Inside Philanthropy

A blog on philanthropy and nonprofit news and issues. A publication of Philanthropy Journal.

June 5, 2013

Why free isn’t free: The unrealized costs of free technology to nonprofits



Special to Philanthropy Journal

Christine Schaefer

After more than a decade of volunteering or working with nonprofits, it is time to come clean. I am guilty. That is guilty of using technology without paying for it to get things done for my nonprofit. Now, that doesn’t mean I stole it off the shelf, more along the lines of I either used software I’d purchased for another purpose or, a volunteer/developer built me something using open source code.

Well, the problem is that it isn’t really free, is it?  Just because I didn’t “pay” for it, doesn’t mean that there wasn’t an associated cost. Let’s do some proverbial math on those two scenarios, and you‘ll see it becomes pretty obvious that free isn’t necessarily free.

Cost Scenario 1: When All You Have is a Hammer, Everything Looks like a Nail
All nonprofit professionals and volunteers have to make the resources they have on hand stretch to fill as many needs as possible.  Technology is no exception.  Many software products come pre-loaded on machines in package deals and we use them to their fullest extent and then some.  Like a contractor with only a hammer in their toolbox, we start figuring out ways to solve every problem with brute force.  Buying a tool built for every job is expensive, right?  One may think logically that using a piece of software like MS Excel to manage lists saves the cash expenses for a supporter management or CRM. But, what about the non-cash costs?

There are two primary unrealized costs to using software in a way that it was not intended:

1. Person-hours cost money and opportunity-lost
To make a piece of technology work in a way that was not intended requires extra work be done.  There are a number of things that must be done manually or semi-manually that a CRM would do for you: de-duping lists, tracking supporter activity history, managing communication opt-ins and opt-outs, organizational relationships, segmentation, scoring … the list could go on. What’s the cost of those saved hours – both salary and opportunity costs?

2. Best practices built into tech make you perform better
A CRM built for nonprofits will encourage you to segment lists, track supporter history, score supporters on type, time and frequency of activity and more.  Research has shown that using just those three things in your outreach can improve response rates and ultimately increase actions or donations by supporters. If you are not doing those best practices, you likely have high opt-out rates, low open rates and low click-through rates on email.  How much is not using best practices costing you? 

Cost Scenario 2: Built Just for Your Nonprofit = Costs Just for Your Nonprofit
There are many talented IT experts who have wonderful ideas on how to support nonprofits.  So, they generously donate of their time to build a custom piece of technology for said nonprofit. 

It’s custom-built to follow your processes so no one in the organization has to change their way of doing things.  No person-hours (issue #1 above) were lost.  It can even have best practices built into it to overcome issue #2 above.  It cost your nonprofit nothing to build.  Or, did it?

This scenario is the one that often has the biggest potential of causing issues for the nonprofit.  Again, I see two primary issues:

1. A single-point of failure can have paralyzing effects.
When you are dependent on technology built by a volunteer, you only have one place to turn for training and support. What happens when a web page goes down in the middle of your annual fundraising drive and the developer is on vacation or if that person moves across country for a new job?  What does all of that cost you?

2. Keeping tech up-to-date requires investment.
Only steady, constant investment will keep technology up-to-date.  Of course, you can keep using the old system for as long as it will function, but it won’t be long before it won’t talk to any other piece of technology in your organization.

As the saying goes, “Nothing in Life is Free.”  Neither is technology.

If you aren’t convinced by the arguments above, then let me share this real life example.  DC Design House, a residential design attraction, has raised hundreds of thousands of dollars for Children’s National Medical Center.  It is the effort of more than 200 volunteers working remotely and coordinating efforts centrally through the main organizers of the event. 

For years, they used whatever technology they had on hand to make it all happen.  They passed lists back and forth over email, manually coordinating communications and events. It wasn’t until they centralized everything into one system (they chose a SaaS-based online organizing CRM platform with online donations and event management), that they were able to do three dramatic campaign-changing things:
  1. Have a starting point for the next event including supporter contact information from the previous year,
  2. Have a way of training all the new volunteers on how to use the system, and
  3. Raise funds year-round. 
That doesn’t even cover all the features that helped them with best practices for list segmentation, automated thank you emails, social media publishing and more.

So, what does your “free” technology cost you?  If you don’t know, maybe it is time to look into it.

Christine Shaefer is vice president for community and marketing for Salsa Labs Inc., a Washington, D.C.-based customer relationship management (CRM) company directly supporting nonprofits.

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2 Comments:

  • At 4:54 AM, Blogger Elaine Fogel said…

    Many nonprofits don't factor in people hours in their costs. Sometimes, paying a fair price for goods and services can free up staff time to work on revenue-generating activities. It's all in the cost-benefit analysis.

     
  • At 5:06 AM, Anonymous Anonymous said…

    After all, time is money!
    -Jon @ nonprofit software

     

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