Ah, what would the world be like without SEC Form 8-K? Without it, I’d never know that Blackbaud was finally signaling its move to open platform. They’ve put an ex-Oracle on Demand employee on their board to give them some of that on-demand goodness we’ve been looking for.
Mr. Chou is a co-founder of Openwater Networks, Inc. Previously he served as President of Oracle On Demand, a division of Oracle Corp (ORCL), which provides software on demand to the Global Fortune 2000, from November 1999 to January 2005. He authored the book “The End of Software” and is widely regarded as an industry leader in software as a service.
He has also served as Chief Operating Officer of Reasoning, Inc., an information technology services firm, and numerous management positions at Tandem Computers. Mr. Chou has served on the Board of Directors of Embarcadero Technologies (EMBT), since July 2000 and was also on the advisory board for WebEx, Inc. recently acquired by Cisco. He has been a lecturer in computer science at Stanford University for more than 15 years, and most recently launched the first class in software as a service. Mr. Chou holds a bachelor’s degree in electrical engineering from North Carolina State University and a master’s and doctoral in electrical engineering from the University of Illinois Urbana-Champaign.
And if that background doesn’t tell you enough, take a look at his article in InformationWeek’s Optimize magazine where he discusses why he thinks Blackbaud will be able to hold off salesforce.com and Microsoft’s Dynamics Live:
We should view the future not as horizontal, fully integrated suites of business software, but as hundreds, if not thousands, of services unique to a particular user or industry. As examples, consider DealerTrack, BlackBaud, and privately held Enviance. DealerTrack, which delivers software as a service (SaaS), went public in December 2005. It uses the Internet to link automotive dealers with banks, finance companies, credit unions, and other financing sources. Blackbaud, with a $1 billion market cap, specializes in providing software and related services designed specifically for nonprofit organizations. It succeeds because making a large-scale ERP application solve the problems of fund raising is like trying to teach an elephant to dance.
Basically, the argument here is that all the business logic that nonprofits have been providing to Blackbaud lo these many years will serve as a bulwark against any encroachment by the likes of salesforce.com. In general, I would agree but let’s face it, fundraising hasn’t really changed that much in terms of process flow if you exclude Internet-based transactions. Raiser’s Edge major bugaboo has been its inability to beat Convio and Kintera at the web game. So while Raiser’s Edge has grown more dominant in the direct mail arena, that particular sector has remained stagnant for years in terms of new process analysis. I mean really, how hard is it to do a process flow for caging checks and getting that information entered into Raiser’s Edge?
The Web is the new game and it is there where Blackbaud is at a loss when it comes to actually executing web-based eCRM. Their NetCommunity product isn’t being talked about much in the sector. And Kintera and Convio are well ahead in understanding eCRM compared to Blackbaud.
I don’t believe that Blackbaud’s lead will last that long under the onslaught of multiple consultants using an open platform. And it certainly won’t last if Kintera or Convio open up soon too. So I believe that Tim Chou’s analysis is correct but the suppositions are all wrong. He’s presupposing that Blackbaud’s grasp of fundraising processes throughout our sector has achieved some sort of monolithic dominance but it has not simply because those processes that Blackbaud’s has learned and incorporated into Raiser’s Edge are no longer cutting-edge. Being a master of direct mail isn’t going to cut it in the future and Blackbaud by simply releasing yet another client-server based piece of software would just seal its eventual doom.
For further evidence, take a look at Blackbaud’s last quarterly filing where nearly 41% of Blackbaud’s revenue came from maintenance fees. It could be said that every time a nonprofit adopts salesforce.com, a little Blackbaud kitty dies. salesforce.com haz can blackbaudburger. And certainly, this business model can only exist because nonprofits rarely do ROI calculations on their fundraising applications. However, sooner or later, they’ll see what their peers will be paying salesforce.com. A maintenance fee-based income structure and client-server delivery model is so outmoded in a SaaS world that Blackbaud MUST know the jig is up.
Hence, Tim Chou is going to have to deliver the open platform, SaaS, on-demand Gospel to salesforce.com in much the same way the new hires at Scott Crowder of Kintera and Gary Allison of Convio have. I’m glad that Blackbaud knew to reach out to get someone like Tim Chou on board but as I always say, turning the ship of strategy around is a huge task for any large organization. Tim Chou and Shaun Sullivan, Blackbaud’s CTO, certainly has their work cut out for them. I can’t wait for my upcoming interview with Shaun Sullivan to ask him questions about Blackbaud’s new direction. If you have any further questions to ask him, please post in the comments below and I’ll try to get those questions to him.
(2 votes, average: 4.00 out of 5)
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Great piece. No matter what happens in this rising battle, the users win because we get more choices.
Totally agree with you. I can’t wait to see how it will all play out.
Why do you think NetCommunity isn’t being talked about much?
I don’t know — NetCommunity seems to have engendered very little enthusiasm. No one blogs about it and it doesn’t seem to be the focus of any concerted marketing push by Blackbaud.
I think that your analysis assumes Blackbaud is not innovating for their future. Clearly it is a big risk that a smaller nimble company can come along and produce a technological discontinuity in the market breaking down an incumbent’s role as the dominant player. However this assumes that the incumbent, i.e. Blackbaud is simply churning out much of the same. Whether this is true or not has yet to be proven. Innovative or not, their new Infinity platform does resolve many of the problems faced by larger organizations that would otherwise use large for-profit based software platforms (often in combination with The Raiser’s Edge). The move away from COM based technology (long overdue) to .NET and SOAP and a system that is highly configurable and web deployable is a start. Added to this broader picture is the focus on the minutiae. The introduction of mobile services (text or SMS messaging to donors as well as mobile web usage) is certainly an innovation not seen integrated into other applications. It is too early to know if this will be enough to keep Blackbaud in the dominant position they currently find themselves in.
I am not convinced that open source “free” software is the panacea that you have often alluded to. In the same vein I am do not believe that Salesforce.com will make enormous strides into the not-for-profit market. Their base is the for-profit world and despite their open API the adaptations that are required to make it work for the not-for-profit arena require enormous investment. More than simply mashups are required for it to be really useful. I would gladly be proven wrong but I have yet to see, in practice, the “onslaught of multiple consultants using an open platform” that you refer to.
When organizations look to move to another software platform they would be naive to think that free is best. What they ought to be looking for is a truly sustainable platform that can change with their needs. My vote is still with Blackbaud at least for the time being.
David
David,
You’ve got the players mixed up. Blackbaud is not the large gigantic company. That’s salesforce.com. Compare revenues for both. Now compare head count. And after that, compare developer communities. salesforce.com is simultaneously large and nimble. They’re a double threat. Also, Blackbaud’s Infinity platform has yet to be released and EVEN if it was out today, it would not be open enough to support an ecosystem of developers like that for salesforce. And moving away from COM to .NET should have happened years ago. The real move that has to happen is from COM to SaaS which should be happening NOW.
salesforce.com isn’t “free”. It’s free for up to ten users. After that, you have to pay but it is heavily discounted. Out of the box, it’s not a great package for nonprofits because the templates aren’t there but I think sooner or later people will start productizing software for salesforce.com. I have a lot more confidence in the ability of ISVs (you know, people like you) to customize a package en masse than the single sole provider of the original software.
I think Blackbaud is still a feasible choice but only if you’re looking at a one year timeframe. IT Directors have to think ahead. I suspect many more will see the writing on the wall and try to avoid the data integration pains that come with RE.
Blackbaud is not the large gigantic company that Salesforce.com is. However in the eyes of the NPTech community there is definitely a role reversal. Just because a vendor is large in the for-profit arena does not mean they will succeed in the not-for-profit. Just look at the not-for-profit products that Oracle and Peoplesoft (prior to being swallowed by Oracle) produced. Despite their relative sizes they have not broken into the NP market with any degree of success.
I am sure that Salesforce.com have a fighting chance but I am just not convinced that there is a community of independent developers out there ready to write those essential add on modules that not for profits will not only require but demand if Salesforce.com is to work for them.
David
I think we’ll just have to respectfully disagree on that point. Obviously, my feelings on the matter are different than yours. I really do think that the community of developers is fast growing. If you had seen been at the NTEN NTC and at that salesforce.com summit, you would have seen the energy and dedication that I had. The cost of becoming a Salesforce.com developer is $0 compared to the cost of being a Blackbaud developer ($15k). That alone guarantees faster growth for Salesforce.com’s developer community in the nonprofit sector. Your Oracle and Peoplesoft examples miss the mark for me since those were your classic client-server products. SaaS is a disruptive technology like the Web was and continues to be. It’s clear the marketplace’s current momentum is such that SaaS will be the preferred delivery mechanism for enterprise software. This is a moment of opportunity for all nonprofit enterprise vendors. It promises new kinds of competition and a shaking out of the market.
And part of that momentum comes from the fact that you don’t need an expensive infrastructure of servers and the admins for them to maintain an RE installation. Who among us wants to keep feeding the beast that we call our RE database server, dealing with the updates and the deployments to client workstations? I think that alone should be a clear benefit to harried IT directors looking to get out of the sys admin business.
I’m not sure that your argument can be supported when the majority of larger non profit organizations prefer to keep their database in house. Despite the economics and advantages that SaaS can have, you are still dealing with decision makers that are unable or unwilling to take what they see as a risky decision and off-source their database.
I would imagine that at least 1/2 of all non profit organizations will prefer to keep their technology in house, and I don’t see that rising at all in the near future (which for the NP world is at least 5 years- even the short term takes longer).
The real threat to Blackbaud isn’t actually from any of the competitors you mentioned. It’s going to come from the literal army of smaller but growing players that actually have clients and a large, meaningful customer base. DonorPerfect, Etapestry, and Sage combined have more clients than Blackbaud. Etapestry actually has a fairly complete web-centric model. DonorPerfect Online has been ‘open’ through their XML API for over 4 years. Sage, of course, has Sage behind it which is larger than both BlackBaud and Salesforce, in annual revenues, COMBINED.
Ask any Blackbaud salesrep who they thing their competition is- you’ll find the real answer there.
I don’t see anything wrong with your argument except that no one really gets excited by DonorPerfect or Sage or Etapestry. Where are the blogs that discuss any of these three players? If DonorPerfect has been so open for so long, where’s their ecosystem? A quick Google search on “donorperfect api” brings up this blog as the third search result. Frankly, that’s a horrible record for developer relations.
Sage is more well known for its accounting software than for its CRM software. I doubt a substantial percentage of their revenue is coming from their fundraising software.
And if the argument is that 1/2 of all nonprofits will keep their tech in-house for the next five years is true, then the sector is in a sorrier state than I thought. I usually dislike arguments based on what everyone else will do. It’s a terrible way to start off a business case. I would suggest that cutting-edge nonprofits and well-run nonprofits have a duty to look at online CRMs that have open APIs and decent developer communities. It’s the only way to maximize your return on expensive software.
I would LOVE to see the other competition take off but where’s the developer love? Show me some good links if you’ve got them.
Just because it’s not blogged about doesn’t mean it doesn’t exist. (Wow, that’s a lot of double negatives!)
Type in “Fundraising Software” or even “Fundraising Software Blog” in Google.
It’s not cheap being listed in positions 1-10, plus you have the pay per clicks at the top of the page.
Non Profits don’t get blogs- they are too busy working endless hours on their mission. However, there are some that do- they read this and that, visit blogbaud and Tech soup, goto conferences such as AFP, CASE and the like.
I really like your writing style, and your ‘get-it-from-the-source’ attitude. Reach out to what you think are the small players and you will be surprised what you see and hear- I know I have and it’s really helped expand my consultancy.
My .02 – keep the updates going!