Open Source

The battle started with two major deals at the beginning of the year. Software giant Blackbaud bought Target Software and Target Analysis Group for $60 million. Online fundraising firm Convio acquired rival GetActive for almost $18 million on the same day.

The news continued in August: Blackbaud added online fundraising firm eTapestry for roughly $25 million and Convio filed paperwork for an initial public offering (IPO), which would bring to three the number of public companies in the nonprofit software/technology arena. Blackbaud and fundraising and database software firm Kintera are already public companies.

And now the race is on to “open” the various systems so that they can integrate with software from other vendors.

“I’m not surprised to see these acquisitions and IPOs. In fact, I was predicting a consolidation a couple years ago. My main surprise is that it’s taken this long to really get going,” said Phil Ferrante-Roseberry, executive vice president for special projects at CompuMentor/TechSoup in San Francisco. “There was a pretty big collapse in the nonprofit software market following the dot-com bust and then 9/11. By 2003-2004, the field seemed to be expanding again, with lots of new players jostling for space. It’s no surprise to see some winnowing of the field as it matures.”

With at least three major software companies being folded into others, one could surmise, at least in theory, that it means less competition.

“There’s way too much made of a couple of acquisitions to make our market seem uncompetitive,” said Gene Austin, CEO of Convio in Austin, Texas. “We are all competing in a very healthy way, in a way that fosters innovation and better things for the clients,” he said. He pointed to as examples Kintera and Blackbaud, as well as other “small yet emerging organizations that will also bring innovation and competition to the marketplace.”

Consolidation in the sector will continue to some degree as the firms move toward Software as a Service (SaaS), not just hosted applications. But, there is still a lot of room for innovation, said Holly Ross, incoming executive director at technology support organization N-TEN in Portland, Ore.

Open source software (OSS) is one avenue that could bring more innovation, and Ross believes the movement is starting to win. “When I say win, things that we’ve been pushing for have been happening in the non-open source software world,” such as flexibility and customization, she said. “Customers are demanding more control over the tools they use.”

The question isn’t really about open source, but about openness, Ross said. “Is the platform open so customers can make it work the way they need it to and when they need it and how they need it? We’ve seen a lot of the big companies moving in that direction.” Kintera and Convio in October both raced to unveil open APIs (application programming interfaces) within days of each other: Kintera Connect and Convio Open. APIs are the code in an application that allows independent applications to “read” and “write” access, most of which are built for use with Web applications, allowing two Web sites to share information.

Convio Open helps nonprofits take advantage of social media sites, such as Facebook, through extensions and APIs to allow integration of Web applications with constituent relationship management systems, Austin said. “Because these technologies create even more valuable constituent data for the nonprofit, the initiative also is about improving the integration with donor databases through connectors designed specifically for popular legacy systems,” he said. Convio’s Open Initiative provides nonprofits “the opportunity to leverage new Web services like social networking, online calendars, photo sharing, viral video, mapping mashups and more” with its products, he said.

For example, an extension allows nonprofits to present personalized content to Facebook users, who can complete actions on behalf of the organization without leaving the site. Organizations can track both activities they facilitate and the origins of any new supporters generated on the Facebook site.

“Organizations can build custom applications on top of the Convio solution to create a unique and engaging constituent experience, integrate their data across multiple channels to gain a holistic view of their constituency, and leverage third-party platforms to reach out to supporters where they live online,” Austin said.

Kintera Connect enables developers and partners to integrate directly with the company’s technology, with the potential for best of breed solutions. Nonprofits can choose from both enterprise and nonprofit providers to best meet their needs, from e-commerce to short message services or call center technology, according to the firm. The initial partner network includes TMA Resources, DailyStrength, FreeCause, Echopasss and Frontline Data.

For instance, FreeCause provides customizable browser toolbars. Integrating with Kintera CRM, clients using the FreeCause toolbar can leverage data in Kintera’s platform to segment their audience and provide tailored information and messages to constituents via the toolbar. Geographic information, such as where supporters live, help a nonprofit send broadcast information about specific regional events only to the relevant audience using the nonprofit-branded toolbar.

“Our open platform is designed to benefit nonprofit organizations, technology providers and partners, as well as our own company. Kintera Connect has the potential to transform the way nonprofits operate by enabling them to select the best technology and business partners to meet their needs,” said Scott Crowder, San Diego-based Kintera’s chief technology officer.

“I think the confusion in open source in our market is that people look at vendors like us that have proprietary applications, and say that they’re not believers in open source, and that cannot be further from the truth because we use those technologies to assemble and build a great application,” Austin said.

“Open source is great for the market, it’s something that will continue to live,” Austin said. “The confusion on the open source market has been, is it possible for people to build applications to the level of completeness in a Convio using all open source technology. I think that’s a question that the future will answer…open source definitely fosters innovation.”

The nonprofit sector needs a lot of different types of software because no one developer can develop what everyone needs, said Steve Klein, senior vice president, business development, at Kintera.

“We believe open source is a value. If nonprofits want to use open source to succeed in what they’re trying to accomplish, great,” Klein said. The nonprofit sector is such a large, diverse market, he said, from one- or two-person organizations trying to solve some cause to higher education institutions that have millions of student alumni, and all have somewhat unique yet overlapping needs. “We’re trying to focus our investment on areas that are common among nonprofits.”

“Our first rule with open source is to meet the needs of customers, develop software to do that, and we have shareholder needs as well that need return on investment,” said Dennis Maxwell, vice president of marketing at Blackbaud, in Charleston, S.C. “Open source somewhat limits that, but not totally.”

The open source movement might not be quite as loud as it was a couple years ago, Maxwell said, but “you will see open source in pretty much everyone’s packages. How much, I don’t know.”

With the recent acquisitions and planned IPO, “there’s been kind of a shifting sand, if you’re hoping to depend on a particular solution,” said Michelle Murrain, a member of the Nonprofit Open Source Initiative’s (NOSI) steering committee.

“There’s been a sea change in the knowledge of the nonprofit sector in open source,” she said, with more expertise for open source software and the availability of good software and support. “Will we see more OSS-based companies in the nonprofit software space, and will some of those be investor funded,” asked TechSoup’s Ferrante-Roseberry. “I think so. But even then, I expect they’ll move with the kind of business cycles we see now, with fields expanding, consolidating and expanding again.”  NPT