Keep Evaluation Simple, Stupid

So I served on the advisory board of the TechImpact project done by NTEN and NPower. That project confronted a key problem faced by Nonprofit Technology Assitance Providers (NTAP):

It’s common to hear examples of how technology has helped nonprofits achieve their missions. However there are few studies that demonstrate this impact in a measurable way.

The project got off to a great start but never quite got to the point of generating performance metrics for NTAPs. Well, over the past year I've been developing the performance metrics for NetSuite.org. We are basically an NTAP, so I very much looked at all the research and evaluation data on NTAPs out there.

I got a headache.

Lots of data, lots of academic mumbo jumbo (which is fine unless all you are trying to do is measure outcomes), lots of ideas and no overall simple solution for building a measurement system.

So what did I end up with?

(1) Second order social impact ( the social impact of a charity attributable to an NTAP) is hard, so

1. Don't bother with it
2. Allow the charity to self report on a question like "What social impact was most enabled by working with us".
3. Collect narrative data on the project and, if your can afford it, do a content analysis.
   

I personally use #3 becuase I suspect we'll be able to do the content analysis in the future.

(2) Use a simple proxy.

1. I like the Net Promoter score. Adjust the question a little to "How likely would you be to recomend XYZ to somone that needs to use technology to expand their social impact" That will generate a simple metric you can manage to (read the details, linked below) 

Net Promoter

http://www.netpromoter.com/site/

TechImpact Project

http://www.nten.org/research/techimpact

Content Analysis

http://writing.colostate.edu/guides/research/content/pop2a.cfm

Complexity

So my job is to give away fairly complex and powerful software. The downside of this is that it can be virtually impossible to serve small charities-- they have enough complexity in their lives as it is.

My company just did a press release and a podcast on nonprofits switching from Microsoft Great Plains to NetSuite. This was part of a broader story of folks from different industries making the switch from Great Plains to NetSuite.

As I read our press release and listened to the podcast I was struck by how similar yet different charities are from "regular" businesses. And how the differences are really hard for a standard commercial company like us to wrap our head around.

Take for example Imagine!, a human services agency that is part of the announcement. Buried in the press release is that fact that they turned to NetSuite first for Case Management. Case Management! Then they found out the system they bought for case management could replace Great Plains and their time tracking ap and their payroll and more.

As anyone in the charity world knows, case management is a really hard problem and there are a bunch of software solutions already out in the world. The key to their sucess was probably that they were a larger organization operating a social enterprise... a social business in their nonprofit. That meant there was less of a gap between how they look at the world and how the NetSuite software wants you to look at the world.

But I wonder is the really compelling story them choosing NetSuite for case management rather than the non-sexy back office financial applications. I wonder which resonates with your average charity more. 

Financial Crisis, America and Ideology

In a diversion from my normal topics, the US financial crisis has my attention at the moment.

First context... a bunch of financial institutions got greedy and bought a bunch of assets (mostly mortgage-backed securities) that no one wants to buy. Since no one wants to buy this stuff and no one can figure out how much they are worth, the government is going to spend up to $700B to buy this stuff.

So the financial institutions made decisions that should make them bankrupt, the government doesn't want them to go bankrupt and here is where it gets interesting.

If I'm a corporation and one of my rivals is going bankrupt, I don't buy the assets that made them bankrupt... I buy a stake in the company. This is what the government did with AIG... they bought 80% of the company (actually slightly less because 80% is a magic number in corporate land).

If, in the future that company does well, my stake in the company goes up and I potentially get a big financial benefit.

Now, instead of this Schumpeter-ian creative destruction, the government is going to buy all the bad assets. This is the key issue... the owners of the firms that made bad decisions get a free pass-- they are not dilluted by government ownership.... which is pretty much the only punishment capitalists understand.

Now, in the ideal world, the government would actually take a stake + buy the bad assets off the balance sheet, since both actions are necessary... buying the bad assets to resolve the crisis and taking a stake to punish the owners of these firms/

(oh wait, I don't want to punish main street since that might cause shareholder activism that might crimp those multi-million dollar executive pay packages)

I suspect if any of the rich people that understand investment and such actually paid any significant taxes, they would be hollaring for the government to use *their* money wisely by buying the assets only on the condition of getting an equity stake.

But since the money comes from a bunch of middle income folks that don't really realize they are partially responsible for this mess by holding Bear Sterns in their retirement portfolios, its OK to just buy the bad assets.

And this is where the ideology comes in. God Forbid the taxpayers own a significant percentage of the financial system they are bailing out. That would be socialism and that would be bad-- not that we know what socialism really is, not that the government acting like an astute investor is good.... since capitalism is only good if you are a private citizen or corporation.

And tying this up into a nice little bow... this just shows the contempt that Americans have for government. Carly Fiorina says that the a person qualified to be president of the United States... in charge of an organization with revenues of $2.5 trillion and 1.7 million employees.... isn't qualified to run Hewlett Packard ($113B revenue and 172K employees).

We say our government isn't qualified to own equity stakes in our financial companies.

We'll probably unload all those bad assets to early to make a decent profit (like we did with the Resolution Trust Corporation) becuase of the contempt Americans havce for their own government.

Its my money darn it, I want it invested well. I want a government that is run well, and just like when my airline does a crappy job, I'm going to switch vendors.

Wait we have an election in a few weeks.... mmmm.

Platforms...

How amusing is it that platform is the dominate meme for this blog?

What is Donor Management Software?

So NTEN decided not to include CiviCRM as a listing in their Donor Management Survey. On the face of it, that was an OK decision because CiviCRM wasn't specifically designed as donor management software.

That kind of made sense to me, plus we have plenty enough users that use CiviCRM that we'll have just as many responses as the named systems. [If you use CiviCRM for donor management, Vote Now!]

Then they modified the front page of the survey to define donor management and I started thinking this is another conflict between the platform solution vs. "best-of-breed". Their definition of donor management is:

1. Manages relationships with current and prospective donors
2. Sends/Tracks correspondence and relationship history
3. Is more than just a donation processor (i.e. PayPal, Google Checkout, DonateNow)
4. Tracks ALL types of monetary gifts (on- and offline, events, etc.)
5. Is available for purchase/download

CiviCRM was probably excluded since it does so many other things, but from CiviCRM v1.0 oh so many years ago we supported each and every on of these "features". But as a platform, we tend not to support "deeper" version of these features... for example, you could track pledges in v1.0, but real useful pledge management / automation functionality had to wait for the current release.

As a platform, we weren't included, but I bet if we called ourselves fundraising software from day one, we would have been.

Platforms like CiviCRM are designed very much on the 80% rule... try to get most of the way there for most of your users. But when you are trying to be a platform for operating a charity, most of the way there for most of your users doesn't look anything like most of the way there for most of your users if you are just building a gifts database. Features for a platform tend to be broad and shallow.

Over time, however, each aspect of the platform becomes deeper and more capable as more users use it, more contributions (code and financial) are made and time simply allows you to get around to a specific piece of functionality.

And finally, there is another reason that CiviCRM doesn't show up on the comparision lists (Techsoup, Aspiration, NTEN, etc.). I think the assumption is that if you can't install it on your Windows PC or access it as SaaS online, it is simply too complex for charity users and therefore shouldn't be put out there as an option. I agree a little with this, but the simple fact is that installing and maintaining a MYSQL application is not beyond an advanced accidental techie... I'm not sure we are helping too much by excluding a high-quality solution for the reason it requires some technical competence to deal with.

OK, they get the benefit of the doubt

I've watched Wild Apricot since it came out of the gate and been impressed with their product as a solution for small groups. I've also been impressed with their well thought out blog and they seem like all around good guys.

I see this blog post about how they are going to:

...take a closer look at free and open-source software: the real costs, the barriers, and the trade-offs; some of the best FOSS alternatives to “brand name” software; and online resources to help you make the most of it.

And I start to wonder if it is going to turn into a stealth vendor hit piece / FUD on open source. But as I mentioned, they don't seem like those type of folks, so I'm looking forward to what they write up.

PS, if anyone wants to compete head to head with Wild Apricot using open source software, you could run a CiviCRM-based ASP ;)

Manatees of the Tech World: The End of Best-of-Breed

Part of the fun of nonprofit technology is that you always know where it is headed with 100% certainty. Just look at the small & mid-sized enterprise (SME) technology market 5 years ago... that is where nonprofit tech is heading today. [note: that time gap is closing, but is still pretty significant]

You'd think you could make some money with that insight, but I digress.

There are a few great debates in the software world client server vs. SaaS, best-of-breed vs. platform. Nonprofit technology is finally getting its head around SaaS being better than client server. A year or two ago, it became pretty clear that SaaS was the way to deploy applications even though the cost advantages were not what were once pomised--in the SME world. In a couple of years, nonprofits too will just accept SaaS is better than client server-- actually the adoption gap here is far smaller since SaaS addresses a bunch of challenges nonprofits have... the least of which no tech staff.

And now no less a luminary publication than the Wall Street Journal has published the truth, "The End of Best-of-Breed," noting best-of-breed software companies have been bought at fire sale prices.

Such software vendors became known as “best-of-breed,” reflecting a belief that specialists in automating certain business tasks can provide customers with a competitive advantage—at least over companies that use multifunction suites of programs that come from a single vendor.

But there was a problem with this approach: It is hard to get different pieces of software to exchange data, which is necessary to understand everything that is happening in a business, said George Lawrie, an analyst at Forrester Research.

So what does this mean in the nonprofit software space? Be very afraid of Blackbaud Infinity if you are a vendor. Find lots of money to buy Infinity if you are an NPO. Since infinity is the closest thing to a platform we have in the sector.

For the small charities, as always, technology will be a harder nut to crack... yet things like CiviCRM, Wild Apricot and others are approaching the world as a platform so eventually something complete might be avaliable. And then there is Salesforce and NetSuite... if they could release a set of applications on their platform, the smaller organizations would have a pretty fantastic resource.

Thinking about security

So after 5 years, I changed all my basic passwords. Why? I was reminded that some of them were used in less than secure sites and I have been remiss in my regular practice of changing them every year or so.

Recent compromises at TechSoup and Network for Good reminded me that ultimately I am responsible for my own security. It is inevitable that security breeches will happen. Most of the responsibility for dealing with those breeches is on me... when a site is breeched, how much of my online life is vulnerable?

The other part of responsibility is on the provider. How do they react? How do they manage risk? How do they communicate the facts and the implications of those facts? The rather minimizing notifications from providers are a little bit disconcerting: http://techsoup.org/maintenance/page10338.cfm.

I'm not sure there is clear communication going on:

1. Viruses and malware means "a key logger could have been installed in your computer"
2. No evidence of download of personal information does not mean the keylogger didn't get your personal information.

You don't want to scare people unecessarily, but I would certainly hope that a mission driven NTAP would err on the side of caution and education rather than delivering what i would call a text-book vendor notification of a breech.

Viruses and malware are used to do little things like capture all your passwords (keyloggers). I saw a great demonstration once of cracking online banking after visiting an infected site.... these are serious issues and I'm not sure that the magnitude of the potential issues is really being communicated to those impacted.

What if viruses and malware are just decoys? I know that most NPO technical services are staffed by competent, well meaning folks. But hard-core security folks that can uncover the *whole* story? Not so much. Without information on what, exactly their response has been, it is hard to have a lot of confidence.

Finally, I think there is something very inevitable about two major NTAPs suffering a compromise of their older, creeky infrastructure... technology changes rapidly... continuous expensive investment is required to keep up with the moving ball. If you can't invest the money and people and time and planning in moving the ball forward, it's time to outsource your efforts.

I will note that both providers have made timid forays into modern technology that can address some of these issues.

Techsoup has used the Drupal open source system for a number of projects. Keeping up-to-date with an open source platform does a huge amount to improve security... the open source community fixes vulnerabilities and staying up to date protects the user.

But why not over the past 3-5 years budget and upgrade to an open source platform?

Network for Good takes another good tack... go to the cloud. They have experimented with Salesforce.com, where Salesforce engineers take responsibility for security and as the cloud gets updated the user is protected.

But why not over the past 3-5 years budget and upgrade all your services to a cloud-based platform?

In the end its all about management. How well do I manage risk by changing my passwords? How well do providers manage risk by investing in their technology infrastructure?

The brighter side :: NGO technology collaborations

Slightly depressed by my last post, I thought I'd highlight some of the big thinking that has happened... the success levels might not be what I would hope for, but it does highlight there are people out there thinking the big thoughts and putting them into action. Yay for them!

Greenpeace Melt. Built for a specific Greenpeace project, open sourced, but never really got much traction. -1- -2- -3- .

NPOKI. Perhaps the most real effort I've seen. -1- -2-

Global DME Solution. Collaboration of big global NGOs. Similar/ same as NPOKI. -1-

Solpath. Stillborn open source grants management solution, but great market research -- very foundation like, lots of paper but o actual code ;) . -1- -2-

Voluntary Action Westminster. "To reiterate what we want to do is develop a community of developers who all use - and are improving the same system. " on CiviCRM!

Various efforts around PEG TV stations. -1-

These examples and other really do highlight the oil and water nature of organizing around mission and organizing around tools. I think you can do one or the other. Eventually, when CiviCRM gets big enough, it will gain market share, but will likely never be selected for mission reasons, just on a feature matrix and cost calculation.

CiviCRM was built because all these mission-driven efforts share very similar underlying CRM-based technology needs. Yet only one uses CiviCRM. And the Melt decision to roll their own put the nail in the coffin of collaboration.

More to the point, the structural considerations around something like NPOKI... funding sustinability, etc, actually drive people away from the CiviCRM model of build it, share it freely... if anyone can get the software, why would they spend money? If I open it to the world, I can't control the community!

These of course are red herrings... complex software requires consultants you pay for. And as long as you control the SVN check in you control the software. Very simple stuff.

It would be nice to know of other past present and future similar efforts, please put them in the comments!

Picking Winners... not so easy.

In reading a recent OpenSourceCMS market survey by Water & Stone, I reflected on how we pick technology solutions to solve specific problems.

Around the same time a few years back, Jon Stahl, Ryan Ozimek, I and many others were trying to tackle the problem of how to provide small charities with effective technology... generally in the form of data (a CRM) and content (a CMS). We all agreed on the relevance of open source for its practical, rather than religious, benfits... cost, innovation, the potential to support niche markets.

There was no really effective CRM solution at the time, so I was involved in the ramp up of CiviCRM and Salesforce Foundation began donating licenses, so neither solution was really obvious. On the content management side, we went three different ways... Plone, Joomla and Drupal.

Here the interesting part. We were serving the same basic constituencies, we agreed on the same basic values being important, we had very similar mental models for how technology could support social change and charity operations.

In the end, we contributed to three different communities and effectively split the old Circuit Rider mind share (a subset of nonprofit technology assitance providers). Today, Jon is on the board of Plone, Ryan is on the board of Joomla, my old partner at CivicSpace is on the board of Drupal.

I have to wonder what all our (and others) deep comitment and significant invested energy and resources over the past few years might have accomplished if it had been invested in a single open source community. I have to be careful to not frame this as a "wouda, coulda, shoulda" question... the individual decisions that were made were fantastic. But since those decisions were about investing in a community rather than a vendor or piece of software, it is funny that the forces that drew us to the technology were far stronger than the forces that drew us together on the basis of our work in the same sector for the same constituents.

Technology is just a tool, so the mantra goes. Therefore, if you need to pound in a nail, you can use a hammer, a mallet or a rock and meet your mission. You'll probably talk to other mallet users and compare notes. Every once in awhile people will switch from mallets to hammers.

It is very clear to me that technology solutions come and go. The charity sector has no strategic vision of technology, nor will it ever... not many charities hire a CIO to think the big thoughts. And there doesn't seem to be the potential in the charity technology community to craft a community of action like there is in Drupal community.

For the life of me, I can't figure out why.

Open source vs Antharia

The folks over at Antharia are some true blue mission driven nonprofit technology providers, but I suspect they are buying into the entire open source vs. vendor thing driven by FUD (fear, uncertainty & doubt) generation on both sides. To whit this post.

I think Jordan and I would enjoy having drinks... something about an affinity for a rant. So here goes,

1. Drupal, Plone and Joomla ARE NOT VENDORS.
2. Antharia, CitySoft, Convio, etc. ARE NOT SOFTWARE.

When you send Antharia a check you are buying two things:

1. FourtyFourFish / On Content, their software.
2. Antharia, the vendor.
   

Jordan has this comment her blog post that is a common misperception... and the way vendors spread FUD about open source (I'll cover how open source spreads FUD about vendors in a sec.).

If I did not know better I would swear the makers of Drupal, Joomla, and Plone were greasing the pockets of NTEN.

I'm not sure how the 1400 individuals that "made" Drupal by offering uncompensated contributions of software code could or even would slip NTEN a check, but hey, whatever. You are not buying a vendor when you use open source software. End of story.

Now, NTEN can take it on the chin for screwing the pooch on the CMS software survey by conflating the software and the vendors into a single entity rather than having people rate the software and the vendor seperately. Not sure how Drupal can deliver on promises since software doesn't make promises, vendors do.

And the open source guys spread FUD about vendors mostly by using the words lock in and free. If you have a good vendor, your probably pretty happy with your lock in.

Finally, as a big open source proponent, I must pose the question... who can write better software? A small company with a couple developers? Or 1200+ contributors driven by a multi-million dollar ecology?

And props to the small nonprofit technology vendors... who can help out a small nonprofit implement software better? 1200+ conributors who couldn't care less about you? A small company where you are an important customer?

What is the best solution for nonprofits? Excellent software (open source) implemented by excellent vendors (small mission driven shops).

Nonprofit Technology Vendors are Competent, Who Knew?

For many years, I always thought the big Nonprofit software vendors were not very smart, nimble or perhaps, even competent. Now that we've gone from Blackbaud, Convio, Get Active, eTapestry, and Kintera to Blackbaud and Convio, these companies are doing some really smart things.

Blackbaud acquired Kintera, giving them a working, robust SaaS platform along with a healthy dose of customer and product consolidation.

I just saw today Convio released a CRM system on Salesforce.com's force.com platform. This I must say is a stroke of brilliance. It does beg the question of why the SFDC Foundation has been slow to get a nonprofit edition out the door.

From a business point of view, it is a no brainer... Convio doesn't have to pay for the servers or the platform AND NEITHER DO THEIR CUSTOMERS! If you are looking for an opportunity to move down market, this is a perfect opportunity. All the customer pays for is basically charity product development expertise and support.

No hint on pricing, but I hope they take this as an opportunity to drive down market.

Self-Delusional Nonprofit Executives Talking about Low Salaries in the Sector

I often run across things and want to get to the truth of the matter. Luckily in the charity sector we value transparency.

A nonprofit executive recently was bemoaning the fact that they were underpaid, asking the question what about the mission made them choose this sector.

Knowing a little about the organization, I found it weird they would consider themselves underpaid. So, with the magic of the IRS form 990 and salary.com, I compared their salaries to "commercial" rates.

The executive is paid 20% MORE than the commercial median salary. The CEO of the same organization is paid 35% MORE. (adjusted for sector and company size)

The wage rates in the sector are a serious issue. I am not making light of that. But many of the leaders in the sector working for leading charities are being paid on par, if not better than, commercial wage rates. Lets be very careful about what we say.

When I worked in in a community based nonprofit, I was certainly underpaid compared to commercial opportunities. Though I remain in the sector, I can't say I that any longer -- I have purposely sought positions with compensation on par with what the commercial sector pays.

I can still shed light on the problems of compensation in the sector, but it would be dishonest of me to suggest I am somehow personally sacrificing to stay in a mission based job that I love.

We should be lowering the costs of CRM implementation

I read this fine post on the Costs of CRM Implementation by an NPower consultant, Anand Sethupathy, and I started to wonder why we in the NTAP (Nonprofit Technology Assistance Provider) community are drawn up-market like regular commercial consulting firms. The costs of CRM implementation were more about organizations with 20 seats rather than organizations with 2 seats.

To define terms, I look at the charity sector like this:

• 80.8% of registered nonprofits have budgets under $100K per year
• 50.9% 990 filers have budgets under $100K

By any measure, the majority of the sector is tiny and cash poor.

Long agi there was Techrocks and Ebase. In 2002, I was at a retreat in Montana where we mapped out the move from Ebase 1 to Ebase 2. Ebase 1 was in the "simple to use" category. Ebase 2 became more flexible and powerful because Ebase users and consultants needed more. Eric Leland reviewed Ebase 2 back then this way:

While ebase 2.0 is a great improvement, it should still not be considered a “ready-to-use”product. Any users considering ebase should carefully evaluate what ebase can do for their organization without any extra work configuring the product, and what ebase can do for them if they are able to configure it.

A perfect example of a solution moving up-market from v1 to v2... getting used by larger organizations with more complex needs and losing its footing in the grassroots.

IMHO, Npower, Salesforce and ONE/Northwest have seen a march up-market among charities as well.

The only groups I can think of that keep a tight focus on the smallest organizations are Mission Research and the Organizers Database (I'm sure there are others, but those come to mind).

What is the determining factor?

As soon as you have a human providing services to charities, you are forced to move up market. Consulting is expensive and only charities with bigger budgets can afford them.

If you focus on a product that "just works" without the consulting component, you don't have to move up market (you also probably aren't going to make any money either).

The hard part is building the ecology that can deliver the entry level product (Giftworks / ODB /Ebase 1) AND provide enough flexibility and tools to allow the consultants to do what they do as well.

DonorPerfect getting nervous about the cloud...

[note: I run NetSuite Giving]

I read this little tidbit in the Techsoup forums and began to think about all the various implications for the traditional charity software vendors.

SalesForce is also a good example of where 'Free' doesn't mean it's the best choice. I'm glad to see you've seen what others have seen in its limitations as a fundraising system.

This quote from a DonorPerfect vice president is fascinating. My thoughts:

1. DonorPerfect is clearly feeling the pinch of a free option for the bottom of the market. My impression of DonorPerfect is it plays just above Mission Works, below Raiser's Edge, and head-to-head with etapestry. They probably all are feeling the same pinch.
   
2. There are real and significant limitations to a cloud-based, business-focused solution like Salesforce. Primarily, the solutions are not "productized" ... they require consulting and generally a lot of work to get running. A good illustration is the case of a LYBUNT report (donors that gave last year but not yet this year). In a cloud-based solution you plan the data model, implement the fields, build the report and it works great 40 hours latter. With a purpose built solution, you click the LYBUNT button.
3. Productization of cloud based solutions will eliminate many of these vendors. If NetSuite releases a fundraising bundle (which includes the datamodel, fields and reports) with a LYBUNT button, many of the limitations of the cloud based solutions evaporate quickly.
4. There is not much clarity on whether fundraising software is transactional (i.e. really an ERP rather than a CRM problem). Solutions like DonorPerfect straddle the ERP/CRM line and Raisers Edge/Financial Edge seem to cover both sides.
   

If this four point story does come true, then vendors like DonorPerfect will be in serious trouble. They can't match the R&D spend of the big boys, but they still have ultra-valuable expertise... sales, marketing and domain skills. If others offer cloud-based solutions on top of Salesforce and NetSuite, they are likely not to be able to compete because their cost structures are too bloated. They need to disaggregate their business and focus on the high margin stuff.

What does that mean in practical terms? Basically DonorPerfect needs to join someone's ecology. They could take their domain expertise and build a solution on top of something like NetSuite Business Operating System.

They then become a sales, marketing and support shop with a small R&D line item. They are able to deliver far more functionality to customers and potentially more flexibility on price, yet still run a high margin business.

I sometimes wonder if there isn't a project running to rebuild etapestry on the Blackbaud Infinity platform. That would be the ultimate proof of concept for Blackbaud becoming an ecology player like Salesforce or NetSuite, except focused in the public/ charity sector. Blackbaud has an escape route, I suspect DonorPerfect does not.

Network for Good needs to do better

OK, I fully admit I haven't exhaustively researched this, but Network for Good is trying to get people to use it's API to give to charities. OK, good thing to allow more websites like change.org to spring up and for charities to get a nice little surprise check in the mail.

I read this and kinda wondered:

Q: If my project does not win and I want to purchase the Network for Good API for use beyond June 30th, what do I do?
A: Organizations interested in purchasing a developer license for use beyond June 30, 2008 should email customerservice@networkforgood.org. The cost ranges from $6,000 - $9,000 depending on the type of organization, the range of web services being used and the level of customization.

First, their API is not open. Not on the web anywhere. I mean publish the API and limit calls to 10 a month if they are unpaid. Not an insurmountable technical challenge.

But more to the point, if you really want to spread things virally, why would you use such an old school model? I find it kind of amusing that it was founded by AOL and Yahoo and, like the corporations that spawned it, it is having trouble staying in the technological here and now.

Finally a couple of truely radical thoughts. NfG charges a 4.75% fee on transactions. All numbers are assuming ~$40M in annual donations (they did $35M in 2006)

(1) Switch to PayPal. Save $740K. Keep $200-250K and the float to handle the costs on mailing, etc.
(2) Make a deal with Google which offers NPO free processing. Save $1.9M. Keep $500K for expenses and send an additional $1.4M to the sector.

Maybe keep another $100K of the savings and make the API free.

When NfG released the widgets, I thought they probably got web 2.0. With there approach to APIs, however, I need to rethink that conclusion.

XYZ doesn't speed up development for folks who aren't XYZ Ninjas

Over the past few years I've been trying to solve the problem of delivering high quality technology to small nonprofits. Basically how do you get them something that costs $30K a year for free or affordable cost?

I've worked with a wide range of open source and proprietary technologies... CiviCRM, Drupal, Salesforce.com, Microsoft, Google, NetSuite. Nick Lewis had this great quote today,

"Drupal doesn't speed up development for developers who aren't Drupal ninjas"

As I thought about this, I realize this is true for any complex software system. The utility of the software system, its ability to meet user goals, its ability to support rapid and iterative problem solving are all related to the specialization and experience of the user/customer.

This has some really important implications for software buyers. We've been saying this for years about Drupal, but it as relevant for Convio, Kintera, Blackbaud, MPower or any other vendor provided system... the more you learn about the platform, the more you invest in the platform, the more you increase you capacity using the platform, the more likely it will to solve your problems quickly and easily.

Back to small nonprofits... "I'm focusing on my mission, you want me to learn the software? Waste of time." Those of us that serve nonprofits keep wanting Muhammad Yunus's digital Alladin's lamp. Maybe that is not reasonable.

Let's look at the last ubiquitous piece of technology.. MS Word and MS Excel. I remember when NTAPs spent a lot of time training people on those technologies. Eventually the training just became part of the tech plan and new hires came in with basic computer literacy. Not sure there are any more deep worries about the affordability of MS Word (which was a huge issue in 1996) or the capacity of organizations to use MS Word (also a huge issue in the late 1990s).

Databases in the sky, CRM and ERP and different beasts, but perhaps we need to look at the trajectory of MS Word literacy to understand where our world is going over the next decade or so.

(1) Eliminate / radically reduce cost. Big corporations like Google, NetSuite & Salesforce are following Microsoft's software donation playbook, just in a new business model.

(2) Ubiquity leads to capacity. Google is teaching the world how web applications work, increasing the literacy of the population for the smaller players like NetSuite and Salesforce. Though I'm not sure how much CRM/ERP literacy is possible... quickbooks is still a black box to most people.

What do you think? Is it just a matter of time before the "big iron" of CRM/ERP comes to the masses in an effective form?

Case Foundation, Community Based Philanthropy

My esteemed ex-collgue from the Beaumont Foundation, Michael Smith, sent me a little reminder about the Case Foundation Make it Your Own Awards.

As if I hadn't been following such an excellent community-based example of philanthropy! It is a great example of all the innovative approaches Michael and others pioneered at the Beaumont Foundation before some smart lawyers figured out how to convert a couple hundred million dollars of public money into a private family foundation.

Case built a network of partners that solicited 5,000 ideas from individuals. No big to-do about 501-c-3 status or such, just community based ideas for creating social change. They then have engaged a wider audience of crowd-sourced philanthropists to help them make the awards.

You can participate here.

I have just one thought... if you are really trying to spur community-based ideas for community-based social change, then you need to find a way to limit the crowd-sourcing of decision makers to the community in question. This is a great idea, the PR value of tieing it to Ning and Facebook is tremendous, but empower local communities to come up with the ideas, execute the ideas and resource the ideas. That would be tremendous.

Product Design for Charities

I'm in the middle of a product design process involving small charities and big, complex software. Generally not such a good combination. ;)

I've been trying to get the folks on the team to really understand who we are designing the technology for. I found the ultimate quote by Muhammad Yunus talking about the One Laptop Per Child computer.

He explains his own vision for a "digital Aladdin's lamp" - "a genie comes out of it and asks, 'What can I do for you, ma'am?' And she says 'I make these baskets but nobody buys them.' And the lamp says 'I will find somebody to buy it.' And the lamp comes back with buyers. She doesn't know about a keyboard or a computer. She just asks questions of the genie."

A charity doesn't need to understand ERP or CRM. They don't want to have to make sure to click these three boxes on a transaction. They just want to hit the gift button, enter a gift and be done.

I doubt we can do away with the keyboard or the computer. But it's possible to clearly define what questions we can help a charity answer, and allow them to ask those questions and understand the answers in plain English.

Which Capacity Building Metrics?

So I'm working up a scorecard for a software donation program to charities and social enterprises. We care most about the capacity building impact within our grantees. When a grantee receives our intervention, the final outcome should be increased organization capacity and increased organizational effectiveness. What metrics should we use?

I must say the siren song of "number of donations" is strong in my ears, but show an executive that metric and decision making might not head in the right direction...

I've found the NPower / NTEN work around impact evaluation for Nonprofit Technology Assistance Providers (NTAPs) useful, but no simple scorecard emerges. They identify two channels to social impact for an NTAP (which is a good benchmark for a software donation program). #1 Technology Management Capacity #2 Technology Innovation.

Software donation program basically work on the technology innovation lever allowing organizations without financial resources, but with technology management capacity, improve organizations effectiveness.

Not sure it's possible for a software donation program to generate outcomes through improving technology management capacity. But by providing a well defined implementation methodology, the software donor can increase the technology management capacity of a single organization on the single task of implementing the software donation.

Michael Gilbert has a good piece on why asking the right question is critical in evaluating nonprofit technology outcomes. Metrics, key performance indicators, scorecards, etc. are only useful in so far as they ask the right questions. I'm not sure we've ever come up with the right questions for technology donation programs.

So, out to the network of smart people... any bright ideas on scorecard metrics that would point a software donation program in the right direction?

Google Redlining

I remember when corporations chose not to serve poor people... banks, supermarkets, phone companies.

And now even web 2.0.

Can you tell where the poor people live?

Open Source as a way to compete against market leaders

So I had a chance to talk with the MPower folks, the topic of my last post, at the NTC.

Overall, they have the right idea, seem like good folks, and their primary driver is building a profitable business (as opposed to mission-based technology). NOTE: I in no way think for-profit vendors don't care about their customers. I simply think that non-mission-based players choose not to serve those that don't pay them. Interestingly enough, an open source license means that the the vendor (MPower) helps nonprofits that don't pay them. This doesn't make MPower a mission-based technology provider, but they are making a critical contribution to the mission of providing better technology to the entire nonprofit sector (regardless of their checking account balance).

We'll see how MPower develops... to my mind, true open source is made up of actions, not press releases. They have taken the most important action... a reasonable license and download.

So what is important about this:

1. No Vendor Lock-In. The source code of MPower, the software, is available to the customer. If an ecology develops around the software, you will not be wedded (or locked in) to working with MPower... you can just hire another company to work on your stuff.
   
2. Commercial Support. MPower, the company, is providing a high level of service and support for the software. This has been the Achillies heel of the CiviCRM ecology... it can be difficult (but is getting far easier) to write a check and have a vendor to blame when your implementation doesn't work so good or purchase a 1-800 number to call and get product support.
3. Autonomy. Want to extend the MPower software's functionality? Simple. Pay them or pay someone else to code what you need. No permission from MPower necessary.
   

Now, of course, the devil is in the details. Here are the details that will make or break whether this has a big impact from a mission perspective.

• Gross margin. MPower is a business. License fees and subscription revenue generate higher gross margins than service and support. Lets all hope that (a) they have a spreadsheet that clearly maps this out, (b) they have investors that aren't looking for big gross margins, (c) they aren't looking to go public. If (b) or (c) are true, then they are going to build a subscription revenue stream.

Some "open source" business plays, most notably SugarCRM, have seen their intentions collide with the reality of revenues and growth rates. The most important thing in my entire conversation with MPower was that they said they were patient... they have patient capital that can wait the many years it takes to build a large, fast growing business on an open source business model.

• Permission. People are going to do things that the MPower company will not like. When another company launches a 1-800 number supporting the MPower software in direct competition with MPower the company, what will they do? How will they react? How will they compete?
  

Hopefully, they will be comfortable providing great service and being confident that they are they best provider there is. (As opposed to limiting competitor access to the community or some other such tactic)

• Community. How do they engage? Who do they engage?
  

Looking forward to the next few years. We live in interesting times.

Yet another creative use of open source...

So this vendor, MPower systems (http://mpoweropen.com/) has "the only full-feature, open source constituent relationship management (CRM) software specifically designed for nonprofits." First of all, they must not know how to use Google to make that statement with a straight face, but hey, whatever.

Marketing tip: "the easiest full-feature, open source constituent relationship management (CRM) software specifically designed for nonprofits" would at least be defensible.

So its open source, eh? They must use an existing license, right? Nope.

Their license has these gems:

1.03 Unless explicitly stated otherwise, any new features that augment or enhance the current Software, including the release of new properties, shall be subject to terms of this EULA

This suggests that if I contribute, my contributions become the property of the vendor. Mmmmm...

2.01 This License allows you to install and use the Software. You may make one copy of the Software in machine-readable form for backup purposes only, provided that the backup copy must include all copyright or other proprietary notices contained on the original.

So if I want to do any development on their "open source" software, I need to do it on my production instance. Mmmmm...

2.02 Except as expressly permitted in this EULA, you agree not to reverse engineer, de-compile, disassemble, alter, duplicate, modify, rent, lease, loan, sublicense, make copies, create derivative works from, distribute or provide others with the Software, in whole or part, or electronically transfer the Software from one computer to another or over a network.

Sure seems like I can't create derrivative works, but I'm looking for the part of the EULA that allows this.

2.03 You may not sell, transfer or communicate the Software to any third party without our prior express written consent.

So not only can I only modify my production instance, but I have to get permission to share any modifications from the vendor. Definitely an open source best practice ;)

And from a quick scan of the license agreement, there are not open source provisions that would allow me to "...have access to MPower’s source code so they can develop features and functionality to meet their organizations’ individual requirements, as needs arise."

This just makes me angry. Do they think their customers are stupid? Do they feel like it is OK to just lie? Did they "forget" to change their license agreement? Are they so cynical to think it doesn't matter?

Looking forward to the next vendor fantasy land definition of open source...

NOTE: They just announced yesterday, so they might have led with the marketing without worrying about anything else. Still seems pretty cynical.

The most important campaign of my lifetime

So far, I have successfully avoided subjecting my (very few) readers to a political endorsement this election season. Sorry, can't resist now.

Andrew Hoppin sums up the import of the moment quite well:

His work to rid Congress of special interest influence within 8 years would leverage a “Crowdsourced Congressional Staff” of 10,000s.

Of whom does he speak? Larry Lessig is considering a congressional run.

The part that really galvanizes me is the concept of a crowdsourced congressional staff. The concept that there could be a politician that runs "ground operations" well after the campaign has ended. Obama (my other favorite politician) fascinates me because he has created a ground operation that is tightly controlled and on message and, in the end, can be turned off once he gets into office. Very different from the whole Dean experience.

A Lessig campaign, I imagine, would be the first step in building the ground operation. A freshman congressperson is pretty irrelevant. A freshman congressman that can mobilize a national constituency around a narrow set of issues (money in congress) without any particular care about reelection.... mmmm that gets interesting.

Ultimately, I'm not sure he is savvy enough or thick skinned enough or tolerant (of old school politicians) enough to succeed in creating change. But I sure would like to watch him try.

Drupal 6 Released!

Drupal 6 has been released! Totally awesome, but slightly misleading. I'll be able to use Drupal in a few months when many key contributed modules have been upgraded.

This is the truth about Drupal. You can do a bunch with the core modules, but the vast majority of sites require contributed modules... plus who wants an un-cool drupal site? The community generally bangs out the upgrades of the contributed modules rapidly, but the D6 release announcement is the start of the process. It will take a few months for the contributed modules to catch up.

(there might be a startup business opportunity in there... I wonder if anyone has ever thought about that ;)

The Drupal community has been doing a bunch of planning around marketing, but I wonder if the big push for blog posts and messaging should happen a few months after the D6 release. The time for me to write this post for a broader audience is when someone can build a production Drupal 6 website.

This is the conundrum of open source marketing... many audiences, many messages. Everything needs to line up just right.

Nonprofit Competition

I've been thinking a lot about the concept of competition recently. In the nonprofit sector, folks often share the same goals... helping the homeless, improving nonprofit effectiveness through technology, etc.

They also find themselves competing for funding, mind share, partners and other resources.

Yet the concept of coopetition really hasn't been well developed, IMHO. In Silicon Valley, they concept of cooperative competition is relatively established... and the calculations are fairly straight forward. Will I make money? If the answer is yes through cooperation, then coopetition is a perfectly good way to go. If the answer is no, then coopetition is a definite no.

But asking the question "will I help the homeless?" maybe shouldn't lead to the same calculation. The homeless might be helped a lot by coopetition, but I as an individual actor might not be doing a lot of the helping. In that situation, I as an actor shouldn't bail out if I care about the goal... my ego should be able to take the bruising of not being able to take credit.

This yields an interesting optimal outcome.... many actors all helping the homeless. They are competing for credit and "market share." They are cooperating on policy and standards (which helps the "market" making the pie bigger).

The key is that no one out competes anyone else. In fact, the fiercer and more equal the competition, as long as there is cooperation on policy and standards, the better the overall social outcome.

So how do you bring institutionalized coopetition to a set of actors?

NetSquared wants you for mashups

The NetSquared team is working on viral videos to catalyze involvement and support. Is a video really viral if it doesn't involve a cut furry animal or stupid people injuring themselves?

Anyway,

Need some powerful software to run your nonprofit, social enterprise or green startup?

I'm happy to announce an opportunity to apply for a NetSuite product donation. Please spread the word!

NetSuite is launching a pilot program to donate NetSuite software and NetSuite employee volunteer assistance to charities and for-profit firms that generate positive social impact. NetSuite (www.netsuite.com) is a public company with over 5,4000 customers-- you might have seen NetSuite in the news recently for our Initial Public Offering (IPO).

Our software is a web-based platform for running all aspects of a business from ERP to CRM to ecommerce. It is a modern, flexible ERP/CRM/ecommerce platform so it can be customized and extended to meet a variety of needs.

Things our current customers use it for that might be relevant to potential grantees include:
- Running an ecommerce store.
- Organizational accounting / general ledger.
- Fundraising / donor & donation management.

We have some great grantees up and running like Special Olympics and Goodwill, and some great partners helping us with this initiative including TechSoup, NPower Michigan and the Tech Museum Awards.

We are looking for three types of applicants:
- Registered charities in the US , UK and Canada .
- Social Enterprises, specifically fair trade organizations.
- Green Startups.

Competitive applicants will:
- Have the capacity to implement an ERP/CRM/ecommerce system.
- Be able to articulate and provide at least one metric for their social impact.
- Be a good match for NetSuite functionality.

To learn more, download our guidelines, or apply for a product donation, visit http://shopping.netsuite.com/giving.

Acquia Valuation- Wow

Acquia, a Drupal start-up from Dries Buytaert, the founder of Drupal was funded for with a $7M seed round. Actually there might have been a smaller seed round and Acquia has been in stealth for awhile, but that is unclear.

The more interesting thing is to speculate on Acquia's pre-money valuation. Basically (I think) you have Dries, a CEO and a business plan. Maybe you have Dries, a CEO and the core team already committed (seems like the core team has been on board for many months from their posts on the Acquia blog).

So some quick math. Assuming they want to keep the founders stake around 50% for a series A, that means VC equity + option pool (lets say 30%) = 50%. Therefore $7M is should be ~20% of the post-money valuation. Putting post money at $35M.

Sounds super high, so maybe they kept founders + option pool at the 50% level and sold the VCs 49% (lets estimate 50% for the math). Of course this means that in a B-round founder control goes away, though we have no idea about what they've done with preferred stock. But $7M is a bunch of money (15 people for 2 years using a $200K per head per year back of the envelope), so that B round is probably not much of a concern.

So the math is $7M equals 50% post-money putting post-money valuation at $14M.

Whatever the case, two guys, a business plan and maybe a team, were worth something in the neighborhood of $7M-$28M pre-money. If I were betting in Vegas, $7M or perhaps less.

Still, a few guys + a business plan is worth $7M? Where did all that value come from? It might be the revenue model, but I suspect it really comes from the Drupal community.

This is the far more interesting part of the Acquia story. Drupal has "spun off" (insert more precise term here) a number of consulting forms that have been growing wildly. Valuations of the CivicActions, Advomatics, Trellons, Lullabots, etc. of the Drupal community are probably pretty good-- general rule of thumb for a profitable consulting firm should be $150K revenue per employee per year, but consulting firms have a hard time growing beyond $3-5M in annual revenue. These guys are feeding their families well, but they aren't making what I would consider "real money" off Drupal.

I think the VC's bought into the idea that Acquia's product has already been mostly developed. They have bought into the idea that customer acquisition costs are low because the customers are aggregated and accessible in a single community.

Now lets look at exits. Acquia is to Drupal as RedHat is to Linux. RedHat's exit was via IPO at a valuation around $3B at ~$40M annual revenue with annual revenue growth '95-99 running around 100%. Red Hat's product strategy was pretty retail there and now is far more services/ enterprise related. Not sure how much they raised.

Someone believes there can be a multi billion dollar exit on Acquia, and their press release blurb gives a good story:

The Drupal web platform has been downloaded over 2 million times since its inception, and project growth doubles annually. Drupal is used to deliver a wide variety of Web 2.0 application types including single or multi-user blogs, wikis, community networks, digital media portals, and core web content management.

What if a single company could sell all kinds of web 2.0 applications without having to pay for the software development? Anyone what to bet on how many times Ning was brought up with VCs (with their rumored post money of $214M in their recent $44M funding round) ? But that might confuse the VCs, since Ning's an eyeball and advertising dollar play, it appears.

I am really curious how Acquia projects revenue. It is distributions and services, but are the customers existing Drupal community members (i.e. a little more retail)? Is it the enterprise players that come into the community and drive the revenue at the consulting companies? By making Drupal easier, how do they project community growth and what percentage of that community growth do they project capturing?

Do they have a Ning story and a Red Hat story? Whichever plays best with investors?

Bottom line though, is that huge pre-money valuation is driven by the strength of Drupal and, very likely, the inability of Drupal to grow its consumer user base as fast as the Joomal community (i.e. Acquia can capture customers the Drupal community simply is not pursuing and cannot reach).

If I were pitching the VCs I would lead with the Red Hat story, then pose the question, "What if a single company could capture all the revenue you see in the Joomla community?"

I'd invest in that company.

Lucy asks for an opinion...

Lucy Bernholz is on the board of GiveWell, subject to a recent firestorm (or maybe a small birthday candlestorm), and has asked for some advice. Never one to shrink away from offering free advice,

As I watched this all unfold, I kept thinking that it is so appropriate to the organization-- openness means you get to see both the good and the bad. And more irritatingly for the board and staff, everyone gets to comment on it.

I also kept thinking about how far worse happens, but would never make it to the light of day in traditional organizations.

So how does one decide between the options you present? I suggest a few criteria:

1. The magnitude of the offense. It is easy to imagine yourself a saint on the net and hold people to your saintly expectations. How bad is the offense?
   
2. The quality of the idea. People tend to join start up boards because they believe in the idea behind the organization or the founder or better yet, both. So is the belief in the idea strong enough to wade in there when you no longer have confidence in the person?
3. Rehabilitation. Some of us believe in locking up the criminals and throwing away the key. Others believe in rehabilitation. Seems like your own beliefs are a pretty big driver. The other angle of this is whether you believe the staff in question can be rehabilitated.
4. Personal energy. Do you have the energy to clean up the mess?
5. The rest of the board. No matter what decision you personally make, if you are the only one for rehabilitation or shutting the place down, then there is not much chance of a positive outcome.

That a guy in his mid-twenties got a little rambunctious after seeing his picture in the New York Times and started to believe his the whole "quit a hedge fund" marketing storyline is not a very big deal to me personally. So for me the magnitude of the offense is small. [Edit: This is not a defense of what was done or a suggestion that it is any way acceptable. I am a big believer there needs to be clear consequences for dishonest actions.]

The quality of the idea is extraordinary, IMHO. No one has done openness and transparency well or modeled it for others. You guys are doing a great job. Unfortunately, you are doing such a good job we get to see the bad as well.

I'm a big believer in rehabilitation. The antics really have me believing the whole ex-hedge fund storyline (I have a low opinion of the ethics of most big money players). But I don't know the man, so I'm not sure of the rehab-ability. But from what I've seen from afar, I would rehabilitate and brace myself for the next 1 or 2 of these and then watch some really extraordinary accomplishments roll out. Too often in the nonprofit sector, IMHO, we discount the high driven, high-performance, outcome oriented crowd because their methods and culture are so different ... and with social responsibility so sexy, lets take advantage of the 10 years we have these guys before they look around and see their peers all driving BMWs into the driveways of their 4 bedroom suburban houses and go out an make a couple million before they have to retire (OK, that was a little cynical).

If this was my only board, I would invest the energy. If I was on more than one, I wouldn't have the energy required and would hope other board members stepped up. An alternative might be to recruit a few additional quality people to the board since the idea is good, but the organization clearly can't be a personality driven creature.

So basically, were I on the board, appropriate sanctions and controls would be put in place and an opportunity to reform offered as long as the whole board stepped up and devoted the hours it was going to take, but that is just me.

PS Know that among the vitriol you have folks out here that are about as supportive as it gets. Keep up the good work :)

Quotes from the public

This whole GiveWell thing is killing me. But it provides such good blog fodder. So I think I'm going to do a series of quotes out of the morass because people are fascinating.

Come on, people. In business this can be dismissed as sleazy shenanigans, but in charity this should not be dismissed.

This comment literally made me laugh out loud. Charities, especially private foundations, IMHO exhibit some of the most sleazy shenanigans ever conceived by corporations . This specific example so doesn't even rate among executive compensation, employing foundations as conduits of money to friends and business associates, etc. If we want to clean house, lets start with something important and systemic.

But it should make Independent Sector shake in its boots. If this represents the popular opinion of charities, then some really ugly stuff could come out of congress in the name of charity accountability.

Luckily, rich and powerful people use foundations so I suspect the lobbyists at work on this issue are far better than the ones 501-c-3 public charities alone could muster. (OK, I might be a little cynical)

Givewell: Tested by their own values

The Givewell firestorm (actually more of a small birthday candle) continues.

My reaction: Givewell is Naive, Inspired and Arrogant. But that does not detract from what they are trying to accomplish. Transparency is not the same as Saint Hood. I've seen private foundations and major nonprofits do FAR more unethical things than trying to generate publicity under false pretenses.

Heck, I wish all the MetaFilter busy-bodies that keep emailing me and posting comments to this blog would turn their attention to the far more egregious behavior in the sector. But since their attention span isn't long enough to do investigation, they need intermediaries to queue up issues or folks like Holden to do stupid human tricks.

For the record: I already know Holden is pissing people off and exhibits poor social skills... now I can add exhibits poor judgment to the list. But that doesn't take away from the fact GiveWell is doing something valuable.

Which brings me to the point. Givewell is starting to feel the impact of its own principles. The Metafilter candle storm is what happens when you open up your operations to the masses. It will make the Givewell staff make better decisions in the future.

Hopefully the next candle storm can happen in an online community with a bit more civility and a bit more background knowledge... rather than just mindlessly spanking Givewell, the community will leverage Givewell's openness to make it better.

PS Sentiments like this piss me off: "My sincere hope is that GiveWell is irrevocably tarnished by this behavior." Check the Metafilter thread for 100s of examples. Why wouldn't someone think that my sincere hope is that GiveWell is irrevocably transformed by the reaction to this behavior and turns into an organization I'd be willing to support.

PPS I kinda like the soap opera aspect of this whole thing. I sincerely hope that after spanking Holden the board can look at this episode as evidence that the idea behind the organization is solid. Then everyone can go out and have a beer and a laugh.