Working on the Cloud - The Challenge & Opportunity of Enterprise Technology for Fiscal Sponsors
Enterprise Resource Planning (“ERP”) or “enterprise technology” is one of the perennial challenges of the nonprofit sector, and especially so for fiscal sponsors. ERP is defined as the core software and systems used to manage business and organizational processes.
Despite the many benefits offered by discount or “strategic sourcing” models like TechSoup, true ERP solutions come rarely (if ever) cheap and out-of-the-box. There is finding the right product/vendor (sourcing), customization and set up (configuration), and ongoing licensing costs, staff training, and support. All of these add up to substantial time and direct costs for any organization. There are three general paths an organization (or community of organizations) can take in standing up a robust ERP.
(1) Engage in managed services. You have a contracted vendor or in-house manager (i.e., resident tech guru) to manage multiple independent systems that may be local (desktop or locally hosted) and on the “cloud” (web-based). Often these systems are not integrated—they do not “talk” directly to each other. For example, you may have DonorPerfect for your donor data, MailChimp for your email campaigns, Quickbooks for finance, and Zenefits for HR. Efficiency can be a challenge with all of your systems uncoupled, not to mention duplication of human effort and the potential for error. Despite these shortcomings, managed services are often seen as the best solution for smaller organizations or those that do not have to manage a lot of complexity.
(2) Build it yourself. The high costs of enterprise solutions and the need for greater customization has, from time to time, driven the nonprofit community to develop its own home-brewed tech solutions. Notable examples include Fractured Atlas’s recently suspended platform artful.ly and django. But what you might gain in bespoke design for needs unaddressed by the commercial market, you lose on other fronts. This approach has not, on balance, yielded lower cost or more sustainable solutions (in our opinion). If you develop software, you become a software company, with all of the accompanying costs of ongoing investment and management responsibilities. Despite the trillions in philanthropic capital out there, it has been impossible for the nonprofit (philanthropy) community to match the capitalization and innovation investment of Silicon Valley and Wall Street when it comes to technology.
(3) Integrate existing solutions. You select the best solutions for your range of needs from commercial, third-party providers and integrate them through Application Programming Interfaces (APIs) that allow one software to talk to another. In this arena, there are two basic choices: go with a one-stop solution, like Netsuite, or pick and choose among more focused products, like Sage Intacct for accounting, Salesforce for Consumer Relationship Management (CRM), and integrate! On the one-stop shop side, there is the reality that no one company can specialize in all of the functions that you need (despite what they say), so this solution is likely to have its strengths and decided weaknesses. On the plus side, you may not have to deal with as many integration roadblocks. When going the integration route, you pick and choose the best of the best (within your budget) for each piece of the system, but then you have the challenge of getting them all to work together and dealing with multiple vendors and cost structures. Pay your money, take your choice, as they say.
The Challenges
The challenges that fiscal sponsors face in developing their ERP technologies are the same as those confronted by any organization, for-profit or nonprofit. But there are some distinct nuances to the challenges faced by fiscal sponsors. Let’s look at the big four.
Research, Pricing, Configuration, & Integration - To start, there is a daunting task of searching the marketplace for the right solution, weighing functionality, vendor values, price, and customer friendliness, among other things. For fiscal sponsors, pricing and integration are particularly challenging. Most enterprise systems charge two types of licensing fees: core systems or “modules” and user access. In other words, you pay for the system and for access to it. For sponsors, the user access can be a larger cost relative to overall budget than you would typically encounter in a single-purpose organization, if you want your projects to be able to access your system directly, for example. In multi-entity systems, the costs for entities and user access for all of your projects can mount quickly. You may have a budget of $2 million, but, because you carry out your mission by administering many projects, you find yourself running a system worthy of a $50 million company, with all the attendant costs. Configuration and integration is also costly and time consuming, but more so for sponsors when you factor in the needs of projects and their constituents. You’re not just building for one mission and team, you’re building for many.
Data Architecture & Segregation - Whether constituent, financial, or other data types, data architecture presents a number of difficulties for sponsors. Most enterprise systems are designed for single purpose (entity) companies where data is tied to one “entity”. While access to kinds of data can be restricted by user, it’s harder in many softwares to segregate basic types of data, such as customers (donors) and vendors, from project to project. Your projects don’t want their financial or constituent data accessible by each other; they want to feel like they are operating independently with respect to data. Things get even more complicated for constituent data. A single donor, Jane Q. Richperson, may have relationships with several projects, but the nuances of that relationship may be hard to parse out from project to project with just one data record for Jane. What if one project has permission to have her private cell phone and another does not. A single data record, even in a “relational database” may not work for a multi-entity environment.
Project Stakeholder Access & User Adoption/Experience - Most fiscal sponsors cater to a staggering array of users, with respect to tech familiarity, cultural background, language, and, frankly, patience and willingness to adapt to new systems. It’s challenging enough for a regular company to get its employees on board with a new system; it’s another matter entirely for a sponsor to convince project staff to use a new system. In fiscal sponsorship land, projects may be beholden legally and otherwise to the sponsor, but they typically see themselves as customers or quasi-independent agents, meaning that convenience and user friendliness cannot be ignored. In the software marketplace fiscal sponsors frequently face the challenge (and paradox) that they need the robustness of an enterprise solution such as Abila or Sage Intacct (which are built for accounting/fundraising professionals) with the simple user experience of a more lay-market product with less functionality like Mint.com or YNAB (which are built for anyone to use). The market is largely divided along user types (i.e., professional vs. lay), which makes finding solutions for fiscal sponsors a challenge.
Transitioning & Sustainability - If you rely on “legacy systems” (i.e. outdated systems that are still in use), there will likely be challenges in moving from your current system to a new one. This is particularly true today as everyone is moving from desktop and locally hosted solutions (servers in a closet in your office) to the Magical Cloud in the sky. There is data clean up and migration, which can be especially challenging if we’re talking about constituent or financial data. Often overlooked or discounted is the fact that any new technology requires training, orientation, and inevitable changes in your human systems, policies, and practices. Changing technology means changing your approach to management.
The Opportunities
Despite these challenges, there is reason to be hopeful, if we work together as a community to develop enterprise solutions for the fiscal sponsorship field.
Negotiating Leverage and Time/Cost Savings - Working together, we have strength in numbers to negotiate more favorable costs and better packages with commercial software companies. Market share, social impact, and other leverage points are all on the table. The promise of addressing the growing fiscal sponsorship market has been key to negotiating very favorable rates for our Sage Intacct instance, for example. We also can stop reinventing the wheel, spending mountains of money to create the same solution over and over. The advent of the cloud makes sharing technology solutions easier and cheaper. For example, as Social Impact Commons was developing our Intacct instance we were aware of two other fiscal sponsors doing the same. Together our three organizations spent more than $1 million(!) in configuration costs alone to build a similar cloud-based system three times over. We could have spent about $300k, and then simply shared the model, which is precisely the logic behind our partnership with Sage. Just think of the savings!
Graduated, On-demand, and Self-guiding User Experience - Tech as “TA” - What if you could graduate the user experience to accommodate advanced users and newbies (or the very impatient)? How often do you struggle with having your projects comply with policies and procedures that are often contained in sponsorship agreements, guidebooks, and manuals that nobody really reads or absorbs? (Rhetorical question.) What if those policies and processes were simply integrated into a comprehensive and self-guiding cloud-based system, supported by Artificial Intelligence (AI) features that help automate further? What if all data could be accessed by projects on demand 24/7? Well that day is upon us. We have the technology. To pick a stupid example: if your policies require receipts for all reimbursements (or a missing receipt affidavit) and the upload window for your ERP doesn’t permit your project director to submit without them, the technology is basically monitoring compliance with what might otherwise be a written policy requiring human oversight. Voilà.
Common Data Models & Field Learning - Lastly, but perhaps most significantly, building and sharing ERP solutions could facilitate greater commonality of data standards and integrity across our field. This, in turn, would open powerful opportunities to gather data and learn about everything from community needs, management practices, and cost savings achieved through fiscal sponsorship, to ways we need to hold funders and policy makers accountable and generally advocate for the virtues and impact of the field as a whole. Without common data architecture built on shared systems, these opportunities remain elusive at best, impossible at worst.
In conclusion, there lies tremendous potential in working together as a field to design, capitalize, build, and maintain ERP solutions for fiscal sponsors and their projects. Social Impact Commons, with its announcement of our SIAP partnership with Sage Intacct and the American Institute of Certified Public Accountants (AICPA), has taken one big step down the road toward a field-sharable solution. We envision this as the foundation stone for a larger, more robust comprehensive ERP integration with custom user interface and single sign on, capable of providing fiscal sponsors and management service organizations their accounting system, CRM, Human Resource Information System, and a host of related functions and useful systems; some of which may not even exist at the time of this writing.
We have decided to name this integration project Flourishment. As the name suggests, we hope our solution doesn’t just alleviate the pain and pathos of technology, but rather sets our field on a path to flourishing through collectively-designed, human-centered technology in the 21st century.
Stay tuned. Here’s to the road ahead.