Software Costs and Usage: Findings of a Nonprofit Sector Survey
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1 Software Costs and Usage: Findings of a Nonprofit Sector Survey September 2005 Candid Information about Nonprofit Software Contact: Laura S. Quinn laura@idealware.org
2 Executive Summary Nonprofit best practices often recommend a more effective use of databases and other software, but we seldom consider the costs involved in finding and buying this software. This short report summarizes the findings of an informal survey that investigated the resources nonprofits are devoting to software, the strength of organizations software infrastructure, and whether a tool that provides software reviews would be useful to them. This information is derived from 261 volunteered responses to an online survey conducted in July The participants were nonprofit staff members who help identify software for their organization s use. Organizations spend a great deal of money purchasing software The surveyed nonprofits reported that they spent on average about $26,000 per year purchasing and licensing software. An estimated $6.8 million per year is being spent solely by this survey s 261 participants. Consider how much more money is spent by the more than 550,000 US nonprofits who filed Form 990 last year. Nonprofits spend a substantial amount of time researching software Organizations included in this survey estimated that they spend, on average, twelve person days a year researching or evaluating software tools. If this time is valued at $30 per hour, this corresponds to about $900,000 worth of time devoted to software research per year solely by those organizations who responded to the survey. Again, consider how much time is spent by the sector as a whole. Many do not feel that they have or know about the software that could be helpful Only 58% of those surveyed felt that their organization has, in general, the right set of software tools to allow them to do their jobs. Only 49% reported that their tech team is aware of most of the software tools that are likely to be helpful to them. This is particularly alarming when it is taken into account that most of the survey participants belong to N-TEN, a nonprofit technology association, and thus are likely to be more technically inclined than most. Participants welcomed a source for nonprofit software reviews The vast majority - 88% - of participants said that they would use a website providing quality reviews that were applicable to their organization. Many would pay for such a resource 52% of those surveyed said their organization was likely to pay at least $20 for helpful reviews. About Idealware Idealware, a nonprofit-in-formation, will provide candid Consumer-Reports-style reviews and articles about software of interest to nonprofits, centralized into a website. Through product comparisons, recommendations, case studies, and software news, Idealware will allow nonprofits to make the software decisions that will help them be more effective. For more information on Idealware visit or contact Laura S. Quinn at laura@idealware.org. 1
3 Introduction This report summarizes the findings from an informal online survey conducted in July In this survey, staff members of nonprofit organizations were asked about their software research and purchasing practices. The 261 people who responded were recruited through posts to a number of nonprofit technology specific list-serves, including the N-TEN members list (58% of participants), the Information Systems Forum group (18%), the Technology on a Shoestring mailing list (9%), and others. The respondents identified themselves as nonprofit staff members who help evaluate software tools for their organization. These organizations spanned a wide range of budget levels and missions. While the participants were not asked for their geographic location, the areas covered by the list-serves suggest that participants were fairly widely spread across the United States with a small percentage from outside the United States. Please see Appendix A for a summary of respondent demographics. Software is a Notable Expenditure for Nonprofits The participants reported that they spend on average about $26,000 per year purchasing and licensing software. The amount spent varied from less than $500 per year to over $100,000 per year. In total, an estimated $6.8 million per year is being spent solely by this survey s participants. This is an enormous amount of money when added up across the sector. These numbers cannot be directly applied against the nonprofit sector as a whole because the survey sample was particularly technically savvy and thus not representative. However, looking at some possible numbers can be illustrative. Let us assume that half of the 550,000 US nonprofits who filed Form 990 last year 1 were actively investing in any software at all. Further, let us assume that each of these organizations spent half as much money on software as the survey respondents at the corresponding annual budget level. This would mean that US nonprofits spend more than $960 Million on software every year. Smaller organizations spent less on software than larger ones, in general. The smallest organizations spent about $1000 per year on average, while the largest spent about $77,000 on average. However, the actual 1 SOURCE: Internal Revenue Service, Exempt Organizations Business Master File (2005, Jul), as per the National Center for Charitable Statistics 2
4 percentage of budget spent on software decreased as organizations budget increased i.e. smaller organizations spent a greater portion of their budget on software. Differences of less than 1% are not meaningful Nonprofits Spend Substantial Time Researching Software Identifying appropriate software tools is a significant task for nonprofits. Participants reported that their organizations spent, on average, twelve person-days a year researching or evaluating software tools. Smaller organizations spent less time than larger ones about six person-days a year for organizations with an annual budget under $500,000 compared to 27 person-days a year for those with a budget over $10 million. Differences of less than 9 days are not meaningful 3
5 The respondents estimates total to about 3750 person days spent a year. If this time is valued at $30 per hour, this corresponds to about $900,000 worth of time devoted to software research per year solely by those organizations who responded to the survey. Again, these numbers cannot be directly applied against the nonprofit sector as a whole because the sample used was not representative. However, there is no doubt that it totals to an enormous amount of time. For instance, let us again assume that half of the 550,000 US nonprofits who filed Form 990 last year were actively investing in software, and each spent half as much time as the survey respondents at the corresponding annual budget level. At $30/hour, this would be the equivalent of more than $150 Million spent every year by US nonprofits in researching and evaluating software. Many Do Not Have or Are Not Aware of Helpful Software Only 58% agreed with the statement We have in general the right set of software tools to allow us to do our jobs." Only 49% agreed with the statement Our tech team is aware of most of the software tools that are likely to be helpful to us." As the organizations that participated in the survey are likely to be more technically savvy than the average organization, this finding is alarming. It implies that more than half of all nonprofits may well be operating without the efficiencies that effective software can bring. Only 7% felt that they were aware of most helpful tools but that their organization did not have them implying that awareness is potentially as much of an issue as cost. Aware of Most Helpful Tools Neutral/ Unsure Not Aware of Most Helpful Tools Total Have Right Tools Neutral/ Unsure Do Not Have Right Tools 37% 14% 7% 58% 6% 5% 5% 16% 7% 6% 14% 26% Total 49% 25% 26% 100% Some types of organizations appear to have particular difficulties with software. Only 32% of organizations with an annual budget under $100,000 felt they were aware of tools that were likely to be helpful, as did 37% of Advocacy/Research organizations and 36% of Child and Youth Services organizations. Organizations with a higher annual budget, and ones that spent more time researching software were, on average, more likely to feel they had the right software and were aware of helpful tools. However, the actual money spent on software was not strongly correlated with either of these responses. Many people wrote comments that suggest that at least part of the issue is the difficulty in finding tools. One wrote Finding reliable evaluations of software tools, especially comparative evaluations, can be a very time-consuming and frustrating experience. A medium-sized child-services organization said We desperately need another way of learning about some of the available tools. Another simply wrote It s a nightmare! 4
6 Participants Were Eager for a Source for Software Reviews The vast majority of participants - 88% - said that they would use a website providing quality reviews and comparisons of software tools that were applicable to their organization. Many wrote comments emphasizing this point nearly a quarter of those who entered comments said that they felt reviews would be helpful for them. One wrote There is a desperate need for non profits to have a reliable, centralized source of information about various software and databases, while another said This would be an invaluable tool. Yet a third wrote Your idea to do comparable reviews is wonderful and would be very helpful to us. Many organizations would pay for such a resource 52% of those surveyed said their organization was likely to pay at least $20 for helpful reviews. 26% said they were likely to pay at least $50, while 12% said they would pay $100. Those who were willing to pay something were willing to pay about $45 on average. The amount that organizations were willing to pay was, surprisingly, unconnected to the budget of the organization or the state of their software infrastructure. There was no correlation between how much a participant was willing to pay and the size of their organization s annual budget, whether they felt their organization had the right tools, or whether they felt they were aware of helpful tools. It was, however, connected to the resources invested in software itself: there was a substantial correlation between how much a participant was willing to pay and how much money the organization spent on software as well as to how much time they spent researching it. It appears that many of those who said they would not be likely to pay anything did so because they doubted the credibility of the potential reviews. 54% of the people who were not willing to pay at least $20 agreed with the statement that they would be suspicious of a nonprofit website that charged for software reviews (compared to 13% of those willing to pay). A few wrote comments in support of that point of view, such as Given the need for transparency in NPO work, I think that groups would be highly suspicious of an organization who charges to provide reviews of software. The expectation is that an organization like this would receive funding to do this sort of work. Several of these people also mentioned in their comments that they felt the current free sources were sufficient for their needs for instance, I would not pay someone else to make an evaluation when I can read free reviews elsewhere on the web or conduct my own research. 5
7 Appendix A: Participant Demographics The 261 people who completed this survey were recruited through posts to a number of nonprofit technology specific list-serves including: N-TEN members list (58% of participants): A list for paying members of the Nonprofit Technology Enterprise Network, a primarily US-based association supporting the diverse people and organizations who help nonprofits understand and employ technology effectively. Information Systems Forum group (18%): An informal nonprofit technology mailing list which appears to include a large number of accidental techies people without strong technology background who are acting as technologist for their own organization as well as a number outside the US. Technology on a Shoestring mailing list (9%): Those who have signed up to receive notifications of new articles about low-budget technology options for nonprofits. These lists were sent an asking members to fill out a survey intended to investigate the feasibility of creating a nonprofit dedicated to providing frank, Consumer Reports-style reviews of nonprofit software tools. The respondents identified themselves as nonprofit staff members who help evaluate software tools for their organization. While the response rate varied by list, it averaged about 5% of each lists total members. There was a reasonable spread of organizations across the range of annual budgets. The participants were asked to write a brief description of what their organization did. This information was then coded to determine the type of organizations participating. The majority of participants worked for direct service organizations, but technical service and research/advocacy organizations were represented as well. 6
8 Note that a full 13% of all participants worked for organizations that provide legal aid services. This large number, unrepresentative of the nonprofit landscape at large, makes it likely that the survey link was circulated among a group of people specifically focused on legal aid. 7
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