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By Rob Garretson  |  Posted 12-06-2006 Print

Obstacle Course

Though the U.S. nonprofit sector is enormous—with an asset base of nearly $1.8 trillion in 2003—the vast majority of the 1.4 million nonprofits registered with the IRS are relatively tiny. Of those 501(c) tax-exempt organizations, 94 percent take in less than $1 million annually, and 81 percent don't even crack six figures. DTH, with fiscal 2005 revenues of $4.8 million, is in the top 5 percent, though it's dwarfed by behemoths like the American Red Cross at nearly $4 billion.

"Size does matter," acknowledges Red Cross CIO Steven Cooper, noting that the global relief agency has an internal IT staff of about 600, plus another 250 or so contractors that it uses to augment staff or provide specialized skills. The annual operating budget of the IT organization is about $200 million, or about 5 percent of the relief agency's total expenses, a slice of the pie more akin to a Fortune 500 corporation than a humble nonprofit.

Yet regardless of size, nearly all charitable organizations are hindered by some major obstacles to technology investment. The most obvious is the pressure, both internal and external, to keep administrative and overhead expenses low, relative to what's spent on the charitable programs themselves. "There is a desire to put all the resources into the mission, and minimize the resources that are in administration and overhead," says Forster. "So nonprofits have both the authentic desire to do that and the absolute desire to say they are doing that."

That's the reality at the Christian Children's Fund, where more than 81 percent of its $191 million in fiscal 2005 revenues went toward program expenses, according to Charity Navigator, which is itself a nonprofit that compiles data and ratings on charities to help inform contributors. "Our goal is to have most of the dollars go to the projects," echoes Bill Cavender, interactive communications manager at CCF, who is responsible for the organization's revamped Web site and a new intranet application being rolled out to its 33 overseas offices around the world.

"Nonprofit organizations get dinged for administrative costs," Forster notes. "Even reasonable administrative costs can turn off a donor." With general overhead guidelines suggesting that no more than 25 percent of budgets be spent on combined administrative and fund-raising costs, most nonprofits are hard-pressed to consider major capital investments such as IT systems.

Another common barrier to technology innovation at nonprofits is their salary structure, which is often significantly below market, making it harder to attract and keep technical talent.

Even so, nonprofits aren't as technically impaired as they were a few years ago. "The digital divide in terms of the hardware, the networking, the Internet connectivity is actually going away in the nonprofit sector," insists Forster. "But what that leaves is an aspiration gap." In other words, now that at least some nonprofits have a basic technology infrastructure in place, they no longer aspire to move up to the next level and acquire the latest IT tools and solutions that for-profit businesses take for granted.

Many nonprofits are led by executives who have not worked in corporate environments where they've had experience with applications that revolutionize business processes, Forster adds. "They can't envision what it would mean to have a network that was up most of the time, and to share constituent information throughout the organization in an efficient way," he says.


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