Selecting Software: How to Avoid Paying for More Licenses Than You Need

 In Capacity, Constituent Relationship Management (CRM)

We frequently see nonprofit organizations pay for more software licenses than they need, particularly in the early implementation phases. This can cost a nonprofit thousands of dollars that would be better invested in other ways. 

At Build Consulting, we work with nonprofits to select the best software and vendor to support their fundraising and operations. Our senior team members have all been doing this for over 20 years. During that time, we’ve worked hard to help vendors be more attentive to the needs of their nonprofit customers, and to help nonprofits be prepared to effectively engage with vendors.

In that twenty years, both vendors and nonprofits have evolved considerably. The number and variety of available software products for nonprofits has increased significantly. Nonprofits are, by and large, more tech-savvy and ready to adopt new technology.

Still, some challenges remain. One such challenge is the way that software sales teams, particularly at larger, more sales-oriented vendors, work with nonprofits during the software licensing process.

Please note: in this post, the words “license” and “subscription” are used synonymously.

A Case in Point: CRM Licensing with Salesforce and Blackbaud

Because of their prominence in the nonprofit technology space, our CRM selections for clients frequently consider solutions from Salesforce.org or Blackbaud. But they (among other vendors) have some sales practices that we believe are out of step with both how they represent themselves and the reality of how software is provided in a “cloud-based” world.

Both Blackbaud and Salesforce.org solutions are provided through a software-as-a-service model, whereby they do all the hosting of the application and data. One of the promises of this model is that it allows the software to be provided as a subscription, which allows a client to scale their use of a product as their needs grow. That is, the client can buy the licenses they need, when they need them.

Because of their software’s broad capabilities, solutions from Salesforce and Blackbaud are often used to meet complex or broad requirements—so the software implementation can take more than six months or even a year from the time the nonprofit selects the software until “go-live.”

During most of this implementation period the nonprofit needs only a few licenses, not a license for every future user of the software. So, a sales strategy encouraging the nonprofit to commit to the full license volume on “day one” costs the organization tens of thousands of dollars or more, depending upon the size of the implementation.

But in our experience, more often than not, Salesforce and Blackbaud sales representatives sell licenses that the nonprofit will not need for many months.

The Reasons Nonprofits Are Sold Too Many Licenses

We think there are several reasons why some vendor sales teams sell nonprofits licenses before they are needed, and why nonprofits buy them.

From the vendor perspective, the rationale is to get the largest commitment from the customer within the shortest period of time possible, because it is a better path to meeting sales quotas, and because it makes for easier creation and management of the contract. Even some vendors providing discounts to nonprofits have sales goals on which the compensation of their sales teams is based, as is the case with both Blackbaud and Salesforce.org.

From a nonprofit perspective, the decision to purchase all subscriptions effective “day one” rather than incrementally is typically due to inexperience. A nonprofit incorrectly assumes they can take a vendor that provides discounts to nonprofits at face value, without questioning them. When a nonprofit does question the rationale, they often meet with sales tactics we feel are inappropriate for vendors who emphasize their commitment to the social good sector.

The Costs to Nonprofits Are Real

Here are two recent examples from our clients’ experiences (pre-engagement with Build):

  • One of our nonprofit clients was sold a subscription for 500,000 constituent records, of which they needed less than 1,000 until they began testing data import some eight months into the implementation.
  • Another organization was sold 50 user licenses, of which they needed about 10 until just before the go-live date some 15 months later.

Unfortunately, our experience indicates this is the norm rather than the exception.

Vendor Tactics You Should Look Out For

  • “This is how everyone does it.” One frequently seen vendor sales tactic is to claim, “Selling all of the licenses up front is how everyone does it.” This is simply false. Many companies offer the ability to subscribe for only the licenses and capacity you need and to then scale it as your needs increase. Furthermore, it’s become much more common for companies to offer a subscription without a term commitment. From our observation, Blackbaud and Salesforce have not adopted this approach, at least with their flagship offerings.
  • “This discount is only available with these terms, until this date.” Another tactic is to convince the nonprofit that long-term discounts are dependent on them signing for the full number of subscriptions up front, and by completing the deal within a certain period—before the end of the month or the end of the quarter. But we’ve found that most often a discount offered before the end of that stated period will also be available afterwards. Yes, we understand that vendors don’t want sales deals to drag out forever, but ultimately we don’t believe these types of tactics serve anyone well.

Vendors Can Better Partner with Nonprofits

We’ve been candid in providing our feedback on these matters to leadership from Salesforce.org and Blackbaud, when the opportunity has presented itself. And let’s be clear: both companies provide vital software to the sector. They both have philanthropic programs through which they give back to the community. And though our criticisms of both Salesforce and Blackbaud are justified and based on our own real-world experience, these problems are not unique to those two companies.

We’d like to see more commitment from Salesforce and Blackbaud to align their sales practices with their statements of commitment to the nonprofit sector. We’d like them to be less hawkish within the sales process, more progressive and flexible in terms of how subscription models are created (trusting the quality of the product and supporting services to take care of customer retention), and better in helping nonprofits make good use of their limited resources.

Blackbaud and Salesforce have strong leadership positions in the nonprofit technology sector—in that their software offerings and sales practices help shape nonprofits as well as other software vendors competing within the sector. This is another opportunity to do so.

Nonprofits Can Become More Savvy Consumers

Nonprofits can become more educated consumers so that they approach the market better able to represent their own needs and best interests. To this end, nonprofits need to think beyond the selection to the implementation. Nonprofits need to craft an idea of how the implementation will be phased, and the licensing level needed at each phase.

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