Shared Back-Offices in the Cloud: Three Models for Organizations to Pool Resources (Findings and Case Studies)

Report published August 21, 2012 in IT Staffing, NPTech Community, Software

[Editor's note: The following is an article written by Laura Quinn, Idealware, based on research conducted for NTEN regarding the ways organizations can shift valuable resources towards their mission when they harness cloud technology to facilitate back-office collaboration. You can read the individual case studies in addition to this article, which summarizes our findings. We thank the team at Idealware for helping us conduct this research, and Google for supporting the project.]

Most nonprofits have at least one thing in common, regardless of their missions: they need to provide a secure, reliable technology infrastructure that allows staff to carry out the day-to-day work. But budget and staff constraints often make it a challenge for organizations to find and provide optimal solutions to technology needs—especially smaller ones. How can they best provide the right software and hardware, the training to help staff understand how to use it effectively, and the technical support to keep it running smoothly?

In an earlier article in this research series, we showed that “outsourcing” traditional Information Technology functions to solutions hosted in the Cloud allowed organizations to better focus limited staff resources on mission-related activities. This is especially true of distributed organizations with multiple offices or staff, where a more traditional IT solution might have historically required support staff in each location.

But might it also be true for unrelated organizations? Sharing infrastructure between multiple organizations is the logical extension of this idea. Regardless of mission, nonprofits often have basic technology needs that overlap, including office productivity software, email platforms, accounting and payroll, data backup, and donor or fundraising databases. If parts of that infrastructure could be consolidated, could they streamline their efficiency and shore up infrastructure while freeing up resources for mission-related activities and staff?

We talked to a few organizations doing just that to see just what functions they’re sharing, and how it works. We identified three possible models for sharing back-office functions, explained in further detail below. You can read the case studies for four of the organizations we talked with in the case studies section of our site.

Sharing One System Across Organizations

In this model, a number of organizations share access to a single, specific resource—say, a shared constituent database, or a particular type of software. This can be a compelling way to gain strong functionality while saving money, as multiple organizations can pool funds to purchase something none of the individual organizations could afford on its own, and reduces the staff needed to maintain the system. It does, however, typically reduce each organization’s ability to tailor the system to its own specific needs. While many systems will allow different organizations to wall off their data and information from other organizations, not many will allow each to have an entirely different configuration.

The Theatre Alliance of Greater Philadelphia is a good example of this model, using the Tessitura arts enterprise software system. Members of the Theatre Alliance can join the PhillyTheatreTix Consortium to use the Tessitura system to manage their own ticketing needs. For the most part, each member’s database access is limited to its own ticketing clients, but the system also allows the organizations to share specific ticketing data with other Alliance members to facilitate collaborative marketing and customer service.

Another example is Environment America, a federation of state-based, citizen-funded environmental advocacy organizations, which uses the hosted Drupal open source Content Management System to manage the 61 websites of the 501(c)3 and 501(c)4 organizations in the federation. The look and feel of each website is the same, and updates to the software, shared content or design can be implemented to all sites at once, but each organization can update its own local content as well.

Jesse Littlewood, Director of the Web Presence Department of the Public Interest Network, a network of environmental groups to which EA belongs, led the project to find a better shared solution.

“It really comes down to stretching our member dollars as far as they can possibly go,” he said. “We want to devote the vast majority of the money given to us toward our program work, so it’s definitely efficient and cheap to do this model. … Now, as we find more effective ways of communicating with members and the public, we can make those changes, and if we want to redesign our websites, we only have to do that once.” (See the Environment America case study for more information.)

Pooling Back Offices

"When you think about the day-to-day of running an organization, having infrastructure in place and staff to support that—it absolutely freed us up to focus on our missions.”
--Katrina Craven,
Hunter Museum for American Art

If multiple arms of a single organization can share resources, why not unrelated organizations? In this model, multiple organizations rely on a single provider of back office services and functions.

One example of this is the Connecticut-based Technology Solutions for Nonprofits, or TS4NP, a nonprofit which provides other area organizations with standardized, hosted office software and data storage and backup for a nominal monthly fee. The services are hosted by a local university and maintained by TS4NP’s single employee, who works with university student volunteers.

“You had all this back office that was just repeated over and over again, and all these techniques that were repeated,” said board member Howie Berger. “We’ve taken the burden of the back office from them, and given them the ability to access their data and do reporting for funders and for their boards.”

Essentially, the goal is to remove the unnecessary obstacles nonprofits face that prevent them from fulfilling their missions. The same need led to a collaborative partnership in Chattanooga, TN, when two smaller museums—the Hunter Museum for American Art and the Creative Discovery Museum—turned to the nearby Tennessee Aquarium for help.

The aquarium’s larger staff provides human resources, IT, marketing, and finance and accounting support for a fee. The collaboration was an early example of a shared back office—the museums first began working together in 1995.

“In many ways, it did allow us to stop worrying about certain things,” said Katrina Craven, director of marketing and PR at the Hunter Museum for American Art, “and not just on the IT side, but accounting and finance, too. When you think about the day-to-day of running an organization, having infrastructure in place and staff to support that, and always being concerned about whether we’re doing this the right way—it absolutely freed us up to focus on our missions.”

Cost and time savings are considerable, and sharing resources led all three organizations to begin collaborating together on fundraising events and exhibits. (See the TS4NP and Chattanooga Museum Collaborative case studies for more information.)

Outsourcing Back Office Functions

The third model we identified resembles the second, but back office functions are outsourced to a third party or consulting firm managing similar functions for other organizations.

An example of this is the rapidly growing nonprofit 50CAN, the “50-State Campaign for Achievement Now,” which maintains a national headquarters in New York City and state-level organizations, or “CANs,” in seven states, with more on the way. 50CAN hired Sinu, a contract IT consulting firm, to facilitate Cloud-based back-office services provided by staff at the national headquarters for all the state CANs.

Much like TS4NP and the Tennessee Aquarium in the second model, Sinu provides similar services to other organizations, but in this model those other organizations are “invisible,” and there’s no collaboration.

“It doesn’t make sense for small organizations like 50CAN to devote any more time or staff to managing infrastructure than they have to,” said David Owen, a founding partner at Sinu. “It’s inefficient, it’s reactive, and frankly, it’s ineffective. Now they can have conversations about the strategic visions of the organization rather than talk for three hours about why this email wasn’t delivered.” (You can see more details about this model in the 50CAN case study.)

Does A Shared Back Office Make Sense for You?

Technology—Cloud technology, to be precise—helped make the sharing model possible, but the technology itself was not the goal. In each case, the goal was to eliminate the back-office hurdles.

In each of these models, organizations have found a way to share services to prevent duplication and streamline operations. Technology—Cloud technology, to be precise—helped make the sharing model possible, but the technology itself was not the goal. In each case, the goal was to eliminate the back-office hurdles that can distract smaller organizations and drain their resources and staff time away from mission-related work by avoiding duplication.

Would sharing back office technology make sense for your organization? It can be a compelling model, but it’s not trivial to implement. There are a number of considerations to think through to help you determine whether it might be a good fit.

  • What will be required to start up? A lot of the time and costs involved in sharing a back office are incurred before seeing any benefit. Before Environment America could support its 61 affiliate websites, it needed to build a website structure that was considerably more complex than it would be for any one organization. And even outsourced back offices have startup costs—for instance, before 50CAN could be entirely supported, it had to transition its existing systems to Sinu-managed systems. Think carefully through the staff time and investment required to get shared services under way.
  • What will the long-term savings be? For many organizations, the most compelling benefit of sharing back office technology is potential cost savings. It’s important to actually estimate this savings, however, and understand where it will come from as opposed to simply assuming it will be there. List out the costs you can be sure of eliminating—for example, hardware and software you will no longer need. Estimate monthly savings in staff time as a result of no longer having to maintain and support that infrastructure. Be sure to weigh all the costs of the shared back office, too, including the money you will invest in the new model and the cost of staff time to manage the relationship and resolve any issues between your organization and the shared infrastructure provider.
  • Do you need complete control and flexibility? By necessity, sharing back office infrastructure with other organizations means surrendering some control and flexibility. You’ll need to work within a model that also works for other organizations, meaning there are likely to be occasions when your organization cannot do exactly what it wants to. Unless your organization’s needs are unique, this isn’t likely to be prohibitive, but you should adopt the model with your eyes open—are your executive management and board aware of what the limitations might be, as well as the upsides and cost savings? On the other hand, be careful not to over-prioritize the importance of doing things the way you’ve always done them. Standardizing processes to a set of well-established cross-organization best practices might be a substantial benefit in the long run.
  • Are all the partners strongly committed? Moving infrastructure into a shared model is a long-term proposition. It may well take a year or more to recoup the costs of transitioning, so it’s important to ensure that the partnership or vendor relationship you’re entering into is stable for the long run. Are all the parties involved clearly committed and in it for the long haul? If you’re partnering with several other organizations, weigh the risk if one of them pulls out. If the whole model will fall apart if one organization changes its mind, you’ll want to consider binding legal commitments—otherwise, the impact on your own organization could be disastrous.
  • Think about data privacy. When considering a shared infrastructure, many organizations have concerns about the privacy of their data. Will other organizations have access to your accounting records? Your donor list? It’s certainly worth thinking this through and making sure appropriate safeguards are in place, but it’s not likely to be a prohibitive issue. Many organizations already outsource bookkeeping to accounting firms, or allow fundraising consultants access to donor lists—these are equivalent models in which one person can have access to many organizations’ data. In a shared infrastructure model, as in these consulting models, make sure it is clear what actions are and are not appropriate for your data, that you can trust the third party to abide by those guidelines, and can fall back on legal remedies in the unlikely chance that someone violates them.

The shared infrastructure model itself is not new. Organizations in shared spaces regularly share things like conference rooms, facilities and printers to cut down on overhead, but with the rise of Cloud-based solutions, the model can more easily be extended to include data systems and cover geographically distributed areas. It would have been extremely difficult both logistically and financially for a distributed organization to exist just four or five years ago in the way it can today. We’ve seen how Cloud solutions can help individuals through simple measures like remote backup and file access, and in our last study on the topic of cloud software for nonprofits, we looked at how they can allow IT staff to focus more on big picture issues instead of spending all their time dealing with server maintenance or other data closet crises. As Cloud solutions make it easier for organizations to exist “virtually,” with employees and offices spread out across the country or the world, it seems likely that shared back-office solutions may become more commonplace—both as a means for a single organization to maintain multiple arms or locations, and as a collaborative measure among unrelated, noncompeting organizations.

Several of the people we spoke with echoed each other’s thoughts on this approach and what it can mean to smaller nonprofits with limited staff and budget. “They shouldn’t be doing this stuff,” Howie Berger said. “They don’t know how, and they should be focusing on their missions.”

Taking the burden of managing the back office away frees up staff and budget for mission-related work, helping them focus on their day-to-day work more easily and more effectively. “It seemed that straightforward and simple when we began,” Katrina Craven said of the Chattanooga Museum Collaborative, “and it’s been very effective. No bumps in the road.”