A client recently asked about my thoughts on the nonprofit software industry. Specifically, they wondered, “Are the leading software providers in our space still relevant in terms of being end-to-end providers?” This question brought back memories of watching the History Channel’s mini-series titled “The Men Who Built America.” I thought about how various tycoons in the late 1800s and early 1900s took different approaches to both vertically and horizontally expanding their empires. Take John D. Rockefeller and Andrew Carnegie for instance— they became titans of industry and great philanthropists in their later years. The titans of the nonprofit marketplace today are not Rockefeller or Carnegie; they are Salesforce, Ellucian, Blackbaud, and others who are all using either vertical or horizontal expansion. And question stands: are they end-to-end providers?
A Vertical Approach to the Nonprofit Market
Drawing a correlation between these individuals and the leading nonprofit software vendors, I see similarities between Andrew Carnegie’s vertical combination approach and that of Salesforce. Salesforce started with one platform and has been steadily gaining momentum in the nonprofit market through their investment into the Nonprofit Success Pack (NPSP) and Gift Entry Manager (GEM) as well as their integration of Salesforce Marketing Cloud back into Salesforce CRM. Salesforce has certainly made some significant acquisitions over the years including MuleSoft, Tableau, and ExactTarget to name a few. What we haven’t seen is Salesforce buying into the nonprofit market through acquisitions.
A Horizontal Approach to the Nonprofit Market
On the contrary, DataTel/Sunguard/Ellucian (Ellucian) and Blackbaud have followed the business model of John D. Rockefeller’s horizontal integration. They all started off as small software companies with roots in nonprofits and higher education. Over decades of existence, Ellucian and Blackbaud have merged with or acquired other vendors in the space to increase their market share and expand the portfolio of products and services they have to offer the nonprofit market.
Balancing End-to-End Providers with Third-Party Support
These two vastly different approaches have proven to be effective in terms of business strategy and stock price, but they still pose challenges related to being end-to-end providers. For years, Ellucian and Blackbaud have tried to be all things for all clients— fundraising, scholarships, student management, grants, etc.— which in my opinion hasn’t yielded great interoperability between their different solutions. This could be due to the pace of acquisition and assimilation of these companies. Salesforce CRM’s evolution to support nonprofits, on the other hand, has been slow and steady. This has opened opportunities for third parties such as UC Innovation and Affinaquest to develop complementary solutions on the Salesforce platform that are specifically tailored to the nonprofit market.
Whether it be the pace of interoperability or the creation of features and functions to support the nonprofit industry, there will always be startups that can innovate much more quickly than any large software vendor, which brings us back to the original question. The leading nonprofit CRM software solutions should be considered the “hub” of your CRM strategy; use its core functionality to support your business processes. However, you’ll find that none of the leading software vendors have best-in-class functionality for all things like managing volunteers and events. So, you’ll need to either integrate with a best-in-class solutions or extend the CRM solution to meet your needs. Making a decision on a new CRM platform needs to be equally balanced between the features & functions of the platform itself; and its ability to seamlessly integrate between systems and adapt to your organization’s needs over the next 10-15 years.