Future Of Technology Donations ‘Cloudy’
June 1, 2012 Patrick Sullivan
The nation’s major software vendors have been generous with product donations. Either directly or working through a pass-through entity, a nonprofit could get software either free or at a discounted rate. The box would show up and the organization was in business.
It often wasn’t a completely free lunch. There were other fees, such as for customization or for data processing or for membership in an organization that served as a clearinghouse for the vendors.
As technology moves to the cloud — a techy way of saying the software resides elsewhere, you just use it — there is no box. It is now just a site license and that changes the nature of the donation for nonprofits, vendors and the pass-through entities.
“There is a trend of technology companies looking to donate licensing to nonprofits,” said Kelly McSween, senior director of corporate initiatives at Good360 in Alexandria, Va. Good360 is a nonprofit that receives software donations from corporations and distributes them to the more than 27,000 nonprofits in its network. It also distributes goods in other categories.
By licensing, McSween means a direct download from the Internet, as opposed to software that comes on a CD or DVD with a manual in a cardboard box. It should be noted that of Good360’s five software donation partners, four offer only in-the-box donations.
With a cloud-based product, the program is hosted on an off-site server, usually administered by the donor company.
For a program in the cloud, you need an Internet connection and a Web browser. For distributors of donated licenses and cloud products, Internet delivery cuts shipping and warehousing costs, as well as packaging waste.
“There’s a real benefit to the sector as a whole in moving to the cloud,” said Marnie Webb, co-CEO of TechSoup Global, a San Francisco, Calif., nonprofit that distributes technology products and expertise to other nonprofits for an administration fee. “We are seeing a movement to products over the Web. That’s been a trend our donors have been moving toward, as Internet connections around the world have been more stable. It didn’t happen overnight. It’s been an ongoing movement.”
Of TechSoup’s 483 donated software products, approximately 55 percent are distributed online, with “many” of the 47 donor companies providing cloud services, according to Glenn Hirsch, TechSoup’s manager of communications and creative services.
Donor companies discount their licenses in a variety of ways. Some give them all away for free, and some have a flat nonprofit discount. Others donate or discount a number of licenses, or provide free or inexpensive access for a set amount of time. Some, like DonorPerfect which produces donor management software, go with a “freemium” and paid model.
DonorPerfect’s donations through TechSoup are all cloud-based, and free to qualifying nonprofits with fewer than 1,000 names in their constituent files and who raise less than $100,000/year. Once they go above either threshold, they have to pay.
Jon Biedermann, DonorPerfect’s vice president of fundraising solutions, said the expectation is that a nonprofit will grow and use more of the product. “They’ll use it more and more and be willing to pay for it,” he said. DonorPerfect also charges for value-added extras, such as online special event management modules, add-ons that “for the most part small nonprofits don’t need at first, but when they grow, they can take advantage of,” said Biedermann.
The challenge that software donation has always sought to solve was the cost to buy into technology. Free software solves part of that problem, but “the most expensive part has always been installation, customization and all the implementation required to make the software work for a nonprofit,” said Webb. “Cloud solutions can often have a smaller up-front cost, but they may have a larger long-term cost because you don’t stop paying for it.”
Webb said she believes that could actually be fine for most nonprofits, especially smaller organizations that cannot raise a large amount of capital to cover a high initial investment. “If you’re just starting a nonprofit, you’d be dense not to go to the cloud,” she said. “You don’t have a legacy system, so it makes perfect sense.” And even for well-established but still small organizations, the cloud is a good solution because “it will probably be a huge organization change issue but not a huge expense, because (small nonprofits) probably don’t have great systems.”
A move to the cloud might be hardest for mid-sized nonprofits that have already invested in on-premise systems, said Webb. Migration costs — installation, implementation, and customization — might be too high if a lot of money has been spent on the current system. Large nonprofits, too, might have problems moving to the cloud, due to the large number of user licenses they could need. “Organizations invested in technology really have to think about migration,” she said. “Moving into new systems and preserving the good in old systems is a challenge.”
Donors and distributors insist there is no fiscal motive for donating software. Some companies might make money through “licensing and maintenance,” said McSween, but “people are really trying to create these programs for the benefit of nonprofits.”
For example, Microsoft makes nothing for its work with nonprofits, said Tom Murphy, director of communications for corporate citizenship at Microsoft, the software giant based in Redmond, Wash. “We do not see nonprofits as a revenue stream,” he said.
For example, the cost of Microsoft’s Small Business Server Premium Add-on for a regular consumer is $1,600. It is free to nonprofits through various channels. Last year, Microsoft donated $844 million of product to more than 46,000 nonprofits in 113 countries. The bulk of the distribution, roughly $500 million, was through its partnership with TechSoup Global.
“This is a long-term investment in partnership with the sector, and our donations have grown in scale with the sector,” said Jane Meseck, director of global citizenship and public affairs at Microsoft. “We really do approach this holistically, trying to help nonprofits get the software they need.”
Meseck said that in Microsoft’s case there is no gain for moving to the cloud. “It inherently has costs around maintenance and provision of the technology. You don’t have to have an internal (distribution) infrastructure, but the downside is the cost of running the (cloud) servers.”
Cloud technology carries other difficulties for the vendors. Holly Ross, executive director, the Nonprofit Technology Network (NTEN) in Portland, Ore., said cloud donations might make things more complicated come tax time. “It’s not a physical product, so tax rules might change,” she said. “It’s easy to take a box with a price tag and donate it. It’s less easy to donate something without a physical asset and that has an ongoing fee structure. Once (a donor company) produces the box, all their costs are sunk. If you make a donation around a cloud (model), it’s an ongoing cost. It could last in perpetuity.”
Ross also emphasized the monetary benefits, or lack thereof, of software donation. “A possible outcome is that the company might get additional license fees from a nonprofit. However, most of the folks who are working with (nonprofits) are really dedicated to approaching the work as a philanthropic activity,” as opposed to a business transaction, she said.
Conceivably, nonprofits can get software and support, end-to-end, for free. “We try to encourage partnering with nonprofit networks of tech service providers,” said Webb. Organizations such as The Community Corps, a project of NPower in New York City, match nonprofits in need of tech support with technical experts who wish to volunteer their time and expertise.
Many nonprofits are already using cloud technology and don’t know it. Gmail, the popular email service from Google, for example, is cloud technology. It’s hosted remotely and accessed through an Internet connection. A March 2012 survey by NTEN found that 91 percent of the 780 respondents used some sort of cloud-based software, and of the 9 percent who said they didn’t, follow-up conversations revealed most used services such as Gmail or the email marketing service Constant Contact, which are cloud technologies.
“I think adoption (of cloud-based services) is really pervasive, but really shallow at this point,” said Ross. “We’re going to be looking to deepen the adoption.”
There have always been barriers to nonprofits adopting the latest software and technology. In the past, it has been the price of those technologies, but “the software donation model is a good way to lower that (cost),” said Webb. “The new question is, what is the barrier with the cloud? What can we build and do to overcome these new barriers?”
A stable Internet connection is taken for granted in the United States. That is not true in many parts of the world. Some nonprofits with operations in remote areas simply don’t have a robust enough connection for a long, data-intensive license download, not to mention the persistent reliability required to access a cloud-based product whenever necessary. For these nonprofits, a boxed product still makes sense. And, “sometimes people just prefer to have the disk,” said Microsoft’s Murphy, especially for processor-heavy programs like Adobe’s image editing software Photoshop or statistical analysis programs.
Though Microsoft has seen a rise in the number of downloads, its “donations in-box are still growing,” according to Meseck. “(Cloud technology is) an important and transformational technology, but we’re still seeing the greatest demand in in-the-box products,” she said. Last summer, Microsoft switched from sending CDs as the default method of distribution to an opt-in checkbox for CDs.
Meseck said the number of downloads jumped sharply, especially in the United States. “The cloud in general is still maturing,” she said. “Nonprofits tend to lag a bit. As you see it mature more in the for-profit sector, nonprofits will follow.”
Also at issue is the perception of security threats. The NTEN survey showed that 55 percent of respondents said that fear of losing control of their data figured into their decision on whether to adopt cloud technology, and, 61 percent said concern regarding unauthorized access to data was a driving factor.
“In general, security isn’t as big a deal (as it is perceived), but it’s still an issue,” said Ross. “Health care providers, women’s organizations, refugee organizations, in those kinds of cases really knowing what data you’re putting in and the potential for it to get out is important. We’ll be really slow to see adoption with financial data and maybe program data, but for the most part we’re headed in that direction.” NPT