Nonprofit Software
BuyerView | 2015

Each year, Software Advice talks with thousands of nonprofit managers looking for the right software for their organizations. This provides us with unmatched insight into the needs of software buyers. We recently analyzed a random selection of 200 of these interactions to uncover buyers’ most common pain points and their reasons for purchasing new software. These findings will help guide the decisions of other buyers in the market for a nonprofit management solution.

Key Findings:

  1. Forty-one percent of buyers are replacing nonprofit software in 2015: a moderate increase over 2014, when 30 percent were replacing an existing system.
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  3. For the highest percentage of buyers (32 percent), the main motivation for replacing software is to acquire additional functionality, thereby increasing operational efficiency.
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  5. Buyers most frequently request constituent and donor tracking functionality (cited by 72 percent), followed by outreach and communication tools (39 percent).

Introduction

Nonprofits that choose the right software can improve upon many business processes, including communication, record keeping, marketing, fundraising, financial reporting and more. According to a 2015 Software Advice research report, for example, 99 percent of professionals surveyed say their use of fundraising software positively impacts the number of donations their organizations collects—and 98 percent say it has a positive impact on overall record keeping, reporting and workflow efficiency.

Many types of applications fall under the umbrella term “nonprofit management software,” supporting a variety of different organizational processes. Here are some of the most common applications:

Nonprofit Management Applications

Nonprofit Management Applications

According to our research, using specialized nonprofit management software has more benefits than drawbacks. This is especially true for small nonprofits with limited staff, where automating even one task—such as sending acknowledgement letters to donors—can free up hours of time to focus on other projects.

But given the large number of product options on the market, making a smart purchase decision is no simple task. To help other buyers, this report reveals what nonprofit managers commonly seek in new software, the current methods they use to maintain records and complete daily tasks and the primary challenges these methods present.

Buyers Replacing Existing Nonprofit Software Up 37 Percent From 2014

In 2014, 30 percent of prospective buyers were already using software developed to support nonprofit data management, such as fundraising or volunteer management systems. This year, the proportion of buyers using nonprofit software has increased to 41 percent.

Prospective Buyers’ Current Methods

Prospective Buyers’ Current Methods

Furthermore, fewer nonprofits are using manual methods—such as paper ledgers—to track constituent data and complete tasks in 2015 than in 2014. While it is good to see more nonprofits realizing the time-saving benefits of software, the fact that more buyers are replacing nonprofit-specific solutions indicates that many products are failing to meet customers’ needs.

For example, the Atlantic States Marine Fisheries Commission (ASMFC)—a nonprofit that works to conserve fishery resources—previously used nonprofit accounting software to track its grants. Most of these were five-year grants, but the software tracked funds for only three years at a time. In other words, the system did not align well with the organization’s processes.

According to software vendor Capitol Nonprofit Solutions, after implementing an accounting solution that tracked grants for five years, ASMFC’s “accounting operations [were] streamlined by 20 percent, saving at least 10 hours a month in report generation.”

Still, the majority of buyers in our sample (52 percent) currently use general-purpose software, such as Microsoft Excel or Google Drive, to manage data: a slight decrease from last year’s 53 percent. While spreadsheets and documents can be a good solution when a nonprofit is just starting out, as the number of records increase, so does disorganization—making this method only a short-term solution for most. Our data shows that many of these general-purpose software buyers represent very small yet growing organizations that want to automate common processes (e.g., processing donations and generating tax receipts), to get more work done in less time.

Additionally, 21 percent of buyers use commercial software that is not developed specifically for nonprofits. One buyer, for example, reports using accounting software to manage financial records as well as constituent data. This buyer explains that the application is not built to function as a constituent relationship management (CRM) tool, and so they are seeking separate software that can better track data about donors and members.

Finally, 9 percent of buyers use no system at all (a slight decrease from 2014). In nearly all of these cases, this is because the nonprofit is a startup, and thus has not yet implemented a formalized system.

A Need for Greater Functionality Is Top Driver for Current Software Users

As mentioned, 41 percent of buyers are replacing existing nonprofit software because it does not meet their organization’s needs. For 32 percent of those buyers, that unfulfilled need is a lack of functionality.

Top Reasons for Replacing Existing Software

Top Reasons for Replacing Existing Software

For example, one buyer explains that her nonprofit’s current donor management system does not allow special characters in the name and address fields. This is a problem, as the organization has many foreign donors with special characters in their names. Another buyer says his nonprofit’s current software program has no calendar or outreach tools, so coordinating volunteers requires more time and effort than it should.

For 15 percent of buyers, the greatest pain point with their current software is that it is simply too hard to use. For example, one says her fundraising management system is “complicated” and “not user-friendly,” and she is disappointed that the vendor requires a fee for training.

Another 10 percent of buyers want new software to consolidate data into a single system. One buyer is frustrated over the inefficiency of tracking records between the organization’s membership management system, email marketing software and a third, unspecified software program. Another explains that with her nonprofit’s current solution, she must manually synchronize data between the software in two different offices. As such, she is seeking a system that staff in both locations can access instantly, without the need for synchronization.

Other common reasons for replacing software include an expansion of programs and services on the part of the organization (10 percent) and a desire to upgrade from an outdated, error-prone system (10 percent).

Nearly Three-Quarters Seek Constituent and Donor Tracking Capabilities

Nurturing relationships with donors and other supporters is a never-ending activity in any nonprofit. It is thus no surprise that the vast majority of buyers want comprehensive constituent tracking and communication tools (72 percent and 39 percent, respectively).

Top-Requested Nonprofit Software Functionality

Top-Requested Nonprofit Software Functionality

Effective constituent tracking helps nonprofits maintain vital contact records and reduce the time it takes to retrieve contact information. Built-in outreach and communication tools, meanwhile, help expedite correspondence via direct mail, email and online channels.

For instance, a coordinator might want to inform highly engaged volunteers about opportunities to participate in an upcoming event for students. In a CRM application with reporting features and built-in email marketing tools, the coordinator creates a list of individuals who are most likely to fit the role by defining relevant criteria. (For example, volunteers who were engaged in the past 12 months and have “teacher,” “educator” or something similar listed as their profession.) Finally, the coordinator composes a message—either custom or canned—and selects whether to email or text the message to the list.

This way, the entire communication process can be accomplished in a few clicks. Conversely, manually searching through spreadsheets and documents and then importing the list to a separate email application might require several hours of work.

The fact that 39 percent of buyers want to purchase products with built-in communication tools also aligns with insights reported by Kivi Leroux Miller, president of industry publication Nonprofit Marketing Guide.com. Chief among her insights is that, for the first time, engaging existing supporters and retaining current donors has surpassed donor acquisition as the top nonprofit communication goal. In other words, demand for constituent tracking functionality and outreach tools is likely to increase as nonprofits develop more sophisticated relationship maintenance strategies.

Reporting is another “must-have” capability for 33 percent of our buyers. Indeed, every nonprofit has federal and state filing requirements that require financial information to be reported. Some grant-funded nonprofits must also submit reports to comply with grant requirements. Other organizations have internal accountability requirements that necessitate reporting on finances and other activities. Most nonprofit software includes standard reporting features, such as contribution reports, solicitation histories and finance summaries.

Sometimes, however, accountability requirements demand more advanced reporting. In these cases, nonprofit managers turn to business intelligence (BI) solutions—as in the case of the educational nonprofit, Teach For All.

Teach For All collects over 300 qualitative and quantitative data points to measure the performance of its programs and to inform growth strategies. Before implementing enterprise business intelligence and reporting software, the nonprofit collected and analyzed that data with spreadsheets. The new software now automates many of these tasks, saving countless man-hours.

Going back to our survey results, other functionality buyers request includes contribution tracking (29 percent), automatic receipts and acknowledgements (21 percent), event planning (18 percent), membership management for tracking member dues and renewals (18 percent) and interaction notes (16 percent).

Conclusions

For the adoption of any new software product to be successful, it must be a good fit for the organization implementing it. Based on our research, we’ve identified four criteria buyers can use to decide whether a product is right for their nonprofit:

  1. Ease of use. In any size organization, a solution that is intuitive for users will be quicker and easier for staff to embrace than a more complex solution—especially if it is taking the place of general-purpose software.
  2. Integration with other systems. Many nonprofits—especially midsize to large organizations with multiple departments—use more than one application to manage data. In organizations where it is important for those systems to communicate, ensure that the new software can be integrated with them.
  3. Communication tools. For organizations that communicate with constituents en masse (or expects to start), buyers should evaluate products with built-in outreach tools. Most nonprofits need email marketing functionality, but fewer require text, social media and direct mail support.
  4. Reporting options. Most products include basic reporting functionality that is suitable for many nonprofits. Those nonprofits requiring more in-depth insights should look for applications that also offer custom (sometimes called “ad hoc”) reports. Buyers from organizations that track large amounts of data and need to perform complex comparisons might consider evaluating BI applications.

Demographics

The largest percentage of buyers in our sample represent human services nonprofits (27 percent), faith-based organizations (20 percent) and arts and cultural organizations (15 percent). Nearly three-quarters of buyers report an annual operating budget of $1 million or less.

  • Prospective Buyers by Segment

    Prospective Buyers by Segment
  • Prospective Buyers by Annual Operating Budget

    Prospective Buyers by Annual Operating Budget

Methodology

Our advisors regularly speak with buyers who contact Software Advice seeking new nonprofit management software. The data used to create this report was collected by our advisors during those interactions for business purposes, rather than for market research. We randomly selected 200 interactions from U.S. buyers during late-2014 and 2015 to analyze for this report. Additionally, we re-calculated “current methods used” data analyzed in 2014 to align with methods described in this year’s report.

These findings exclusively represent those buyers who contacted Software Advice for guidance on software selection and may not be indicative of the market as a whole. Expert commentary solely represents the views of the individual. Chart values are rounded to the nearest whole number.

If you have comments or would like to obtain access to any of the charts above, please contact janna@softwareadvice.com.


Janna Finch

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