Enabling Technology Funding
Helping grantmakers understand the
importance of technology to NPOs
Information is the fuel for civil society. It empowers
decision-making and enables action across the range of human
endeavors. Information technology wields enormous power to advance
nonprofit missions, and the key component of building and
maintaining social capital lies in collecting, storing, analyzing,
and distributing information.
However, the majority of nonprofit leaders and grantmakers have not
yet embraced and acted on these facts. We hope that this position
paper will help grantmakers understand the necessity for a shift in
attitude. Further, we hope it will give grantmakers the tools they
need to evaluate that aspect of funding requests that concerns
In this document, we address the role of information management in
the nonprofit sector and examine four obstacles to incorporating
technology into the funding mechanism. Our goals are the following:
- to encourage involvement with and acceptance of technology as
a key component of organizational capacity and accountability.
- to provide guidance for grant makers and grant seekers;
- to identify topics for continuing education, discussion, and
We advocate that grantmakers and funders include an information
technology component in their guidelines. Further, we propose that
funders develop a common terminology and a common set of standards
that will contribute to a consistent evaluation protocol for
technology requests. We encourage grantseekers to participate
enthusiastically in this process and to contribute to the dialogue.
Nonprofits face increasing demands for information from internal
sources such as management and boards and from external sources such
as grantmakers, regulators, media, and individual donors. Nonprofits
must include service statistics to document their effectiveness, and
they must be fully accountable to funders about their mission and
their finances. While technology is not the only answer to requests
for information, it’s an important part of the answer. Information
technology must be built into every nonprofit’s approach to funding
requests and into every grantmaker’s expectations.
Furthermore, for nonprofits to communicate effectively with current
and prospective stakeholders, they must also embrace new
communications technologies. For example, everyone understands the
importance of the World Wide Web, especially when integrated with
other publications. Another example is email, which can be used as a
tool for recruitment as well as for retention and fundraising.
Calling the Question
If few would argue these beliefs, why is it so hard for nonprofits
to articulate and satisfy their own technology needs? And why are
grantmakers reluctant to make technology-related grants? We suggest
The absence of models for technology components in proposals
First, there is a dearth of models for technology components in
proposals. Few funders issue guidelines for addressing technology
needs in proposals. Few tools are available to help program officers
evaluate the contribution of sound information management to the
success of the project or organization. Without models, guidelines,
or evaluation checklists, both parties to the equation must
continually reinvent the process.
The myth of make-do
Second, many nonprofits operate according to "make-do" myths. They
operate on the conviction that they must get by with what they have
and that current technology is beyond their merit or means. Both
grantseekers and grantmakers tend to think only of the capital costs
of technology, ignoring ongoing soft costs, such as how much staff
time they must invest in planning, implementation, and training.
In addition, nonprofits often fail to understand the difference
between technology funding as an investment and technology as an
ongoing cost of doing business. Because foundations and nonprofit
staff members seldom understand the rules of thumb for how to budget
for technology, grant requests are often inaccurate at both extremes
-- not large enough on the one hand to cover the true costs of
technology, or too expensive on the other in relation to the
Accountability without tools
Third, while foundations increasingly require greater
accountability, they are not specific about how to meet these
requirements. In effect, do not raised the bar but not yet
identified how to leap the hurdle. In many cases, foundation staff
members do not acknowledge that meeting these higher standards
carries a price tag.
Demanding greater accountability from grantees is a positive step
that gives foundations a means of evaluating the impact of their
investment in the community. However, this higher level of
accountability represents a significant shift in how many nonprofits
conduct business and places greater emphasis on record-keeping and
evaluation. Although a dollar buys less service under this model, it
allows funders to better evaluate the societal return on investment.
Fourth, we contend that information technology is poorly understood
by grantseekers and grantmakers alike. This situation often results
in hesitation, avoidance, and over-reliance on vendors, consultants
and sometimes a nephew’s opinionated roommate. Technical illiteracy
is a pervasive problem that must be articulated and addressed. Until
that happens, including technology in funding considerations will
continue to face special difficulties.
Making the Case for Technology
We can no longer afford to remain silent about technology in funding
guidelines. It is not enough to assert that technology is important
to the nonprofit sector. Some specifics are called for. In the
for-profit sector, technology is used to speed up and increase the
capacity of traditional processes (bigger, better, faster) and to
accomplish new tasks (e.g., 24/7 information and referral on the
Web) that would otherwise be impossible.
The nonprofit sector can benefit from the same applications of
technology. The following examples show how technology can impact
program functions, administrative tasks, and fundraising. Some of
these are obvious while others are intended to encourage thought and
Looking at key sub-sectors and critical nonprofit functions
The human service environment depends on case information to meet a
range of agency needs. Caseworkers need a way to plan and record
care information for new intakes and for cases transferred to them
from other workers. Case records develop a life of their own, and
prior care history is critical to understanding where clients have
been, as well as where they are going.
The watchword for line workers should be "documentation is service."
Once information has been entered, once it is available for reuse in
court reports, evaluations, progress tracking and other sifting and
sorting chores. Given the complexity of case record requirements
today, such tasks are impossible in a paper-only case record.
A robust case management system is vital in identifying cases that
exemplify best practices, as well as those that require supervisory
intervention. And an electronic client management system allows an
agency to bill and be reimbursed in a timely fashion for services
provided under contract.
Arts and cultural organizations often have diverse constituencies.
Keeping a record of the interests and past participation of
constituents including individuals, families, corporate executives,
schools, and clubs is essential to the right mix of programs and
services. Expectations are high, and today a host of commercial
providers from Internet booksellers to the corner grocery store are
collecting information about consumers and their purchases in order
to create and market products and services. Similarly, nonprofits
are expected to offer a high level of personalization. Those that
survive are those that can personalize cost-effectively.
Information is at the center of communication and advocacy as well.
Organizations that can develop an integrated communications strategy
combining content with multiple delivery vehicles will be better
able to have their messages understood than those that offer their
services through single channels or in markets that are
long-abandoned. Today’s new communication channels are not the only
valid venues for discourse. The most successful organizations are
those that meet their constituents wherever they may be, whether by
flyers tacked to neighborhood telephone poles or via direct mail,
email, or the Web. Information technology plays a role in each of
Education and healthcare organizations traditionally incorporate
sophisticated information management as part of their basic business
models. Technology is changing the face of services and enabling
these organizations to compete with entities from the for-profit
sector. These for-profits use technology as a way to deliver more
customized services at lower cost, and they frequently pick the
low-hanging fruit by focusing on activities with the highest profit
margin while ignoring hard-to-serve populations.
Local providers can be left without a cushion of revenue-producing
services but with an increased workload made up of students and
patients considered least profitable in terms of their dollar
return. These issues are even more critical for smaller
organizations. Distance learning and telemedicine technology use the
communications infrastructure to meet people’s need for expertise,
skills, and ideas regardless of their physical location. All these
factors directly benefit the community.
Administrative and fundraising functions are experiencing the same
technology revolution as in being changed by the for-profit sector.
Human resources and finance in particular are undergoing radical
changes as the use of technology rises rapidly. A range of tasks
from advertising available positions to tracking applicants to
administering employee benefits increasingly contain an electronic
Fundraising has a long tradition of automation. The Internet lets
organizations connect with donors and prospects at narrowly targeted
levels, and it enables donors to contribute electronically. A
connection via the Internet can give donors a clear picture and
broaden their understanding of an organization’s mission, and it can
heighten the level of trust between donors and organizations.
Models for Guidelines and Proposals
The integration of technology into foundation guidelines has two
focal points. First is the assertion that information is a dynamic
almost organic resource, and because of that, information technology
in an organization is a significant and recurring expense. Second is
that the principles and standards that pervade corporate technology
planning and decision-making should be extended to the non-profit
Technology is a significant and recurring expense
The first rationale for the inclusion of a technology component in
grantmaking is that information technology is part of the basic
infrastructure of an organization. The sector has tended to think of
all technology as a special expense, not part of ongoing operating
budgets. In preparing agency budgets, executives have resisted
designating line items for technology upgrades, maintenance, and
To use technology effectively, nonprofits must budget for day-to-day
technology expenses the same way they do for postage, photocopying,
and other operational needs. Understanding the direct costs of any
activity is an important managerial tool. Including technology and
appropriate information management expenses in the calculation
improves coordination, strengthens planning, and helps insure
At the same time, some initiatives use technology to do things that
would otherwise be impossible. Changing business practice, such as
more intensive vouchering or an invoicing requirement, often
requires initial capitalization of new information systems. A
community technology center designed to bridge the digital divide
will be largely a technology project. Similarly, major systems
planning, along with significant upgrades or additions to
organizational capacity, qualify for special funding. In these
situations, a major part of the funding request may involve
capitalizing the technology investment.
Few would argue that technology is a major part of every activity in
the sector. Yet many projects or programs do not require a whole
computer and therefore will not require a hundred percent of a
computer’s cost allocation. One reason that computers are such
powerful multipurpose tools is that they need not be dedicated to a
single task. A single computer can store and process data from
multiple software applications for multiple projects. While every
proposal should contain a technology component, it does not
necessarily follow that every project requires dedicated hardware.
Program officers should keep this fact in mind while still realizing
that every project has information management costs.
Adapting corporate technology principles
Technology planners in the corporate sector operate under accepted
business principles or laws. These principles offer a baseline for
calculating the cost/benefit ratio of networking, hardware
replacement and the point of diminishing return for technology
investment. They include:
Moore’s Law (named after Dr. Gordon Moore) is a manufacturing
benchmark for predicting the rate of advancement for chip speed and
cost. This law, which has been demonstrated as true for more than 25
years, postulates that computer speed will double every 18 months,
while the value of existing computers will drop by one-half. An
important implication of Moore’s law is that computers are
essentially obsolete within two years of purchase. A key component
of effective operations is adequate hardware, which we define as
computers less than 36 months old. Moore’s law is a compelling
argument for replacing hardware on a regular schedule.
Metcalfe’s Law (named after Bob Metcalfe) concerns the value of
information. Not as easily quantified as Moore’s law, Metcalf’s law
states that the value of information increases exponentially with
the number of computers connected to a network. A document on the
local hard drive of a single computer is useful only to the user of
that computer; but, when readily available to all the staff members
of an organization, the document may well be the essential
just-in-time piece of information needed to make a decision.
Formulated prior to the widespread use of the World Wide Web,
Metcalf’s law was one of the major justifications for corporations
to install Local Area Networks (LANs). The rapid migration to the
Internet for personal, business and nonprofit applications
resoundingly affirms this principal. Metcalf’s law is a powerful
argument for both LANs and Internet connections in the nonprofit
sector. Yet increasingly it raises issues of privacy and
confidentiality as information becomes more accessible.
Less widely discussed than the previous laws, the Cost Complexity
Curve states that the cost of a project will increase exponentially
with its complexity. In other words, the cost of a technology
project grows at a rate much faster than its functionality, and
small increases in the complexity of a project can escalate costs
dramatically. The cost/complexity curve is the major reason why so
many technology projects go over budget -- those small enhancements
to scope, unforeseen in the original plan, drive costs up the curve.
The organization’s staff members often fail to understand the cost
implications of these enhancements and almost always advocate for
including them regardless of cost.
While the cost/complexity curve is the best-case representation of
the relationship between price and functionality, it is certainly
possible to pay for more than you get. For the program officer, this
problem increases the challenge of assessing the cost-to-benefit
ratio of a proposal. Two comparable and competing proposals can
carry vastly different price tags based on slight differences in
Information management is a significant component of any nonprofit
activity, and funders should insist that grantseekers include a
sound technology plan. That plan must be sustainable and able to
leverage new technologies, must make information accessible both
internally and externally, and must balance costs and manage risk.
Evaluating Technology and Effectiveness
Everyone nods in agreement that technology can benefit the nonprofit
sector. All too often, however, those nods turn to head shaking as
program officers struggle to make sense of technology requests. The
best technology changes daily, and keeping up with options, pricing,
and opportunities is a full-time job. How can program officers
adequately consider the technology component of proposals?
Our advice first is to keep the process program-driven and never
lose sight of the project’s goals and outcomes. The fundamental
question remains: "Is the cost worth the outcome?" Factors such as
technology evolution (Moore’s Law), the value of information sharing
(Metcalfe’s Law), and the relation of cost to complexity will
establish a baseline for what’s reasonable. That baseline may seem
high, but it is often a cold reflection of the true cost of doing
business. Time and experience will help program officers refine
their sense of appropriate technology costs.
When technology costs are too high in relation to the impact of the
proposal and in comparison to similar projects, program officers can
advise grantseekers to reduce the scope of their technology in the
same way that they recommend adjustments in any proposal. However,
the technology specified may be appropriate to the level of
information management required and the only way to cut costs is to
reduce the proposed level of information gathering, analysis, and
While there are no satisfactory guidelines for what program outcomes
should cost, it is possible to develop internal measures for
comparison. Some program officers establish a base cost per person
by comparing the ratio of constituents served to the total project
cost. Others use the cost of technology per worker as a measure. The
values determined in these exercises are less important in
themselves than they are in comparing similar proposals.
The hard part in comparing proposals occurs when technology costs
are in line between similar projects. In these situations the cost
of service, whether measured by worker, client, or some other metric
will not show any clear winner. The challenge then is to determine
whether the proposed technology plan is the most effective way to
The first and by far best indicator of success is usually an
organization’s prior experience with technology in the proposed
area. Innovations built on experience are more likely to work than
new initiatives. Organizations that are familiar with the problems
being addressed and how the technology tools fit into the solution
typically do a better job than agencies that start from scratch.
That is not to say that new applications of technology to nonprofit
endeavors should not be funded. It simply means that these areas
carry a greater risk of failure.
Second, funders should be alert for lessons learned by individual
program officers and grantees regarding technology grantmaking. They
should also be prepared to share their own outcomes, both positive
and negative. The possibility that a project will fail because it
uses innovative technology should not disqualify it from
consideration -- especially if the lessons learned can help other
grantees or the sector avoid similar problems in the future.
Third, look at past performance. Be alert for signs that the agency
may be trying to solve fundamental management problems with magic
computer pills. While advertising encourages us to believe that
business problems can be solved by purchasing new hardware and
software, this is seldom the case. We urge funders to investigate
carefully any proposal from a technologically inexperienced
organization that requests new information management capabilities
yet fails to explain how change will happen within their
Fourth, develop reliable independent resources. Among these might be
individuals who are technologically savvy, staff members at
tech-smart companies and organizations, trusted colleagues at
colleges and universities, and the professionals at the IT Resource
Center or similar nonprofit technology experts. Foundation board
members, particularly when they have professional links to IT-
intensive industries such as insurance or financial services, may be
willing to volunteer their staff members to serve on a technology
Do not assume that the foundation’s MIS staff members will help.
They already perform an important function that is different and
separate from the program staff, and it may be unwise to presume
that they have the time, the willingness or the expertise to
Assessing Information Management in an Organization
Specific components to assess in a proposal include:
Effective planning should extend well beyond shopping lists and
installation timelines. At its best, planning should include
discovering the most effective combination of human, financial, and
technical resources to achieve the proposed goal. The best
technology plans are filled with questions as well as tests to
answer those questions. A key reason for failed technology is lack
of planning, particularly in testing assumptions and piloting
projects before full implementation. Piloting a project with end
users provides valuable insight into how things work in the real
world and the time the project will actually require. Program
officers should be wary of plans that do not allow for adjustments
based on lessons learned from test outcomes.
The sustainability of technology becomes a key factor in the overall
sustainability of the proposed project. As applicant organizations
develop sophistication in creating and upgrading technology budgets,
their income streams develop apace. Technology needs on the whole
should fit into the organization’s overall budget; but major
expansions in service will often require substantial and costly
upgrades in infrastructure, which require major funding.
A fully articulated infrastructure includes a training component.
Training should be integrated with operations at all levels of the
organization. Training increases the value of employees and insures
that the organization will function at an optimal level. It can also
contribute to staff retention. Among the questions to ask:
· Is there a proposed articulated training component?
· Is the training ongoing?
· How closely would training adhere to budget?
Training must continually be reassessed to make sure it accommodates
changes in technology and human service?
Technology needs are as legitimate as any other category of business
expense. The proposed budget should reflect the actual need, just as
in any function of an organization. The watchword here is
appropriateness. For grantmakers, best practice requires familiarity
with costs and the ability to easily find resources that will
facilitate an appraisal of the proposed line items. Agencies that
subscribe to the myth of make-do will underestimate the role of
technology, but it is also possible to overuse or overstate what
technology can accomplish.
Managing information requires a significant commitment of resources.
Money is almost always first on the list of needed resources, but
staff time for learning, changes in business plans and operations,
and technical support skills are also important. A good technology
plan acknowledges the full range of financial, human, and
organizational resources that must be committed to help a project
succeed. The plan also should specify whether the resources are
internal to the organization, such as a
network administrator, or will be outsourced to a contract
worker. Nonprofits do not need every technology skill within their
own staffs, but they do need the means to access these skills and
services as needed.
Advice to Grantseekers and Grantmakers
Guidelines for grantmakers
Grantmakers must provide guidelines on technology funding that are
clear and fully articulated. They should spell out whether they will
accept technology projects on their own or how to present the
technology components of any project. They should be specific about
what level of detail to include in proposals, and they should
incorporate realistic time frames between proposal approval and
actual implementation. Guidelines must indicate the level of detail
expected in budgets. Funders should specify any requirements for a
training plan and an upgrade plan, along with a budget for
technology maintenance sufficient to indicate whether the planned
project or operation meets the organization’s expressed needs.
We recommend proceeding with caution because no technology is free,
and technology is an ongoing cost, not a one-time expense. Donated
technology - especially hardware - is usually available because it
is no longer useful to the donor. Why then would it be useful to a
Of the four impediments to technology funding cited at the beginning
of this paper, the most difficult to address is the last: The lack
of understanding by grantseekers and grantmakers of the power of
technology and the resulting hesitation, avoidance, and
over-reliance on outside experts.
This weakness is found most often among more senior staff members
(on both sides) whose formal education and career advancement
occurred before computer technology became a keystone of the
business world. We recommend searching out learning executive
opportunities that are designed specifically for the nonprofit and
philanthropic sectors. This learning should help individuals:
- explore and understand both the power and the limitations of
- clarify the options available today as well as capabilities on
- create a comfort zone for themselves in key applications.
These kinds of educational opportunities we envision will help
leaders embrace technology, not treat it as a necessary and
Some nonprofit certificate programs are beginning to emphasize
technology, and some computer science programs are starting to
include the nonprofit sector among their industry-focused options.
While we applaud these efforts, we would also like executive
education options to be designed for three-day immersion seminars or
weeklong camps that can accommodate busy program officers and
Technology is important to a stable and productive nonprofit sector.
Recognizing that importance in grant maker’s guidelines and grant
seekers’ applications will help that promise bear fruit.
Appendix/Related Web Resources
Grantmakers for Effective Organizations, or GEO, is an affinity
group dedicated to promoting learning and encouraging dialogue among
funders doing work in the field of organizational effectiveness.
The National Strategy for Nonprofit Technology (NSNT) is a
leadership network of nonprofit staff members, funders, and
technology assistance providers working together to analyze the
technology needs of the nonprofit sector, and to develop a blueprint
for how it can use technology more creatively and effectively and
creatively. They have proposed principles for information technology
in the sector as well as the formation of the Nonprofit Technology
Enterprise Network (NTEN).
The mission of the Alliance for Nonprofit Management is to provide
to provide leadership in enhancing a civil society by challenging
and strengthening those who deliver management and governance
support services to nonprofit organizations.
ONE/Northwest (Online Networking for the Environment) is a
non-profit organization helping the conservation community in the
Pacific Northwest protect the environment through the effective use
of electronic networking technologies. Their tool kits and
assessment forms are useful for any type of nonprofit.
NPO.net is a Chicago-area nonprofit-focused Internet resource
operated by the IT Resource Center and the Donors Forum of Chicago.
The Benton Foundation publishes an online tool kit of policy and
best practices for nonprofits using technology.
For a discussion of Metcalf’s law, review George Gilder’s paper at:
The US Department of Commerce funds technology projects through the
National Technology Infrastructure Administration’s Technology
Opportunity Program. This program epitomizes the ideal of sharing
both good and bad lessons learned.
Developed by CompuMentor, a San Francisco Bay Area technology
matching program, TechSoup.org provides news, articles, and an
information exchange around nonprofit technology issues.
November 08, 2002