Non-Profit Tech Blog

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.