bad for the nonprofit world (unless the vendor being absorbed wasn’t a strong player to begin with), I’m less concerned about the impact on small nonprofits. There are tons of choices out there for small and mid-sized organizations. Idealware’s Consumer’s Guide to Low Cost Donor Management Systems reviewed 30 systems, the majority of which don’t come from Convio or Blackbaud. I’ve also been compiling a list of every donor database I come across at https://socialsourcecommons.org/toolbox/show/1661
I’m more concerned about the top end of the market. There were few full solutions designed for large nonprofits to begin with. Blackbaud has already bought Team Approach and PIDI, and (assuming this goes through) Luminate will join that club. On the recent NTEN community call someone asked the panel to name 5 vendors (other than Blackbaud and Convio) to whom we’d send a CRM system RFP for a $100 million nonprofit. It’s a real struggle to come up with five that can handle:
- Millions of records and hundreds of users
- Complex family, social, business, corporate, and financial relationships
- Provides robust, flexible support for all forms of fundraising, membership, marketing, and communications
- Support advocacy, volunteer management, complex events, electronic communications, content management, online payments, and merchandise sales
- Provide strong reporting and analytic tools
- Has an intuitive user interface for casual users
- Supports streamlined, high-volume data entry tools
- Provide data integrity tools to keep the data clean
- Has an open API and flexible import and export tools
- Has strong role-based security as well as strong protection against hackers
- Supports multiple locations or chapters, multiple currencies, multiple languages, and multiple character sets.
In addition, the vendor or consultant needs to understand nonprofit best practices, workflows, reporting needs, fund accounting, and unique requirements like giving societies, membership benefits, fair market donation values and tax benefits, soft credits, gifts that are split between funds or sources, auction gifts and purchases, and how to provide donor recognition credit for gifts that have no tangible value. Finally, the system needs to be backed by strong implementation practices, training, and ongoing product development and user support. Software alone seldom gets the job done.
I’m also concerned about the confusion this will cause in the industry. I’m currently working with clients that are considering Blackbaud and Convio’s database products (among others). They don’t want to choose a product that won’t get the full resources of the merged company, or could even be killed off. Some independent consultants who implement Common Ground have questioned whether my clients even want to consider that product until the dust settles. (I’ve also heard from competitors that are expecting to pick up new clients because of the confusion).
And I’m concerned about confusion at Blackbaud. My experience with past acquisitions was that it took months or years for sales reps to figure out where their products stood. Sometimes they would pitch competing Blackbaud products against each other. Other times they would refuse to show us a product that a client was interested in because of an internal decision to promote product A over product B.
Although Blackbaud has bought companies and immediately killed off their products, (e.g., Fund-Master and GiftMaker Pro), of late, they’ve acquired companies and kept their products going (Team Approach, eTapestry, PIDI, Kintera). However, in most cases I haven’t seen evidence that they have invested in the future of these products. In some cases (like Team Approach), clients have been told that there won’t be any future product enhancements.
I expect that it will be many months before we have any clarity about what this merger will mean and years before anything significant happens. But it’s hard for me to believe that Blackbaud will be able to support all of these products. I expect that some clients will be given notice that they should make other plans. It’s also hard to imagine that established products will be killed off — at least not any time soon. I’m more concerned about newer products, or those with smaller customer bases.
I do expect that this will create opportunities for existing systems. If nothing else, many nonprofits won’t be able to wait for months or years to see which products will survive. But those companies will need to be able to provide the tools and support that nonprofits need, and have the marketing muscle to get the word out.
It could also open the door to an open source project. During the NTEN call we discussed Tessitura, the performing arts fundraising and ticketing system as an example of a successful effort. But that product started out with development and support from a major organization (the Metropolitan Opera). The Met was able to form a separate company to invest in and support the product, and it’s been a huge success.
Holly Ross says
Hi Robert – Thanks again for joining us on the call this week, and especially for this post. I’m really interested in the fact that most of the concern I see about consolidation in the market is coming from folks who are thinking of small to mid sized nonprofits. But you’re right – the market impact here is really at the top end. What do you think it will take to get more products up at that end of the market?
Robert says
Hi Holly – Not being a software developer I can only guess. I think a team would first need to figure out a business model to support the one-time and ongoing development & documentation of the software and staff a help desk. They’d also need to figure out how to to support clients when they implement the software, develop & document their business processes, and train their staff. You’d then need an advisory team to specify requirements, advise on design decisions, test iterations along the way, and beta test the release. You can try the open source approach and build an ecosystem of developers and consultants. That seems like herding cats to me, but CiviCRM may prove me wrong. But a lot of nonprofits want (and need) a one-stop shop for software and support, not a piece of software for which they have to find their own support.
It seems like it would be easier to start with a working product rather than building from scratch. Convio and Affinaquest built on Salesforce, but even that took years. They also used partners for support rather than providing it in-house. That’s had its ups and downs for Convio, and they’ve started providing more support (particularly for Luminate) themselves. Affinaquest is young, so we’ll have to see how that works out. Tessitura started with a product built by the Met.
It might be interesting to talk to the folks at Tessitura. When I first looked at their system 10 years ago they had 2 staff and fewer than a dozen clients. Now, it looks like they have hundreds of clients and nearly 20 staff.
Donald Lobo says
I’m just slightly biased, but i’m pretty sure CiviCRM will prove you wrong 🙂
So a couple of specific answers to some of your questions:
1. We have a pretty good ecosystem of consultants and developers and this is growing at a good clip. There were at least 3 SaaS like providers that orgs could goto if they did not want to go thru the download / install cycle. Together with Drupal, specifically with modules like Views and Webform Civi’s extensibility and customization is quite powerful
2. We have made good strides with regard to sustainability. With a combination of Make It Happens, CiviCon and sprints around the world the platform is getting more solid.
3. Yes it is like herding cats, but seems like we have quite a few accomplished cat-herders within the community who are very effective
4. More and more large orgs are using us and contributing back significant number of patches and improvements. A recap of a few of our accomplishments in 2011 is here:
http://civicrm.org/blogs/lobo/civicrm-2011-accomplishments-and-highlights
Speaking of which the blog gives a nice overview of how many developers from different orgs and consulting firms are contributing back to the platform
lobo
Robert says
Lobo – That will be great!
Robert says
Lobo,
Here are some other thought on CiviCRM, Common Ground, and SalesForce. My clients have found it very difficult to get a read on what these systems will cost and what they can do. As I said on the NTEN call, they have to choose both a software product and a consultant. (There must be orgs that can configure and support the systems by themselves, but that type of org never calls me.) For each of these systems we have solicited multiple bids from consultants who specialize in that product and asked about pricing and whether the systems can provide certain functionality. Some consultants have declined to bid because my clients’ budgets (generally in the low to mid 5 figures for software and services) were too low. The prices we’ve gotten have varied wildly, with the high bid as much as 4x the low bid. My clients then question whether the high bid is wildly overpriced or the low bid is wildly underestimating the complexity of the project, or trying to pull them in with a low bid only to raise the price later on. Then, when asked whether the system can do X, some consultants say yes and others say no. That leads clients to question whether the “yeses” are lying. Or maybe the “nos” aren’t competent. None of these outcomes leads the clients to trust what they’re hearing. So in the end they often choose a product with clear pricing and clear functionality. Maybe we’re asking the wrong consultants, but they all have good reputations and all were recommended by the vendors or developers. It’s frustrating for all concerned.
David Geilhufe says
I can understand the frustration, but the experience sounds perfectly normal. We like to think that a software implementation of a fixed scope costs $X. It doesn’t.
A couple person shop of experts in the software will deliver excellent outcomes for very low cost — probably ~1.5x the low bid.
A couple person shop of young, mission-driven folks might deliver good or bad outcomes at 1x the low bid.
Then you have shops that deliver excellent outcomes at 4x the low bid because it a large team of excellent resources — not a big profit margin because they use excellent senior resources. The same shop might goose profitability by off shoring configuration, but they’ll still charge 4x rather than lowering their prices.
From the customer perspective, its a better experience just getting the one bid from the vendor. The customer doesn’t worry if the SaaS company is running a negative gross margin to drive recurring revenue (1x) or if they are making a modest profit (2x) or if they are trying to goose profitability (4x). The customer can’t control if they get the A-team of pro serv guys or the brand new trainees. You might get a good outcome or not, but at least with a vendor, they’ll try to make it right to protect their recurring revenue.
With the CiviCRM world the customer at least has visibility and choice into all the variables. In the single vendor world, the customer is exposed to all the same risks and variables, they just don’t have any visibility.
The saving grace of the vendor world is that the SaaS vendor will generally lose money to keep the customer happy since they make money on the recurring. A consultant has less incentive.
One final observation about functionality. Highly configurable systems means that if you ask two people about the same functionality, if it is an edge case you’ll get two different answers — nothing untoward about it.
Erik Hommel says
We are a small Dutch firm with experience of implementing CiviCRM. I am convinced CiviCRM can be a good answer to a lot of NGO’s. Our biggest project to date was implementing CiviCRM with a Dutch social housing corporation, who use CiviCRM as their back office CRM (not as an open website). They have about 70 regular users of CiviCRM, and use CiviCase quite heavily for lots of social support cases.
Our approach to implementations in general tends to focus a lot on the development cycle with the customer, trying to establish different prototyping cycles in which we grow with a team from core CiviCRM to a customized version, where the aim is always to stay as close to core as possible. We have supported a fair number of larger implementation projects in the past with ERP software like BPCS, SAP and Microsoft Dynamics. We experience no real difference in implementing CiviCRM, the same kind of issues come up. The main success factor in my opinion focuses on people, training and skills and not so much on the software side.
I can understand the different approaches you get from consultants and shops. Awkward is it is, it is the standard experience in the IT marketplace I have known. Personally I think it is an illusion to expect standard rates as long as there are no standard clients or people….
Robert says
I’m not saying the conflicting bids are surprising, just that it makes it harder to know what you’re getting, harder to decide who will help you implement a system, and harder to know what it will cost. It’s like the much-publicized “paradox of choice“. Choice (and transparency) is great until it becomes overwhelming and leads to analysis paralysis.
In the case of Tessitura, the Met created a company to sell and support the product, and the company built a consortium of users. If you’re interested in Tessitura, you have the kind of one-stop-shopping you get from a traditional vendor.
Donald Lobo says
Hey robert:
I agree with most of david g’s statements. I do think you do raise a few valid issues, some of my thoughts are below:
To a large extent deploying and configuring an extensible system is a lot like building a house. 10 different contractors will give you 10 different widely varying bids. The end-user / org needs to do a fair amount of research and homework to try and figure out which one best suits them and they way they go about managing their business.
That said, i do think most open source projects including CiviCRM and Drupal have a problem with how best to “certify” / “validate” the consulting eco-system. I suspect the closed-source vendors (salesforce, convio) might also have that issue, but at their price point, the developers who can even play / dabble with it is fairly limited and hence the impact is far more for projects like CiviCRM. Note that our professional service listing is not a sign of endorsement for any of the organizations.
There is also the flip side to this. Many an org think of these products as FREE and hence are a bit shocked at the sticker price. I do think that in the first year or so of transition / deployment for most orgs there is no cost savings to switch to an open product. for that matter it might be even more expensive. However if they/the consulting firm does things right (i.e. contribute back their changes, work with the community), subsequent years they get to reap the benefits of the open source model and use all the additional changes and modifications that other folks have contributed back.
A prime example of this is CiviCase which was funded by Pysicians Health program of British Columbia a few years back. They are using it extensively today, but there are other orgs (like NYSS) who are also using it and who’ve improved it since the first version. PHP deploys the latest version periodically and gets all these new changes for a fairly low cost (primarily upgrade and testing). This is happening across the Civi stable of modules. It improves and adapts at a nice rate
With regard to the feature set, as we mature as a product this is getting a lot better defined. With the set of books (http://book.civicrm.org/) orgs can have a better idea of what id delivered as part of the package vs what needs to be customized for their specific needs. I think this is where the greatest discrepancy in costs comes in. Different folks estimate very differently based on past experience
just my 2 cents …
lobo
Mathew Barnett says
Is there really no other vendors that could satisfy a large-scale non-profit. If this is truly the case, why would these large scale non-profits not complain to Justice department. Is it not possible for a larger more generalized non-profit to enter this market and compete?
Nick Ward says
Roberts cogent comments, I think, do a remarkable job of summing up the potential market impact of this consolidation on large non-profit market. Even though Blackbaud has proven a worthy partner serving as a focus for best practices and as an aggregator of solution technology, this kind of lopsided concentration is rarely good for the market. Rapid innovation and flexible pricing are certain casualties, and employees seeking new venues to bring ideas to fruition have few options.
The salesforce platform and our companies name (roundCorner) has been mentioned frequently as an emerging alternative. Large non profits should know that scaleable solutions tied to large-scale enterprise experience are being actively encouraged and supported by the salesforce Foundation. Though roundCorner is little more than 2 years old, we have almost 10 years of experience with the salesforce platform and large scale enterprise wide implementations. My partner and I were co-founders of a prior company which was salesforce’s largest implementation partner in the financial services industry. We brought over 33,000 Merrill Lynch brokers up on salesforce and dealt with the large data bases and complex financial functionality that accompanied salesforce implementations at Citibank, Barclays and Deutsche Bank.
At roundCorner we have installed full membership/donor management applications in Public Media (PBS, WGBH and others) as well as complex operationally intensive installations at large scale national non-profits such as The Student Conservation Association and City Year. Our full suite of donor management software functionality, roundCause, will be released as a salesforce managed application by the second quarter of this year. Recently we have also benefited from additions to staff that include some of the industries most experienced and respected non-profit technology experts including one of the founders of a prominent Blackbaud acquisition.
The salesforce eco-system is frothing with innovation, and in partnership with the salesforce Foundation we, and other emerging providers, are being supported to give the non-profit world a new generation of alternatives that will help to create a new model for constituent engagement in the emerging digital social age.
Jeff Gordy says
Hi Robert,
I fully agree with you. We have been working on our NEON CRM product for 8 years now, and we have been up against all the competitors in the nonprofit market. We have probably won & lost deals with all of them (I also really like your recent article about the decision making process: http://bit.ly/vE4R1T).
I believe the challenge in creating a solution that works for large nonprofits (over 1M records in our opinion), is that the organizations all have very specific needs and it is hard to develop something that works for all of them. We have been slowly headed in this direction by doing what we call “Shared Development” in which we combine all the projects we work on, into our main NEON CRM solution so they can be shared & configured by all of our customers. This is our “supported” version on “Open Source”, where we close the source and development, but share all the features.
This is helping us not only provide great solutions for smaller nonprofits, but we are working towards an amazing system that will rival anything on the market for larger organizations.
We are starting our NEON Certified Consultant & Developer program next month to help get more organizations and nonprofit professional involved.