Time to find a fundraising solution that can’t be bought
August 6th, 2007 | Published in Open Source, Software | 8 Comments
Blackbaud, which is one of the big gorillas in the CRM/Fundraising space bought a littler guy, eTapestry. This is not so far on the heels of the acquisition of Get Active by Convio. Blackbaud has done other acquisitions in the past. And, I’m sure there are more to come.
There basically are three types of software acquisitions that companies make. The first is to acquire a company that does something that you do not. For example, Yahoo bought del.icio.us - it didn’t have social bookmarking. In those situations, generally, the product remains largely the same (with some branding changes over time.) The second kind of acquisition is to acquire a company that does something you do, but much better. Like Google buying YouTube, or Yahoo buying flickr. In that case, the acquiring company eventually does away with its own product, and the acquired product becomes that companies offering in that space (with changes.) The third type of acquisition is when a company buys a competitor, which may or may not have technologies that it has. In that situation, the acquired company is basically engulfed by the acquiring company, and eventually (or immediately, in some cases) completely disappears as an option. This third type of acquisition has been the hallmark of the acquisitions in the CRM/Fundraising space. GetActive is no longer an option to choose from. Nor is Giftmaker (bought by Blackbaud.) True, eTapestry had a platform that Blackbaud does not - but don’t mistake that as the first or second type. eTapestry as a separate choice is bound to go away. And this is a bad thing for the many small organizations that have been using eTapestry for reasonable prices (or free).
You have heard me rant and rail about the fact that the vast majority of money (both from nonprofits themselves, as well as by investors) goes into developing, maintaining (and acquiring) CRM/Fundraising software. This is something that, honestly, we as a sector are complicit in. And there are fewer and fewer choices every single day. Fewer choices means less competition, which means that prices will likely rise. And nonprofits often feel they have no choice but to pay big bucks for fundraising/CRM packages.
If nonprofits want to have a good fundraising platform that they can know won’t be bought and swallowed and changed so that they’ll have to shell out more, it’s time to invest money and effort in an open source platform. One already exists that needs support and development to make it ready to compete with the big guys. Allan Benamer says:
Obviously, Blackbaud is taking a page out of Oracle’s playbook and applying it to themselves. Rapidfire acquisition of smaller players so that you can wrap it up into a system of systems seems to be their strategy for now. They now control the vertical fundraising environment for nonprofits from the base of the nonprofit market (eTapestry) to its apex (Target Software).
Blackbaud is publicly traded. It is important to think about the fact that dollars raised by nonprofit organizations are going to Blackbaud’s investors whose major interest in Blackbaud is the profit it can produce. That is the driving force behind what Blackbaud is doing - maximizing profit. It is unrealistic to expect that acquisition mania in the CRM/Fundraising space is going to result in anything except fewer, more expensive choices. (Remember that as good and open and free as Salesforce is, it also can be acquired, and nothing is guaranteed.)
We don’t have to submit to the “Buyout Blues”! We have power and options in using open source solutions. Isn’t it time we began to realize the power of community-owned and driven software that no one can buy?
August 7th, 2007 at 8:50 am (#)
I don’t think that ownership is really the issue, though I understand the sentiment. The issue is having affordable software that serves nonprofit needs. eTapestry had only 7,000 customers, in a sector with over 1.5 million nonprofits. Blackbaud has 15,000 (prior to the eTap buy), 2000 coming from Campagne. DonorPerfect has something like 6,000, we have something like 6,000. Salesforce has something less than that, though they likely have more seats.
So what are all the others doing? Access, Excel, custom stuff, and a smattering of other vendor applications. There’s definitely room for an open source effort, but it needs to match the realities of the nonprofit world: most nonprofits don’t have the benefit of in-house techies, most don’t like their data out on the web, and most can’t afford thousands of dollars or hours.
So my question to you and your colleagues, from our perspective, is what do you want us to do? What kind of vendor would you like us to be? APIs? Free software? Web APIs?
August 7th, 2007 at 9:22 am (#)
I am not sure that I agree with your analysis. Firstly Blackbaud’s products are expensive so much so that smaller non-profits are not willing to pay that price for them. eTapestry on the other hand is covers the lower end of the market. It is naive to say that Blackbaud are buying up the competition. They do not have a comparable product that would stand to benefit. It would seem as though they are broadening their product spectrum so that they can claim to have solutions for every type of non-profit.
I understand that in the past they bought GiftMaker and it is no longer in the market place but it is much more likely that they will lose eTapestry’s client base if they get rid of that product rather than them migrating to an existing Blackbaud product such as The Raiser’s Edge. Blackbaud have said that eTapestry will remain a wholly owned subsidiary and continue to operate as such.
There are definitely instances where companies buy up competitors to simply shut them down but I am not convinced that this is such a case.
David Zeidman
August 7th, 2007 at 9:24 am (#)
Excellent summary. Click & Pledge will soon be launching a new version of its SaaS for
nonprofits. It will include custom open source CRM, Web Content Management and enhanced payment
system. And as always, very affordable, easy to use and secure. We will fill the void.
Jim
August 7th, 2007 at 11:36 am (#)
As to David’s comment - I think that we will know at some point in the future whether or not eTapestry continues to be an option, and what kind of option it is. The history of software mergers (actually any mergers) between competitors is not on his side, but we will know how it turns out, eventually.
Charlie brings up an interesting point - the number of customers that Blackbaud has pales in comparison to the leagues of nonprofits who use other solutions. Charlie is from Mission Research, which also provides a CRM/Fundraising product, and his question is a good one - what do I want CRM vendors to be? I’m an advocate of free and open source software, but I’m not overly dogmatic - I do think that at least for a while (and maybe a long while) there is a place for commercial software in the ecosystem. In fact, I think it’s good that there is - it provides the bar that FOSS needs to be able to jump. The more good, and reasonably priced (which Mission Research’s offering is) packages that are out there, the better. And, he is right - lots of nonprofits don’t have in-house tech staff - so there will need to be good, easy to implement commercial options until FOSS CRM options are as easy to implement as Firefox or Open Office (there are a couple of those, by the way - eBase, which is no longer in development, unfortunately, and Organizer’s Database - both however, dependent upon commercial, proprietary platforms)
And also in terms of what kind of vendor - it’s not free as in “beer” that matters the most (although it’s helpful), it’s free as in “libre” - all aspects of “libre” - open standards, open APIs, and, ultimately, open source.
But in terms of the overall issue, my point remains. If nonprofits want to be able to implement CRM/Fundraising solutions (or any software solutions, for that matter) that cannot be taken away from them, or have the terms under which they use them change without their control or consent, there have to be open source alternatives. And the way to get FOSS alternatives is for organizations, foundations and others to invest time and energy into those options.
I don’t know anything about Click & Pledge, and what their “custom open source CRM” is, but if it is SaaS (that is, Software as a Service) then it doesn’t quite fit as a truly open source solution. Terms of use can change without notice or control. However, SaaS (like Salesforce or eTapestry) is truly a great option for many organizations, and I’m glad they exist.
August 9th, 2007 at 10:55 am (#)
I believe that Blackbaud will mostly continue the eTapestry line for some time. However, since they spent practically 4X sales for a company that they themselves admitted ‘made only a small profit’, they will have to raise fees to cover their investment. It may not happen quickly at first, but make no mistake- Blackbaud has a proven history of acquiring products and forcing people to upgrade to more expensive support and services- here’s a funny video explaining their strategy.
Here at DonorPerfect, we’re actually quite happy that Blackbaud made this move- it further positions us as the only alternative for robust fundraising software- whether installed or SaaS- that’s moderately priced and has the sophisticated features and support that non-profits require.
Also, in reference to the title of this article, “Time to find a fundraising solution that can’t be bought.” - we’re simply not going away. We are one of the only larger companies that have succeeded the old fashion way- without venture capitalist money or outside investors. We put our customers, employees and partners first- not some wealthy VC partner or Mutual fund owner.
As for open solutions, Charlie is correct- the majority of non profits do not have the dedicated resources to implement an open source solution or even something ‘low-cost’ such as Access or Excel. Instead, they will have to rely on consultants, or unfortunately volunteers. In the end, their ‘free solution’ is not only NOT free, but more expensive in terms of real dollars spent on implementation and lack of functionality that hinders their growth.
Perhaps one day we’ll get there, but in my 15+ year experience, the level of tech resources in non-profits have stayed the same, and I don’t think it’s likely to change.
In the end, I think it’s always better to focus on core competencies. This means non-profit staff should focus on mission and fundraising and outsource technology to those that live and breathe it every day.
-Jon Biedermann
Vice President
DonorPerfect Fundraising Software
blog: http://www.donorperfect.com/dpoblog
August 9th, 2007 at 10:03 pm (#)
Jon,
That is a funny video.
In terms of open solutions - please don’t spread the FUD that free and open source software necessarily requires in house technical expertise in a way that other solutions (like yours) don’t. As a general rule, it is not true. There are certainly some examples where it is true. And there are many others where it is not true (I’d betcha a bunch of money that Firefox takes less technology support that IE). In the specific realm of CRM/Fundraising, there are at least two free (not completely open source because they depend on commercial frameworks) CRM/Fundraising tools that are very easy to work with - eBase and Organizer’s Database - and these could easily be used by folks who are using Excel spreadsheets.
Both commercial and free and open source software range widely in usability and need for technical support. I’m sure that your package is a good fit for some organizations. And other organizations might find that CiviCRM, for instance, a better fit. It all depends on the individual set of needs and resources available to an organization.
September 1st, 2007 at 9:18 am (#)
[...] so I’m going to sound like a broken record. But, hey, why [...]
December 20th, 2007 at 7:05 pm (#)
[...] Time to find a fundraising solution that can’t be bought [...]