the total economic impact™ of the blackbaud …...the following fundraising channels: us mail,...

A Forrester Total Economic

Impact™ Study

Commissioned By

Blackbaud

Project Director:

Bob Cormier

Vice President And

Principal Consultant

February 2016

The Total Economic Impact™ Of The Blackbaud Raiser’s Edge NXT™ Solution Cost Savings And Business Benefits Enabled By The Blackbaud Raiser’s Edge NXT Solution

Table Of Contents

Executive Summary .................................................................................... 3

Disclosures .................................................................................................. 5

TEI Framework And Methodology ............................................................ 6

Analysis ........................................................................................................ 7

Financial Summary ................................................................................... 19

About The Blackbaud Raiser’s Edge NXT Solution: Overview ........... 20

Appendix A: Total Economic Impact™ Overview ................................. 22

Appendix B: Glossary ............................................................................... 23

ABOUT FORRESTER CONSULTING

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consulting to help leaders succeed in their organizations. Ranging in scope from a

short strategy session to custom projects, Forrester’s Consulting services connect

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© 2016, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited.

Information is based on best available resources. Opinions reflect judgment at the time and are subject to

change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to www.forrester.com.

3

Executive Summary

Blackbaud commissioned Forrester Consulting to conduct a

Total Economic Impact™ (TEI) study and examine the

potential return on investment (ROI) enterprises may realize

by deploying the Blackbaud Raiser’s Edge NXT™ fundraising

and relationship management solution. The purpose of this

study is to provide readers with a framework to evaluate the

potential financial impact of the Blackbaud Raiser’s Edge NXT

solution on their organizations’ overall business goals of

finding new donor revenue, growing existing revenue and

creating a supported, scalable infrastructure.

To better understand the benefits, costs, and risks associated

with the Blackbaud Raiser’s Edge NXT solution, Forrester

interviewed the senior director of development for the US-

based Habitat for Humanity of Dane County, a nonprofit

organization affiliated with Habitat for Humanity International.

Habitat for Humanity of Dane County, or Habitat Dane, has built affordable housing in 18 communities in Dane County,

Wisconsin. Habitat homes help with community building and the establishment of healthy neighborhoods. Habitat Dane is an

existing Blackbaud customer with 10 months of experience using Blackbaud Raiser’s Edge NXT.

Prior to using Blackbaud Raiser’s Edge NXT, it had been using The Raiser’s Edge 7 (and previous versions) along with a

variety of other systems and applications for more than 10 years. It was able to consolidate some of those systems with its

investment in Raiser’s Edge NXT.

According to Habitat for Humanity of Dane County, it uses the Blackbaud Raiser’s Edge NXT Pro subscription package for

the following fundraising channels: US mail, email, online, events, and peer-to-peer fundraising.

BLACKBAUD RAISER’S EDGE NXT GENERATES COST SAVINGS AND BENEFITS

Our interviews with Habitat for Humanity of Dane County and subsequent financial analysis found that it experienced the

risk-adjusted ROI, benefits, and costs shown in Figure 1. The analysis points to benefits of $70,825 versus costs of $25,174,

equating to a net present value (NPV) of $45,651. The payback period, or breakeven point, was a quick four months.

FIGURE 1

Financial Summary Showing Three-Year Risk-Adjusted Results

ROI :

181%

Payback period: four months

Total benefits: $70,825

Total costs: $25,174

NPV:

$45,651

Source: Forrester Research, Inc.

An investment in Blackbaud Raiser’s Edge NXT

allowed Habitat for Humanity of Dane County to

project three years of cost savings and benefits

totaling $70,825 in the following areas (risk- and

present value-adjusted):

• Elimination of third-party applications and IT

contractor: $8,307.

• Incremental donor revenue from online

fundraising: $13,442.

• Back-office labor savings: $25,863.

• Labor savings from newly acquired email

addresses: $23,212.

4

If a risk-adjusted ROI and NPV still demonstrate a compelling business case, it raises confidence that the investment in the

Blackbaud Raiser’s Edge NXT solution is likely to succeed, because the risks that threaten the project have been taken into

consideration and quantified.

› Benefits. Habitat Dane experienced the following risk- and present value-adjusted benefits, totaling $70,825. See the Benefits — Quantified section for more details. The benefits include:

• Elimination of third-party applications and IT contractor: $8,307.

• Incremental donor revenue from online fundraising: $13,442.

• Back-office labor savings: $25,863.

• Labor savings from newly acquired email addresses: $23,212.

› Costs. Habitat Dane experienced the following costs adjusted for present value, totaling $25,174. See the Costs section for more details. The costs include:

• Internal labor to preplan and manage the implementation — $10,800.

• Blackbaud’s net incremental fees for migration to NXT — $14,374.

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Disclosures

The reader should be aware of the following:

› The study is commissioned by Blackbaud and delivered by Forrester Consulting. It is not meant to be used as a

competitive analysis.

› Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises

that readers use their own estimates within the framework provided in the study to determine the appropriateness of an

investment in the Blackbaud Raiser’s Edge NXT solution.

› Blackbaud reviewed and provided feedback to Forrester, but Forrester maintained editorial control over the study and its

findings and did not accept changes to the study that contradict Forrester's findings or obscure the meaning of the study.

› Blackbaud provided the customer names for the interviews but did not participate in the interviews.

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TEI Framework And Methodology

INTRODUCTION

From the information provided in the interviews, Forrester has constructed a Total Economic Impact (TEI) framework for

those organizations considering investing in the Blackbaud Raiser’s Edge NXT solution. The objective of the framework is to

identify the cost, benefit, flexibility, and risk factors that affect the investment decision. Other objectives include helping

organizations understand how to take advantage of specific benefits, reduce costs, and improve the overall business goals

of winning, serving, and retaining donors with the Blackbaud Raiser’s Edge NXT solution.

APPROACH AND METHODOLOGY

Forrester took a multistep approach to evaluate the impact that Blackbaud Raiser’s Edge NXT can have on Habitat for

Humanity of Dane County (see Figure 2). Specifically, we:

› Interviewed Blackbaud leadership, marketing, sales, and product management individuals to gather data relative to the

Blackbaud Raiser’s Edge NXT solution and the marketplace for Raiser’s Edge NXT.

› Interviewed Habitat Dane’s senior director of development to obtain data with respect to costs, benefits, and risks

associated with Blackbaud Raiser’s Edge NXT.

› Constructed a financial model representative of the interviews using the TEI methodology. The financial model is

populated with the cost and benefit data obtained from the interviews.

› Risk-adjusted the financial model based on information provided by Habitat Dane during interviews. Risk adjustment is a

key part of the TEI methodology. While Habitat Dane provided cost and benefit estimates, some categories included a

broad range of responses or had a number of internal and external forces that might have affected the results. For that

reason, benefit totals have been risk-adjusted and are detailed in each relevant section.

Forrester employed four fundamental elements of TEI in modeling the Blackbaud Raiser’s Edge NXT solution: benefits,

costs, flexibility, and risks.

Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester’s TEI

methodology serves to provide a complete picture of the total economic impact of purchase decisions. Please see Appendix

A for additional information on the TEI methodology.

FIGURE 2

TEI Approach


Perform due diligence

Conduct customer interviews

Construct financial model using TEI framework

Write case study

7

Analysis

HABITAT FOR HUMANITY OF DANE COUNTY

For this study, Forrester conducted in-depth interviews with Habitat

Dane’s senior director of development. The interviews and our

analysis are focused on Habitat Dane’s use of the Blackbaud

Raiser’s Edge NXT solution.

Previous to its investment in Blackbaud Raiser’s Edge NXT, it had

been using The Raiser’s Edge 7 (and previous versions) for over

10 years. With its investment in Raiser’s Edge NXT, it had the

following goals and objectives.

› Increase fundraising potential:

• Identify new donors with high wealth ranking.

• Easily identify lapsed donors.

• Create a seamless donor experience.

• Move toward annual events and capital campaigns that

focus on simplifying a multiyear pledge system with

recurring gift and online giving.

• Perform high-level reporting, including acquisition, retention, and lapsed and reactive donors.

› Increase staff efficiency at all levels of Habitat for Humanity of Dane County:

• Create efficiencies for back-office operations.

• Allow for unlimited users. Prior to investing in Raiser’s Edge NXT, Habitat Dane was using the maximum number of

allowed user licenses for The Raiser’s Edge 7. It could only have so many people using The Raiser’s Edge 7 at one

time, and frequently someone had to log off the system to allow another person to log on.

• Update donors’ records by automatically populating missing information such as phone numbers, email addresses,

and wealth ratings.

• Alleviate credit card fraud issues with its previous online and offline credit card processor.

› Take advantage of the additional functionality in Raiser’s Edge NXT that Habitat Dane had not used or that was not free in The Raiser’s Edge 7, such as:

• Wealth analysis, including alerts for new donors with high wealth ratings.

• Online giving, email marketing, tribute (constituent recognition), and event management.

› Improve user-friendliness:

• Raiser’s Edge NXT’s interface is far more useful and intuitive.

• Users get customized views.

• Users get the same user experience on desktop, mobile, and tablet (more robust mobile app).

“The revenue results from

Raiser’s Edge NXT online

fundraising were tremendous,

and I attribute that to Raiser’s

Edge NXT’s streamlined and

easy-to-use online donation

pages.”

— Amy Good, senior director of development,

Habitat for Humanity of Dane County

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HABITAT FOR HUMANITY OF DANE COUNTY INTERVIEW HIGHLIGHTS

The interview revealed that Habitat Dane has a Raiser’s Edge NXT subscription to the Pro Package and is using or will be

using the following features and functionality:

› Cloud access: web and mobile, unlimited users, training videos, and chat support.

› Fundraising and supporter management: online fundraising, crowd fundraising, recurring gifts, payment processing,

prospect research, events, membership, volunteers, and alumni.

› Data enrichment and analytics: address updates and wealth ratings, email appends, and suggested major donors and ask

amounts.

There are 10 employees currently using Raiser’s Edge NXT, including the following: the CEO, directors of development,

program managers, family services staff, volunteer coordinators, development assistants, and the office manager. The CEO

just started using Raiser’s Edge NXT due to the ease of use compared with the prior version.

Habitat Dane currently has 43,000 records within Raiser’s Edge NXT, which include: constituents, donors, members,

volunteers, alumni, event attendees, prospects, actives, inactives, and deceased.

BENEFITS — QUANTIFIED

Habitat for Humanity of Dane County experienced a number of

quantified benefits attributable to the Blackbaud Raiser’s Edge NXT

solution.

Elimination Of Third-Party Applications And IT Contractor

With its investment in Raiser’s Edge NXT, Habitat Dane will be able

to eliminate expenses associated with third-party applications,

including its digital payments processor, credit card terminal, credit

card processor, fundraising platform, online email marketing

subscriptions, and an IT contractor responsible for legacy server

issues and upgrades. In addition to realizing direct savings, Habitat

Dane achieved the following benefits (unquantified) from replacing

the above applications with Raiser’s Edge NXT:

› Greater safety for donor information and PCI compliance.

› Reconciliations done in one system.

› Elimination of the risk of data errors between systems and the duplicate entry/updating of email addresses.

Habitat Dane has not yet fully eliminated these applications, so there’s uncertainty as to the future savings. Forrester risk-

adjusted the savings downward by 30% (see Table 1) to reflect uncertainly of current and future years’ benefits. The risk-

adjusted savings over three years ranged from $3,142 to $3,492 and total $10,055. See the section on Risks for more

information.

“Raiser’s Edge NXT has really

streamlined our back-office

operation and gives us the

flexible infrastructure we

needed to feel comfortable

growing and doing lots of

campaigns.”

— Amy Good, senior director of development,

Habitat for Humanity of Dane County

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TABLE 1

Elimination Of Third-Party Applications And IT Contractor

Ref. Metric Calc./Source Year 1 Year 2 Year 3

A1 Digital payments processor Interview $0 $300 $300

A2 Lower credit card fees (replace credit card

terminal) Interview $1,100 $1,200 $1,300

A3 Fundraising platform Interview $588 $588 $588

A4 Online email marketing subscriptions Interview $300 $300 $300

A5 Third-party IT contractor Interview $2,500 $2,500 $2,500

At Elimination of third-party applications and IT

contractor A1:A5 $4,488 $4,888 $4,988

Risk adjustment � 30%

Atr Elimination of third-party applications and IT contractor (risk-adjusted)

$3,142 $3,422 $3,492


Incremental Donor Revenue Attributed To Raiser's Edge NXT

With Blackbaud Raiser's Edge NXT, Habitat Dane was able to increase its annual revenue by $5,405 (risk-adjusted) using

NXT’s standard online fundraising feature. It allows users with little online experience to easily create unlimited donation

forms by following step-by-step instructions to design modern and flexible forms, and then copy and paste the JavaScript

code into the organization’s website. Prior to investing in Raiser’s Edge NXT, Habitat Dane averaged 74 online gifts annually;

thereafter, donor gifts attributed to NXT increased by 54 annually. At an average gift size of $143, Habitat Dane was able to

increase annual donor revenue by $5,405 annually (risk-adjusted).

Forrester risk-adjusted the incremental revenue downward by 30% (see Table 2) to reflect uncertainly of current and future

years’ incremental online gift revenue. See the section on Risks for more information.

10

TABLE 2

Incremental Donor Revenue Attributed To Raiser's Edge NXT


B1 Number of online fundraising gifts (projected) Interview 256 256 256

B2 Percent of online fundraising gifts attributed to

Raiser’s Edge NXT Interview 50% 50% 50%

B3 Number of online fundraising gifts attributed

to Raiser’s Edge NXT B1 * B2 128 128 128

B4 Average number of online gifts with previous

solutions

Previous

average 74 74 74

B5 Number of incremental gifts attributed to

Raiser's Edge NXT B3 - B4 54 54 54

B6 Average gift amount Interview $143 $143 $143

Bt Incremental donor revenue from Raiser's

Edge NXT online fundraising B5 * B6 $7,722 $7,722 $7,722


Btr Incremental donor revenue from Raiser's Edge NXT online fundraising (risk-adjusted)

Bt*Risk $5,405 $5,405 $5,405


Back-Office Labor Savings From Blackbaud Raiser's Edge NXT

Habitat Dane reported that by using Blackbaud Raiser's Edge NXT, its back-office operations were more efficient. It was able

to eliminate several third-party applications (see Table 1) whose functionality was duplicated in NXT. Having everything in

NXT eliminated several manual processes and saves time entering information about donors. It also created a more

seamless donor experience. The labor savings can be attributed to the work of several individuals and, according to Habitat

Dane, totaled 10 hours per week saved. At an average fully loaded rate of $25 per hour, the total back-office labor savings is

$13,000 (10 hours * 52 weeks * $25 per hour) annually, or $39,000 over the three years of our analysis. Forrester risk-

adjusted this benefit downward by 20% (see Table 3) to be conservative. See the section on Risks for more information.

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TABLE 3

Back-Office Labor Savings Attributed To Blackbaud Raiser's Edge NXT


C1 Back-office labor savings — hours per week Interview 10 10 10

C2 Back-office labor rate (fully loaded) Interview $25 $25 $25

Ct Back-office labor savings attributed to

Blackbaud Raiser's Edge NXT

C1*C2*52

weeks $13,000 $13,000 $13,000


Ctr Back-office labor savings attributed to Blackbaud Raiser's Edge NXT (risk-adjusted)

Ct*Risk $10,400 $10,400 $10,400


Newly Acquired Email Addresses From Blackbaud Raiser's Edge NXT

Habitat Dane had been using The Raiser’s Edge 7 National Change of Address service to update its records; however, it

was not paying the additional fee to append missing email addresses. Therefore, email addresses were missing from many

of its donor records. Habitat Dane agrees that sending donors emails is more efficient than using US mail, so it was

important to update and/or populate donors’ records with email addresses. Raiser’s Edge NXT was able to provide Habitat

Dane email addresses from its database, which automatically populated Habitat Dane’s donor database. In Year 1, the base

year, there were 6,800 automatic email updates from NXT. After the base year, Habitat Dane assumes 500 updates in each

of years 2 and 3. Forrester risk-adjusted the benefits, as Habitat Dane has never actually updated 6,800 email addresses

manually; therefore, there’s some uncertainty as to the actual time involved to do that (see Table 4). See the section on

Risks for more information.

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TABLE 4

Labor Savings From Blackbaud Raiser's Edge NXT Newly Acquired Email Addresses


D1 Number of email addresses automatically

provided by Raiser's Edge NXT Interview 6,800 500 500

D2 Time and effort avoided per email address

(hours) 1/3 of an hour 0.33 0.33 0.33

D3 Total hours saved with newly acquired email

addresses D1 * D2 2,264.4 166.5 166.5

D4 Cost per hour (entry-level and fully loaded) Interview $12.50 $12.50 $12.50

Dt Labor savings from Raiser's Edge NXT newly

acquired email addresses D3 * D4 $28,305 $2,081 $2,081


Dtr Labor savings From Raiser's Edge NXT newly acquired email addresses (risk-adjusted)

Dt*Risk $22,644 $1,665 $1,665


Total Benefits

Table 5 shows the total of all benefits across the areas listed above, as well as present values (PVs) discounted at 10%.

Over three years, Habitat Dane expects risk-adjusted total benefits to be a PV of $70,825.

TABLE 5

Total Benefits (Risk-Adjusted)

Ref. Benefit Year 1 Year 2 Year 3 Total Present Value

Atr Elimination of third-party applications

and IT contractor $3,142 $3,422 $3,492 $10,055 $8,307

Btr Incremental donor revenue from

Raiser's Edge NXT online fundraising $5,405 $5,405 $5,405 $16,216 $13,442

Ctr Back-office labor savings attributed to

Blackbaud Raiser's Edge NXT $10,400 $10,400 $10,400 $31,200 $25,863

Dtr Labor savings from Raiser's Edge

NXT newly acquired email addresses $22,644 $1,665 $1,665 $25,974 $23,212

Total benefits (risk-adjusted) $41,591 $20,892 $20,962 $83,445 $70,825


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BENEFITS: UNQUANTIFIED

Habitat for Humanity of Dane County identified the following additional benefits of using Blackbaud Raiser’s Edge NXT but

was not able to quantify the benefits at the present time:

› With Blackbaud Raiser’s Edge NXT, frontline development staff is able to mine the database and focus attention on the top

donor prospects who will produce the best results for the mission or campaign. Donation letters to individual donors are

customized based on donor attributes and wealth.

› Raiser’s Edge NXT allows for unlimited donation forms. In the past, Habitat Dane used one donation website with fixed

recommended donor amounts. Now it can create multiple URLs with different recommended donor amounts based on the

wealth and history of individual donors.

› Habitat Dane is able to code each mailing campaign to drive donors to specific web pages, which allows them to track the

effectiveness of each campaign. Prior to using NXT, Habitat Dane would receive donations without knowing which

campaign produced them.

› With the consolidation of third-party applications into Raiser’s Edge NXT, there has been a significant reduction in data

errors previously attributed to double data entry into more than one system.

“We never realized how many ‘gems’ were hiding in our donor database until we

looked at the potential of NXT’s wealth ratings and wealth analytics. It provides

a rating of potential giving and recommends individual donor ask amounts.

There’s really exciting future potential with wealth ratings.”

— Amy Good, senior director of development, Habitat for Humanity of Dane County

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COSTS

Habitat for Humanity of Dane County experienced the following costs associated with the Blackbaud Raiser’s Edge NXT

solution:

› Internal labor to preplan and manage the implementation — $10,800. Habitat Dane’s development staff spent 360

total hours over 12 weeks working internally and with Blackbaud to move the original The Raiser’s Edge 7 to Raiser’s

Edge NXT hosted cloud environment and learn and implement the new NXT functionalities. Other preplanning tasks

included: reconciling how non-technology-savvy staff would log into NXT from three different locations and with

inconsistent versions of Windows; setting up users on the Citrix login client and the hosted environment; changing

passwords; learning and implementing the NXT modules; creating an internal user guide; and watching Blackbaud training

videos. At an average rate of $30 per hour, the internal cost to preplan and manage the NXT implementation was $10,800

(360 hours * $30 per hour).

› Blackbaud Raiser’s Edge NXT subscription fees — net increase of $17,340 in total fees over three years. Habitat

Dane migrated from The Raiser’s Edge 7 to the SaaS-based Raiser’s Edge NXT, and the incremental net cost (difference

between The Raiser’s Edge 7 and NXT) was $5,780 annually, or $17,340 over three years. Habitat Dane purchased

Raiser’s Edge NXT Pro subscription services. Included in this fee are all the modules, online tools, and hosting of the

SaaS software, including:

o Cloud access: web and mobile, unlimited users, training videos, and chat support.

o Fundraising and supporter management: online fundraising, crowd fundraising, recurring gifts and payment

processing, planned giving, prospect research, events, membership, volunteers, and alumni.

o Data enrichment and analytics: address updates and wealth ratings, email and phone appends, and

suggested major donors and ask amounts.

TABLE 6

Total Costs Associated With Implementing And Managing Blackbaud Raiser’s Edge NXT

Ref. Metric Calc./Source Initial Year 1 Year 2 Year 3

E1 Internal labor to preplan and

manage the implementation Interview $10,800 $0 $0 $0

E2 Blackbaud net incremental fees

for migration to NXT Blackbaud $0 $5,780 $5,780 $5,780

Et Cost to deploy Raiser's Edge NXT E1+E2 $10,800 $5,780 $5,780 $5,780


Etr Cost to deploy Raiser's Edge NXT (risk-adjusted)

$10,800 $5,780 $5,780 $5,780


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“We had some credit card fraud issues with our last credit card payment

processor. Blackbaud Raiser’s Edge NXT solved those fraud problems and also

automatically updates donors’ credit card information, saving staff time to

track down new credit card numbers.”


Total Costs

Table 7 shows the total costs as well as associated present values, discounted at 10%. Over three years, Habitat Dane

expects costs to total a net present value of $25,174. Forrester did not risk-adjust costs because a majority of the costs were

either actual costs or fixed quotes from Blackbaud.

TABLE 7

Total Costs Associated With Implementing And Managing Blackbaud Raiser’s Edge NXT

Ref. Cost Initial Year 1 Year 2 Year 3 Total Present Value

E1

Labor to preplan and

manage the

implementation

$10,800 $0 $0 $0 $10,800 $10,800

E2

Blackbaud net

incremental fees for

migration to NXT

$0 $5,780 $5,780 $5,780 $17,340 $14,374

Et Cost to deploy Raiser's

Edge NXT $10,800 $5,780 $5,780 $5,780 $28,140 $25,174


Etr Cost to deploy Raiser's

Edge NXT $10,800 $5,780 $5,780 $5,780 $28,140 $25,174


FLEXIBILITY

Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business

benefit for some future additional investment. This provides an organization with the “right” or the ability to engage in future

initiatives but not the obligation to do so. There are several scenarios in which an organization chooses to implement

Blackbaud Raiser’s Edge NXT and later realizes additional uses and business opportunities. Flexibility would also be

quantified when evaluated as part of a specific future project (described in more detail in Appendix A).

Blackbaud Community

According to Habitat Dane, it has considering using the Blackbaud Community, which is a group of thousands of Blackbaud

product users around the world that will afford Habitat Dane (or any other NXT customer) the following benefits:

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› Ask questions and get answers for Blackbaud products.

› Get access to a host of resources to support a mission.

› Receive up-to-the-minute updates on new releases and updates.

› Connect and communicate with peers.

Social Fundraising

In the future, the senior director of development for Habitat Dane will be taking advantage of Blackbaud Raiser’s Edge NXT’s

social fundraising feature, which was released for online fundraising customers in early 2016. Social fundraising is available

at no additional cost and is automatically available in online fundraising. Gifts that are received as a result of a shared social

fundraising link will include attributes that show which donor started that particular social fundraising, which donor's link the

current donor clicked to make their gift, and the social fundraising ID of the donor who made the current gift.

Wealth Analytics

Wealth analytics helps organizations identify constituent gift capacity and recommend who solicitors should be targeting for

maximum major gifts. This includes: simple ratings of wealth based on public assets such as real estate and private

company ownership; donor inclination to give a major gift, using giving trends in your house file; and the recommended dollar

amount you should be asking, based on capacity and asset information. Habitat Dane will be using wealth analytics in the

future with the expectations of increasing donor revenue.

Crowd Fundraising

Donors and supporters can set goals, create donation web pages, and track their progress to fundraise on behalf of Habitat

Dane — without involvement from Habitat Dane. By offering crowd fundraising functionality to its individual donors in the

future, Habitat Dane anticipates being able to increase donor revenue.

Habitat Dane is in the early stages of considering these options, so it was not able to articulate and quantify these future

flexibility option benefits. Therefore, Forrester did not quantify them for this study.

Forrester encourages readers to learn more about Blackbaud Raiser’s Edge NXT’s capabilities to determine the potential

quantifiable flexibility option benefits for their organizations. The value of the flexibility option, when calculated, is based on

the Black-Scholes Option Pricing formula. (For information regarding the flexibility calculation, please see Appendix A.)

RISKS

Forrester defines two types of risk associated with this analysis: “implementation risk” and “impact risk”. Implementation risk

is the risk that a proposed investment in Blackbaud Raiser’s Edge NXT may deviate from the original or expected

requirements, resulting in higher costs than anticipated. Impact risk refers to the risk that the business or technology needs

of Habitat Dane may not be met by the investment in Blackbaud Raiser’s Edge NXT, resulting in lower overall benefits. The

greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates.

17

TABLE 8

Benefit And Cost Risk Adjustments

Benefits Adjustment

Elimination of third-party applications and IT contractor � 30%

Incremental donor revenue from online fundraising � 30%

Back-office labor savings � 20%

Labor savings from newly acquired email addresses � 20%

Costs Adjustment

Costs to deploy Blackbaud Raiser’s Edge NXT � 0%


Quantitatively capturing implementation risk and impact risk by directly adjusting the financial results provides more

meaningful and accurate estimates and a more accurate projection of the ROI. In general, risks affect costs by raising the

original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers should be taken as

“realistic” expectations since they represent the expected values considering risk.

Readers should take into consideration the following generic risk associated with any technology investment:

› Does your organization have the requisite skills to take full advantage of the benefits of Raiser’s Edge NXT?

The following impact risks that affect benefits associated with Raiser’s Edge NXT is identified as part of the analysis:

› The future quantification of benefits was based on less than a year’s experience with Raiser’s Edge NXT. Habitat Dane expressed some hesitancy when asked to forecast benefits for years 2 and 3; therefore, Forrester risk-adjusted those

benefits downward to reflect the uncertainty.

Forrester did not risk-adjust costs because a majority of the costs were either actual costs or fixed quotes from Blackbaud.

Table 8 shows the values used to adjust for risk and uncertainty in the cost and benefit estimates for Habitat Dane. Readers

are urged to apply their own risk ranges based on their own degree of confidence in the cost and benefit estimates.

If a risk-adjusted ROI and NPV still demonstrate a compelling business case, it raises confidence that the investment in

Blackbaud Raiser’s Edge NXT is likely to succeed, because the risks that threaten the project have been taken into

consideration and quantified.

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Forrester’s interview question: “Does Raiser’s Edge NXT allow you to scale your

environment and infrastructure to facilitate growth?”

Answer: “Absolutely. As we prepare to have events focused on multiyear

pledges, as well as a capital campaign, we really needed the power, flexibility,

and expanded features of NXT. It’s going to make it easier on my team.”


19

Financial Summary

The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback

period for Habitat Dane’s investment in the Blackbaud Raiser’s Edge NXT solution. Figure 3 is a three-year cash flow chart.

FIGURE 3

Cash Flow Chart (Risk-Adjusted)


Table 9 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the

risk-adjustment values from Table 8 in the Risks section to the unadjusted results in each relevant cost and benefit section.

TABLE 9

Cash Flow (Risk-Adjusted)

Initial Year 1 Year 2 Year 3 Total Present Value

Total costs ($10,800) ($5,780) ($5,780) ($5,780) ($28,140) ($25,174)

Total benefits $0 $41,591 $20,892 $20,962 $83,445 $70,825

Net Benefits ($10,800) $35,811 $15,112 $15,182 $55,305 $45,651

ROI 181%

Payback period Four months


($20,000)

($10,000)

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Initial Year 1 Year 2 Year 3

Cash flows

Financial Analysis (risk-adjusted)

Total costs Total benefits Cumulative total

20

About The Blackbaud Raiser’s Edge NXT Solution: Overview

The following information is provided by Blackbaud. Forrester has not validated any claims and does not endorse Blackbaud

or its offerings.

SMART CLOUD FUNDRAISING AND RELATIONSHIP MANAGEMENT FOR NONPROFITS

For over 25 years, Raiser’s Edge has been a leader in fundraising and relationship management for nonprofits. With the

launch of Raiser’s Edge NXT, it is ushering in a new age of performance and support for customers: a comprehensive,

cloud-based solution built specifically for the needs and desires of the nonprofit community. Smart, scalable, and predictive,

Raiser’s Edge NXT provides nonprofits with the infrastructure to achieve sustainable growth.

Here are some of the benefits associated with Raiser’s Edge NXT:

Drive New Donor Revenue

› Raiser’s Edge NXT makes it easy to reach prospects, send engaging communications, and increase the likelihood of first-

time donations.

› Data enrichment services find missing contact information, such as mailing and email addresses, so your organization can

reach more prospects.

› Multichannel communications, including email marketing and direct mail, make it easy to engage with supporters and

easily understand the impact of campaigns. Online and offline giving tools process payments to drive new revenue from

donations, memberships, and events.

Grow Existing Revenue

Raiser’s Edge NXT comes standard with the cultivation tools to increase donor retention, upgrade major donors, and

empower evangelists to raise money on behalf of the organization:

› Donor retention insights discover donors at risk of lapsing and provide the tools to grow recurring donor revenue.

› Wealth analytics target top prospects to solicit for major gifts and prioritize the actions needed to upgrade donor revenue.

› Crowd fundraising and social sharing tools empower evangelists to raise money on behalf of your organization to expand

your base of supporters.

Create An Infrastructure For Growth

As a smart, all-inclusive cloud solution, Raiser’s Edge NXT provides organizations with one view of performance:

› The smart, all-inclusive solution stores all supporter info to provide one view of relationships and performance across the

organization.

› World-class customer service guides nonprofits through a proven path to success, based on 30 years of expertise in

helping nonprofits to achieve real outcomes and results.

› The modern cloud platform delivered by Blackbaud Sky creates a scalable, secure, global environment that makes it easy

to access information and connect with other solutions.

21

TEI FRAMEWORK ASSUMPTIONS

Table 10 provides the model assumptions that Forrester used in this analysis.

The discount rate used in the PV and NPV calculations is 10%, and the time horizon used for the financial modeling is three

years. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are

urged to consult with their respective company’s finance department to determine the most appropriate discount rate to use

within their own organizations.

TABLE 10

Model Assumptions

Ref. Metric Source Value

F1 Back-office labor rate (fully loaded) Interview $25/hour

F2 Entry-level labor rate (fully loaded) Interview $12.50/hour

F3 Average online gift amount Interview $143


22

Appendix A: Total Economic Impact™ Overview

Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-

making processes and assists vendors in communicating the value proposition of their products and services to clients. The

TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior

management and other key business stakeholders. TEI assists technology vendors in winning, serving, and retaining

customers.

The TEI methodology consists of four components to evaluate investment value: benefits, costs, flexibility, and risks.

BENEFITS

Benefits represent the value delivered to the user organization — IT and/or business units — by the proposed product or

project. Often, product or project justification exercises focus just on IT cost and cost reduction, leaving little room to analyze

the effect of the technology on the entire organization. The TEI methodology and the resulting financial model place equal

weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on

the entire organization. Calculation of benefit estimates involves a clear dialogue with the user organization to understand

the specific value that is created. In addition, Forrester also requires that there be a clear line of accountability established

between the measurement and justification of benefit estimates after the project has been completed. This ensures that

benefit estimates tie back directly to the bottom line.

COSTS

Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business units

may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the investments and

expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures any incremental costs

over the existing environment for ongoing costs associated with the solution. All costs must be tied to the benefits that are

created.

FLEXIBILITY

Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can typically be

the primary way to justify a project, Forrester believes that organizations should be able to measure the strategic value of an

investment. Flexibility represents the value that can be obtained for some future additional investment building on top of the

initial investment already made. For instance, an investment in an enterprisewide upgrade of an office productivity suite can

potentially increase standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration

feature may translate to greater worker productivity if activated. The collaboration can only be used with additional

investment in training at some future point. However, having the ability to capture that benefit has a PV that can be

estimated. The flexibility component of TEI captures that value.

RISKS

Risks measure the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in two

ways: 1) the likelihood that the cost and benefit estimates will meet the original projections and 2) the likelihood that the

estimates will be measured and tracked over time. TEI risk factors are based on a probability density function known as

“triangular distribution” to the values entered. At a minimum, three values are calculated to estimate the risk factor around

each cost and benefit.

23

Appendix B: Glossary

Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Companies set

their own discount rate based on their business and investment environment. Forrester assumes a yearly discount rate of

10% for this analysis. Organizations typically use discount rates between 8% and 16% based on their current environment.

Readers are urged to consult their respective organizations to determine the most appropriate discount rate to use in their

own environment.

Net present value (NPV): The present or current value of (discounted) future net cash flows given an interest rate (the

discount rate). A positive project NPV normally indicates that the investment should be made, unless other projects have

higher NPVs.

Present value (PV): The present or current value of (discounted) cost and benefit estimates given at an interest rate (the

discount rate). The PV of costs and benefits feed into the total NPV of cash flows.

Payback period: The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs)

equal initial investment or cost.

Return on investment (ROI): A measure of a project’s expected return in percentage terms. ROI is calculated by dividing

net benefits (benefits minus costs) by costs.

A NOTE ON CASH FLOW TABLES

The following is a note on the cash flow tables used in this study (see the example table below). The initial investment

column contains costs incurred at “time 0” or at the beginning of Year 1. Those costs are not discounted. All other cash flows

in years 1 through 3 are discounted using the discount rate (shown in the Framework Assumptions section) at the end of the

year. PV calculations are calculated for each total cost and benefit estimate. NPV calculations are not calculated until the

summary tables are the sum of the initial investment and the discounted cash flows in each year.

Sums and present value calculations of the Total Benefits, Total Costs, and Cash Flow tables may not exactly add up, as

some rounding may occur.

TABLE [EXAMPLE]

Example Table

Ref. Metric Calculation Year 1 Year 2 Year 3


the total economic impact™ of the blackbaud …...the following fundraising channels: us mail,...

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