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The Business Case for Software Charity Licensing

June 6, 2012

© 2012 by Nick B. Nicholaou, all rights reserved
President, Ministry Business Services, Inc.
Reprinted from Christian Computing Magazine

There are more than 985,000 charities in the U.S.[1], with more than 13 million employees.  Charities make up a large percentage of the U.S. economy[2].  Some software companies, knowing only that, have a difficult time justifying charity licensing discounts.  But there’s more to the story, and knowing it proves that offering charity licensing discounts is smart business.

Our firm has been consulting with charities in the U.S. for twenty-six years.  We help them with CPA and IT services, and continue to be impressed with the complexities of managing their operations.  In addition to typical for-profit management challenges, charities have the additional complexity of managing volunteers– 61 million of them!  Volunteers aren’t there because it’s their job and because of their need for a paycheck, and this adds a layer of management that is challenging and rewarding.

For software solution providers, knowing who those volunteers are and why they’re there offers great insight to the opportunity available to those willing to take the extra steps necessary to reach this important sector.  Add that to the foundation of helping those who help others, and it’s a win-win!

Who Are These Volunteers?
It’s the volunteer component that is the strongest business reason for offering charity licensing discounts. 

Many volunteers, whether in a tactical role (usher or other kind of helper) or in a management role (serving on the board) are in decision-making and decision-influencing positions in their regular paid jobs.  Couple that with the fact that charities are voluntarily funded, and you have a set of watching eyes that are sensitive to how technology helps their charity’s efficiency and productivity.  What volunteers see work for their charity does get noticed, and does get talked about in their regular workplace.

For instance, a charity board member is part of the discussion on whether or not to implement a certain IT solution.  (Boards in charities tend to get involved in more tactical matters than do boards of large corporations.)  Board members are usually chosen based on their kinship with the charity and on their ability to lead an organization; often seen by their role in their regular job.  That means influence that is tied to passion for efficiency and productivity.  When a board member agrees that it would be wise to invest in a certain technology in their beloved charity, they watch the results closely.  After all, it is likely their contributions helped fund the initiative.  If the solution does well and improves operational and tactical efficiency and productivity, you can bet it will get talked about in the board member’s workplace.

Low Cost Marketing
How much does charity licensing really cost a technology company?  Not much; certainly a lot less than advertising and marketing campaigns.

Because charity budgets are donation driven, they are reluctant to spend money unless necessary.  And because they are mission-focused they try to put as much funding as possible towards programs that further their purpose.  Thus they tend to have efficient spending models, though some of their decisions can be unwise.

I’ve seen many charities look for free or cheap solutions just because they didn’t think they could afford better, often more appropriate solutions.  That means this large sector of the economy will often not use a product that might be a best fit to save a few budget dollars.  Charity licensing is a great way to help those organizations, and often is the only reason why charities decide to purchase good software rather than piece together cheap or free applications.  From a software company’s perspective charity licensing can be a very effective marketing strategy.  And because charities would have tended towards free or cheap solutions, the discounts don’t mean money lost; they mean sales gained.

A Leader Who Agrees
In his best selling autobiography, Lee Iacocca said the auto industry has grown to love the rental car industry.  The reason?  He said as an auto executive he was always thinking of new ways to try to get people to test drive their cars.  But then he realized the public was actually willing to pay to test drive them through the car rental industry!  By partnering more closely with that industry the manufacturers were able to increase the number of “test drives” dramatically!

Getting software into a charity has the same effect.  If it does well in making the team more efficient and effective, board members and other volunteers will notice and will likely influence their organizations to follow suit!

Some software and hardware companies get this.  Those that do benefit from the soft marketing accomplished by achieving success stories in charities watched by their many volunteers.  They also benefit by contributing to the process of helping many. It is a win-win!

[1] 335,000 churches, according to the Hartford Institute for Religious Studies, and 650,000 nonprofits other than churches according to the Nonprofit Quarterly.

[2] Nonprofits represent $1.5 trillion in revenue according to the Nonprofit Quarterly.

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