Information technology: Learning to love ICT

Gary Flood

Third Sector's latest survey asked voluntary sector staff how they view information and communications technology. The results show they know what the problems are, but don't trust ICT to solve them.

Third Sector asked 300 charities about their views and expectations of information and communications technology. The results show that even in the largest organisations polled, between a quarter and a third have no technology investment plans aimed specifically at addressing what respondents claim are the big issues for their organisations. In other words, we know what the problems are, but we don't trust ICT to solve them.

"I'm not surprised by these findings," says Pete McCabe, chief executive of brain injury association Headway. "The fact of people not investing is partly due to the fact that every penny in a charity has to be seen as benefiting the aims of the charity, and ICT systems are expensive."

But for McCabe, and many like him, it's also to do with scar tissue.

"In a previous role I came in to find very substantial investment had been made in a computer system, but what was promised and what had been delivered were not the same thing," he says. "When I talked to the ICT supplier I found that any change had to be paid for with a lot of money.

I didn't get the impression these people were working in a very ethical framework, shall we say. This experience has made me very wary about technology, even more than I would naturally be as head of a charity where all expenditure has to be justified."

But McCabe also freely admits that without using modern ICT for communications, fundraising and finances, his charity couldn't operate. "We couldn't function without it, and I have no doubt ICT does provide value," he adds - a view backed up by our survey, which found that 64 per cent believe they couldn't run without ICT, while the rest say ICT provides value "in some areas but not enough". Is there a contradiction here?

The question comes down to the fact that charities just can't afford to make the kind of mistakes with ICT investment that seems, alas, all too common in the public and private sectors. Nor is it any easier in the non-profit sector to justify the cost and measure the returns as closely as we would like. A spokesperson for children's cancer charity Clic Sargent says: "It's the old problem of hard and soft benefits and how to justify them. It can be very difficult to quantify the benefits of ICT investment, but without our new centralised database and wide area network we wouldn't be in a position to move towards anything like exploiting customer relationship management."

Should we therefore blame the ICT companies - are they selling us dodgy systems? McCabe mutters darkly: "Beware slick salesmen in shiny suits."

It's a tempting justification, but could we be letting ourselves off too easily here?

Yes, thinks independent ICT consultant Peter Flory, who has worked with an extensive number of charity clients. "People say they want better financial software, better fundraising software and better membership software," he says. "But there are packages in each of these areas that sing and dance. The problem is that people don't use systems to their full capacity and they don't put enough money into training - new joiners get no training at all and are just expected to get on with it. These systems are so complex these days that extensive training is essential.

"Nor do charities put enough effort into working out just how to use the software effectively, or put the resources in to manage it when it is working," he adds. "To be fair, there are some rubbish systems around as well, but if they have one of those then it is their fault for choosing the wrong one and probably not getting good advice."

Flory claims that few charities carry out feasibility studies before selecting a system. This means they have no idea what to expect and no benchmark against which to measure the performance, so no measurements are done. "Add this to the fact that virtually every system is under-performing because people don't know how to use them properly and you have a great deal of dissatisfaction and disillusionment - all of which is completely avoidable, but which takes time, effort and money to fix. The problems with ICT come down to poor management and penny-pinching attitudes."

Westwood Forster - developer of Visual Alms, one of the most widely used fundraising and membership software packages in the sector - adds that this research confirms many of its own findings from its customer base.

"The focus always seems to be on financial, not strategic, imperatives," says its business strategy director Owen Palmer. "There's a constant stress on financial controls and how to operate more efficiently, which is valuable - but as a result ICT doesn't get a chance to show what it could do for overall operational strategy. I think these results show we're still generally in trouble in terms of ICT use.

"It may seem difficult for ICT to provide the right answers in this environment.

But this is only because chief executives may be unclear about the problems they are trying to solve."

So a clear finding of this research is that charities need to think less about how they can use ICT to solve a spot problem and more about how they could use it to further their global aims. "This research confirms our own findings that voluntary and community organisations use ICT much more effectively when they have spent time developing an ICT strategy and budget," says Nicola Thompson, project manager at the ICT Consortium, which will be running the ICT hub under the Home Office's ChangeUp initiative.

"Organisations should be wary, however, of assuming that technology is the answer in itself, because ICT as technology is only a tool to help organisations get to where they want to be."

Certainly, computer companies that sell to charities recognise the worrying trends exemplified in the survey results, and that technology for technology's sake doesn't cut it any more. Charities, like all ICT customers, want (and need) the business benefit story to be a much higher priority.

"As a supplier, I see these results as telling us we need to work much harder at producing return-on-investment studies," says Andes Loukianos, director at Third Sector's research partner, the ICT services group Touchstone-Tate Bramald. "There is a suspicion of ICT out there, and rightly so - there have been a lot of ICT disasters of biblical proportions."

Jason Nash, product manager for software giant Microsoft UK's CRM portfolio, adds: "Some of the findings relating to benefits are lower than we might have expected. What we see here is a great opportunity to help."

Do charities need help? Teresa Jones, a senior research analyst at Butler Group, the ICT analysis section of research firm Datamonitor, who normally spends her time dissecting the doings of ICT companies and the relevance of what they do for commercial firms, points out just one reason charities can't sit on their laurels. "Better use of ICT for charity marketing is something I see the need for as a supporter," she says. "Why all these duplicated mailings? Data quality is clearly an issue for some charities.

They don't seem to have grasped that money spent sorting that out could save money elsewhere on more targeted marketing. This is why CRM is of growing interest and relevance."

But Jones, echoing many other commentators, says that what these figures show is a lack of strategic focus. "I don't see enough suggestion here that ICT is seen as a way to underpin the entire charity's direction," she says. "Instead, I think it's being used too much in a piecemeal way.

Overall, I'm afraid, the grade for charities based on this research has to be 'must do better'."

For practitioners of ICT within the sector, the bitter truth is that many have to agree. David Clayden, director of strategic information at The Salvation Army, says: "I feel these results show a lack of imagination and expectation by these executives, an assumption that the answer to a range of problems is an ICT 'system' that will resolve some current issues on their desk without much further thought and involvement. ICT seems to be a 'need to have' rather than an enabler of major changes.

"But what about transforming the business paradigm used by the charity through web, internet, mobile working, business process revolution, active monitoring and management of the enterprise, and so on? Some of these come with, or are promised by, some types of software associated with the big issues identified - CRM, for example - but they are really business issues in their own right."

The verdict seems to be that ICT can be dangerous if misused, but it may deserve a second hearing from organisations that haven't used it properly before. Touchstone-Tate Bramald's Loukianos notes that many ICT problems come down to over-ambition. "There's a tendency to go for the big bang, wall-to-wall replacement," he says. "A better approach is to work on defined projects with very specific business imperatives that deliver the goods first - then build on them."

The good news is that, as a sector, charity isn't doing anything disastrously wrong. "Charities are somewhat behind in their successful use of ICT, but not that far behind, and not as far as these figures seem to suggest," argues Microsoft's Nash. "You wouldn't expect them to be on the cutting edge, and they can't afford the kind of automatic technology refresh that is common in commercial organisations every two years."

But the speed of progress does mean you can't afford to ignore the problem.

"Charities know they need to operate in a more commercial way and compete for every pound," says Nash. "ICT is going to be a major tool to help them do that."

Loukianos adds: "I see this study as a call to action for chief executives to engage with a trusted third party that can help you build a real business case and spend your ICT budget as well as you can."

That message is echoed by Nash. "Charity leaders need to find skilful partners who can help them do a real gap analysis, which will spot what is and isn't working in their systems and business processes and help them get to where they need to be. But this is a journey, a long-term process, and it cannot be achieved with one-off, piecemeal spend, no matter how big."

Database supplier File Maker's UK managing director Tony Speakman says there is a simple solution for charity chief executives or non-technical decision-makers. "When you are told you need to spend 'x', ask to see an example of where a similar organisation to yours achieved value," he says. "To generate more money for the charity, you know you might need to spend more money, but you need a trusted adviser to help you make that decision."

This Third Sector survey delivers one clear message to the charity leader: healthy suspicion of the information and communications technology industry hype has led to a lack of willingness to engage with it properly. Charities know they have to use ICT - but don't really want to. Is that still a defensible position in the wired world of 2005?

WHAT THEY SAID...

'Every charity would like a bigger budget, and every charity would like a bigger budget for ICT.' - Simon Bass, social work manager, Churches' Child Protection Advisory Service

'ICT can make or break an organisation. There is scope for ICT to make greater impact in terms of linking systems, but it is difficult within budget restrictions.' - Julie Ballard, senior manager, the Mental Health Foundation

'Over the past two years ICT has allowed us as a small charity to punch well over our weight, and what was a small charity now has international scope and reach thanks to ICT.' - Mike Rich, chief executive, APEC

COMMENT

There is an array of issues the organisations surveyed think it important or very important to solve during 2005, writes Graham Opie.

These include:

- Operational efficiency and reducing costs - Improving financial control

- Optimising relationships with stakeholders and beneficiaries

- Meeting compliance & regulatory requirements such as Sorp and Sofa

- Improving fundraising effectiveness

- Optimising relationships with the supporter base.

An ICT expert would argue that technology can play an important role in this. But is ICT already making a contribution?

ICT is widely used in the organisations surveyed. Average ICT spend is just over £40,000 per annum, with many spending more than £100,000.

However, a substantial minority seems not to be benefiting to the same extent as the rest: although 64 per cent say they couldn't function without ICT, the rest say it provides value in some areas, but not enough.

This applies irrespective of the organisation's ICT budget. If this situation persists, the organisations that are more agile when it comes to ICT will accelerate away as they address their big issues sooner and better than the laggards.

The survey also reveals a mismatch in ICT spending plans. There are three key areas where better organisation and technology would deliver improvements:

- Better financial software and processes would help manage costs, improve financial control and aid compliance

- Better fundraising software would help improve fundraising effectiveness

- Better membership software and processes would help optimise relationships with supporters, stakeholders and beneficiaries.

A huge majority of respondents surveyed say these are important or very important issues for their organisations. However, when asked what business applications investments are being planned, 43 per cent say "none", only 27 per cent say fundraising and 20 per cent say accounting or budgeting.

Even in the largest organisations, between one-quarter and one-third have no investment plans aimed at addressing the big issues.

Although about three-quarters of respondents cite fundraising and relationship management as significant organisational issues, we have shown that few plan to invest in these areas in 2005. "The results show that the sector is often more focused on immediate service delivery rather than long-term improvements to infrastructure," says Andes Loukianos, director at Third Sector's research partner Touchstone-Tate Bramald.

This apparent paradox is compounded by the fact that almost half the organisations surveyed have no fundraising software (47 per cent) or membership software (45 per cent).

On the other hand, 95 per cent of organisations surveyed told us that they use some form of financial management software.

Given the thrust of a number of the key organisational issues specified by the senior respondents we surveyed, one would expect the senior management team to be highly aware of the strengths and weaknesses of the financial management tools it uses.

But that is not the scenario the survey has uncovered. We asked for their rating of their financial management software against six core functions.

Between one-quarter and one-half of the chief executive or executive directors admit that they don't know how well the organisation's financial software supports their operations. "CEOs need to be more in tune with the needs of their organisations, and aware of how valuable financial management systems are," says Loukianos.

If 80-90 per cent of them say they want to reduce costs, improve financial control and be fully compliant, how can it be acceptable that so many do not know how well their existing systems support them in achieving these objectives?

"A mindset shift is required away from seeing IT as an administrative cost, rather than as an enabler," says Loukianos.

The organisations surveyed span the full range of sizes: one-third have up to 25 employees, one-third between 26 and 100, the remainder more than 100.

Overall, the seniority of respondents is high - 25 per cent are chief executives or executive directors, 41 per cent are senior managers and 26 per cent are managers.

- Graham Opie is the research director at ICT market research consultancy Vanson Bourne, which completed the research on behalf of Third Sector.

- Touchstone-Tate Bramald is an ICT services company that works with charities to help them improve financial control, fundraising effectiveness and operational efficiency: www.touchstonetatebramald.com.

CASE STUDY - FOREST YMCA

Forest YMCA in east London is a small charity that has seen dramatic improvements in both its effectiveness and budget use. It has made effective use of both external ICT advice - its ICT consultant James Nicola works on a voluntary basis - and a new low-cost method of sourcing and using ICT-hosted solutions (also called application service provision or ASP).

Using ASP, Nicola says, the charity has reduced its ICT spend from £200,000 to £80,000 a year and reduced the cost of individual computer units from £800 to £300. The key was a switch to Microsoft's Great Plains accounting system, sourced from ASP company NetSuite, as well as a thorough spring clean of existing ICT. "We found needless duplication and wasted resources, so we ripped it all out and started again," he says.

"Start by measuring exactly what you're spending on," advises Nicola.

"You could have a shock."

Forest YMCA's success with this approach has prompted it to work with other charities, including Raleigh International and Fairbridge, to form a small consortium that is realising cost reduction and improved efficiency by sharing computer resources.

CASE STUDY - RNIB

One organisation that has decided to invest in ICT is the Royal National Institute for the Blind. Last December it announced a £350,000 commitment to CRM, which will give it consistency of communication with supporters, as well as improve fundraising and cross-marketing initiatives, according to its ICT services manager Demis deSousa.

The charity is on track to produce a unified database that will contain all the information it has on its 12 million donors under one consistent view by mid-2005, and by 2006 this will extend to all live areas of fundraising.

"We see that the vast majority of charities are using off-the-shelf or bespoke fundraising systems, but we saw we needed something more like CRM," he says. As part of its review, his team looked at how similar systems were being successfully used at commercial organisations such as NatWest.

"A top priority for us is going to be working out the 'donor journey' as part of the process of turning low-value donors into high-value ones where appropriate," he says.

The move is the fruit of a thorough ongoing review of ICT and business processes that began in 2000 inside RNIB, says deSousa: "That really helped us identify exactly what systems we needed to put in place."

FURTHER INFORMATION

- Charity Technology Trust is a charity that aims to help other voluntary groups improve their use of ICT. See www.ctt.org Citra is a coalition of charities working together to improve access to ICT resources. See www.citra.org.uk

- The ICT Consortium has government funding to create an ICT hub for the voluntary sector. When developed, it will provide advice, guidance and practical help such as professional skills, volunteering support from ICT professionals, circuit riders and lists of accredited local suppliers and consultants. See www.ictconsortium.org.uk.

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