Practice What we Preach

A question came up recently on a technology bulletin board (for SalesForce) that was innocent enough: someone was looking for a template spec to use in their pro bono work with a nonprofit. My response (perhaps not so innocent?) follows:

the asymmetry between the powerhouse that is SalesForce and the context of a nonprofit seeking pro bono assistance has major implications for any "specification". To wit: whereas a spec is usually thought of as a set of instructions coming from the client to a vendor (where the kind knows what they want and need and the vendor seeks to meet those requirements), in most nonprofit implementations this gets turned upside down.

It might not seem politically correct to acknowledge this dynamic, but ignoring it is a mistake with real consequences, and this dynamic is exacerbated by the use of pro bono assistance. This may seem counter intuitive, so forgive me if I elaborate for a moment.

I happen to be a tall, well educated white guy that happened to grow up the child of missionaries in Colombia. If I walk into a rural village and start asking questions about the educational needs of children, I guarantee you that the leadership of that community will enthusiastically proclaim education as THE issue holding them back, and that the building of a school house (with my assistance, connections and outside visibility) becomes their goal.

But what if this rural village has a problem with water? My good intentions combined with the community's desperate need to "get something" ended up missing the mark. But it is not just that they needed water and got a school, but we have effectively distorted leadership into a pattern that views the outside as the source of solutions to their problems, and we have distorted the investment of "capital" within that community (leader priority and sweat equity labor) to be aligned with externally defined goals.

To get back to your question: The nonprofit knows they need something, they just don't know where to start. This is not a place most of us call a comfort zone. Beware of letting them off the hook by suggesting easy answers.

The "spec" is an opportunity for the nonprofit to discover its own needs. It really needs to begin with a listening exercise, (and this is where an outside facilitator pro bono can be helpful!). I have a set of questions I use for these sessions which you are welcome to: http://bit.ly/YeagerDiscovery

This is not a spec outline, but it is a very necessary prequel. Feel free to contact me as to how I move them from this to more of a spec.
doug

The Wow is back: The new Wave

Consider this a message from the latest car show by a friend thunderstruck by a new wonder machine.  On the one hand you know he is dazzled, but on the other hand a part of you wished you could play too - and this friend knows cars... so you listen, even if the friend is a bit tongue-tied.  Remember the first time you saw the Google search engine?   One little box? instantaneous response? Remember the first time you saw Google Maps? Not just the mapquest thing, but the mashups?  Magic, plain and simple. Well, Google has done it again: Google Wave  (see Official Google Blog: Went Walkabout. Brought back Google Wave.) Trust me that this product revolutionizes communications and collaboration:  it is as concerned with the process of communicating as it is the product/ end-result;  in their words: A "wave" is equal parts conversation and document, where people can communicate and work together with richly formatted text, photos, videos, maps, and more...; it combines email, instant messaging, wiki, shared white board and publishing:  it will knock your socks off. The tricks are cool, but the cummulative effect will change the way work is done.  And Google is making it an Open Source project, so that other vendors will be able to create different versions of Waves, and clients will be able to host them on their own servers, and they will all be able to inter-operate. If you indulge yourself in one technology fantasy this year, take the time to watch the video intro to Google Wave.  But make sure to sit down in a comfy chair and bring the popcorn, it is 1:20 long.  This was its intro to a crowd of developers, so there is some technical jargon, but it is well worth it  (http://www.youtube.com/watch?v=v_UyVmITiYQ&feature=player_embedded). Just for grins: fast forward to email thread playback: 13:10 post to blog with real time update 19:00 live concurrent editing: 35:50 spell checking - context sensitive 43:00 twitter integration 57:30 real time translation 1:12:00 and btw: I have no financial interest in Google, and I have been annoyed with them plenty of times, but they have the resources and chutzpah to dream big, and sometimes this pays off. What do you think? Doug Yeager Yeager and Assoc LLC doug@dougyeager.com (502) 693 1800 Raising the bar in the business of philanthropy http://www.dougyeager.com/joomla/about-yeager-and-assoc/leadership.html

Follow up: Vista Acquisition of MicroEdge

This an update to my comments on the pending acquisition of MicroEdge by Vista Equity Partners: (for my original post, see http://tinyurl.com/luzo5y)

1. Responsiveness : the new administration scored points right away by reaching out to me and offering conversation to discuss my concerns, and this by a lead director. As a symbolic action, it speaks to a change that is welcome.
   
2. Caveat: as the acquisition has not yet been finalized, Vista Equity Partners has to be careful of what it says. Most of what follows is a description of how the firm has approached the acquisition of other companies within its portfolio.
   
3. Questions answered : One specific concern that I had raised was a substantial decrease in year over year expenditures by MicroEdge on product development activities. The answer was that this was mostly attributable to the write-off of several unsuccessful development projects.
   
4. Insights about Vista Equity Partners: (all quotes from http://www.vistaequitypartners.com).
   1. They are in the business of acquiring and managing software companies that serve vertical markets. In their words: companies that "research and develop a proprietary software solution" (sound familiar?).
      
      
      1. The companies listed as investments demonstrate this vertical market strategy:

         Accero, Inc.	-	Payroll processing/ HR
         ADERANT Holdings, Inc.	-	Law firms and professional services
         BigMachines, Inc.	-	Front-end selling for customers and channel partners.
         Brainware, Inc.	-	Data capture and search & retrieval
         P2 Energy Solutions, Inc.	-	For the upstream oil and gas industry.
         The Reynolds and Reynolds Company	-	Automotive retailing.
         Sirsi Corporation	-	Library industry.
         Sunquest Information Systems, Inc.	-	Laboratory, radiology and pharmacy
         Surgical Information Systems, LLC	-	Surgery management
         Ventyx, Inc.	-	Service Delivery Mgmt in Utilities & Communications
         Zywave, Inc.	-	Employee benefits and property & casualty insurance

      2. The premise is that such companies have a great deal in common in both positive and negative aspects.
         1. Negative: It is not uncommon to find companies that have lost touch with their core client base; lost focus in product development; either become obsessed with sales (chasing features) or fixated on a technology (what is cool); and in short failed to effectively manage the product.
            • Vista understands the negatives and through dedicated management and capital intend on making each company successful.
         2. Positive: the attractiveness of the sector (and the reason that Vista is in the business) is due to the fact that these companies share a combination of the following:
            • Existing or potential recurring revenue
            • Mission critical, “sticky” solutions
            • Experienced management team
            • Favorable customer characteristics
            • Defensible competitive position
            • Favorable market dynamics
            • Strong customer value proposition
            • Potential for high margins
         3. Long Term Orientation: It is worth noting that vertical markets present an opportunity for a longer term perspective within a technology sector that is typically chasing fads and trying to re-invent itself every 18 months. A majority of the above "positive" factors are but aspects of this long term perspective.
            • This is good news for the foundation marketplace.
            • This is not to say that Vista Equity Partners does not exit markets, but rather that its management philosophy leans to the longer term. Indeed, it has sold companies to the likes of Bain Capital, Mellon Financial and Business Objects.
      3. Subject Matter Expertise: Another positive factor that stands out is the recognition of "experienced management team" as an asset. Since the negative factors include dropping the ball on product management, this experience translates as an in depth subject matter expertise regarding the vertical market.
   2. The value added that Vista Equity Partners claims to bring to these companies makes sense:
      1. As expected, they point to strategic analysis, financial planning and budgeting strengths, and to bringing in additional management talent.
      2. But in their "value added" they also include building an awareness of the market through industry research and the establishment of partnerships and alliances.
         1. These goals directly address the insular nature of traditional legacy vendors.
      3. Lastly, they are big on operational best practices, of using experience in one company to model practices for other companies.
   3. Technology: one common denominator among vertical market companies is the status of their technology. While on the one hand it is often outdated, the business rules for the vertical market are deeply embedded in the code. This makes wholesale replacement expensive, and runs risks of reduced functionality and introduces development risk and error. There is no simple solution to this situation, but experience in working with it is advantageous.
   4. Customer Focus: Vista will be faced with two conflicting goals as it assumes responsibility for MicroEdge.
      1. On the one hand it will wish to re-establish relationships with its clients as a key aspect of the value of the company.
      2. On the other hand it will wish to regain control over the product and of new product development. This implies taking the time to assess the product and market, make plans, develop and launch new features, and most importantly, not making promises it cannot deliver.
      3. This means that at the same time as they are trying to re-establish a degree of trust, they will also be very circumspect in what they say. In the past silence and lack of substance have been interpreted by the field as neglect and even arrogance.
      4. An early indicator of the new owner's character will be their success in managing this dilemma. If their response to this author's posting is any guide, they get it and plan to address it straight on.

What questions remain for you?

MicroEdge Sold to Vista Equity Partners

Is the sale of MicroEdge, Inc. to Vista Equity Partners an important event for your foundation? (in case you missed it, here is a link to the MicroEdge announcement: http://tinyurl.com/MicroEdgeSold). If you, like most foundations, are highly dependent on FIMS, FoundationPower or GIFTS, then the answer can only be 'yes'.

Other forums will discuss the merits of the new owners and speculate on the fate of associates at MicroEdge with whom we have all worked. Mergers and acquisitions are hard on employees, and I for one hope that this transition is kinder than most to all concerned.

What is offered here is an analysis of the data published by Advent about MicroEdge as a part of its 8-K filing with the SEC. The 8-K postings are rare snapshots of internal corporate financial results, and the opportunity should not be missed. The linked PDF has two pages: the first contains analysis, the second the raw data from the 8-K form. http://tinyurl.com/MicroEdgeFinancials

Bottom Line?

From an operational standpoint, MicroEdge is relatively healthy, with a total 2008 net income of $4.9 million on gross revenues of $26.9 million.

Despite the economy, gross revenues were up 4.9% for the first half of '09 over the same period '08.

Considerable belt tightening on the expense side (-15.7%) improved net income from operations over three-fold for the first half of 2009 over 2008.

Note: These results exclude stock based compensation and amortization of technology.

What concerns are evident?

Two areas bore the brunt of the expense reductions: Sales & Marketing and Product Development.

• Sales & Marketing: -16.2%, or -$874,000 on an annual basis.
  • A reduction in this area in not unexpected in an M&A environment. This may well affect MicroEdge's presence and sponsorship of conferences and events.
    
• Product Development: -24.5%, or -$1,700,000 annualized.
  • The reduction in development should be a major concern to MicroEdge's foundation clients. At industry standard rates, this represents the loss of 7-11 full time programmers.
  • Losing one quarter of programming capacity can't help but also have a material affect on the subject matter expertise of the organization (i.e. the intellectual capital embodied by the people that wrote the software).
    

A foundation using a MicroEdge platform deserves an explanation from Vista Equity Partners as to how this reduction in force will be managed moving forward.

CRM Leaderboard: Business Needs Determine “Best” Solution

Choosing which provider has the best CRM solution is a technology decision, right?

Wrong.  It is a business decision (informed by technology).

Think of it more like choosing a car...

• Ask a young man to choose a car, and he will likely choose the fastest, beefiest, baddest set of wheels they can get their hands on.
• Ask a cheapskate, and you'll end up with a $500 car (that ends up costing $3,000).
• Ask a utilitarian, you'll get a minivan.

Chances are that your organization, on discovering the need to adopt a CRM solution, created a committee of tech-savvy and predominantly "young" people (because everyone knows young people understand technology).

Not having been given further guidance than "we need the best," the group then spends most of its time evaluating features that few will understand, much less use.

A much better approach is to first ask the question, “what problem are we solving?” This allows clients to “begin with the end in mind,” and to increase their chances of choosing the best solution for the organization.

Lots of Choices:

Yes indeed, there is a lot of software that is used to track and manage relationships. In the foundation field, MicroEdge's FIMS, FoundationPower and GIFTS platforms are used for this purpose.  Other providers include SalesForce.com, Kintera SPhere, Convio, Blackbaud Raiser’s Edge, CiviCRM, SugarCRM and others.  Many social networking sites (Facebook, LinkedIn, etc.) are morphing into CRM functions the same way our accounting systems have stretched to cover the water front.

If we resist the temptation to focus only on the technical, the right question to ask of these packages is: What business needs are important? What are we trying to do?

One of the allures of CRM is that it promises everything: it can reach from soup to nuts, from directly talking with your customer to translating that data directly to your suppliers. But this allure is its own downfall - a LOT of big corporate multi-million dollar CRM projects fail because they try to go too far too fast.

Foundations have many business requirements:

• Funds Development: Relationships, Contact Management, eCommunications
• Client Self Service: Event Registration, Online Donation, Donor Fund Portal, Grantee Research, Grant Application, Social Networking.
• Workflow Management: Task Assignment, Scheduling, Opportunity Management, Case Management, Document Management
• Reporting: Each of the above has its own flavor of reporting: Client profile (360 degree view of a customer), Scorecards (summary to a client), Dashboards (summary activity reporting, exception reporting.
• Systems Maintenance: user administration, version control, data synchronization, systems administration.

This list can go on. A quick survey of the major CRM platform options shows that none is able to meet all of these requirements singlehandedly!

• It turns out that doing "funds development" is different than "corporate sales."
  • Packages written for the nonprofit sector, such as Raiser's Edge and Kintera, understand what a complex relationship is, and these relationships lie at the heart of the data model. 
  • A corporate business-to-business solution, such as SalesForce, does not. It can be added, but it is at best a second best solution.
• Self-service is a powerful tool, but it brings up security issues that scare a lot of people.
  • Kintera and Convio are very good at client-facing forms.
  • Raiser's Edge, which does not sit on the web directly, requires an add-on application layer to be accessible.
  • SalesForce, through its licensing policies, discourages direct customer participation in its system. It also requires an added application layer for access.
  • Social Networking is up for grabs, with many options and no cases where a foundation has incorporated it into their operational systems.
• Workflow is generally well supported.
  • SalesForce shines when it comes to back office workflow features, and the ability to customize workflow functions. Hands down.
• Reporting[o1] :
  • Ask a FIMS or FoundationPower user to compare their reporting options with those built into any CRM system, and they will just smile.  But go to a user conference for any of these same CRM systems and listen to the major complaint?  Reporting.
  • The biggest problem in reporting is that users know that they are unhappy with current options, but are not willing to invest the time to get inside the issue.
• Systems: Yes, the choice of CRM is informed by technology - just not driven by it.
  • Local versus Hosted:
    • Raiser's Edge is feature for feature the best CRM option for nonprofits, but it is a client/server system, meaning that you the customer have to worry about having a server to put it on, a secure network, physical security of the server and network, a current version of the software, backup, disaster planning, etc.
    • Kintera and SalesForce are hosted Software as a Service (SaaS) applications, meaning you don't worry about these things.  Smart.
  • Data Synchronization: if it does not work with your back office accounting system, the CRM system will be less than effective.
    • The Atlas Data Bridge (http://www.atlasdatabridge.com) provides this type of synchronization between systems.  The list of supported providers is growing, but it includes FIMS, FP, Kintera and soon SalesForce.

And the Winner Is:

Clearly, it depends on what is important to an individual client. Clients are encouraged to consider as many as four systems. The precipitous drop in software pricing over the past five years and advances in data synchronization make this do-able.

• Kintera Sphere: to handle funds development and constituent self service.
• SalesForce: to handle back office workflow processing and document management
• Atlas Data Bridge: to handle data synchronization
• Up for Grabs: Social Networking.

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How to Get There? How about where to start?

You ever see something that is so obvious that it is elusive? 

Philanthropy has its very roots in community:  from the Greek phil - having a strong affinity or love for, and anthrop- human.

But "Philanthropy" has come be about money, egos, status, power and elitism, about institutional empire building, relationship dependency,  con artists and sycophants.  Yes, there are exceptions, and even at its most pompous good works can happen, but the tendencies are very real.

So how to "love humans" without the skewed social dynamics and the power of the purse?