Most Nonprofits Are Investing More in Software than Hardware, Study Shows

Just like in the business world, larger nonprofit organizations tend to invest more in technology than smaller ones. However, when measured per staff member, the difference isn’t that great.

Most nonprofits are spending more on software than IT hardware, according to the Nonprofit Technology Network’s 10th annual “Nonprofit Technology Staffing and Investments Report,” which comprises data from more than 250 organizations (NTEN is the membership organization of nonprofit technology professionals). The report provides a snapshot of how nonprofit groups are investing in IT.

Nonprofits often have tight budgets, and data about their IT spending habits offers a window into their priorities and what they care about in a shifting technology landscape.

What Are Nonprofits Spending Their IT Budgets On?

In the taxonomy of the report, small organizations have total budgets of less than $1 million. Medium-sized nonprofits have budgets of between $1 million and $5 million, large ones have budgets of between $5 million and $10 million, and very large organizations have budgets above $10 million.

NTEN also breaks nonprofits down into other categories:

• Leading: These nonprofits are innovators that recognize that technology is an investment in their mission, and the organization’s leadership integrates IT decisions with organizational strategy. Technology-responsible staff are involved in overall strategic planning. These nonprofits explore new tools and approaches to ensure their IT is up to date and it’s serving the needs of the organization and community.
• Operating: These nonprofits say they keep up with IT, have stable infrastructure and a set of tech policies and practices. Their leadership team makes technology decisions based on standard levels, according to industry/sector information, and gathers input from technology staff or consultants before making a final decision.
• Functioning: These organizations keep the lights on and have basic IT systems in place to meet immediate needs. Leadership makes technology decisions based on efficiencies, with little to no input from staff or consultants.
• Struggling: These nonprofits report a failing infrastructure, and say their technology time and budget generally go toward creating work-arounds, repairing old equipment and duplicating tasks.

According to the report, the larger the organization, the larger the IT budget. Very large nonprofits spend an average of $235,445 on IT; large ones spend $101,064; medium-sized nonprofits spend $45,184; and small groups spend $7,595.

However, the report notes that “looking more closely at the ‘per staff’ value of investment is often more useful than looking at the average per overall size category.” For IT budgets, the per-staff budget amount “tightens up across all the size categories.” Very large organizations actually spend less on tech per staff member than medium and large organizations, and they have a tighter range of budget-per-staff averages.

Very large nonprofits spend an average of $3,081.23 on IT per staff member. But large and medium-sized organizations spend more per staff member — $5,016.32 and $3,468.11, respectively. Small nonprofits spend an average $2,127.45 on technology per staff member.

When it comes to technology’s slice of the nonprofit’s overall budget, small organizations spend the most on IT — 13.2 percent on average. Medium-sized nonprofits spend 4.8 percent, large ones invest 2.8 percent and very large organizations spend 1.5 percent.

Not surprisingly, leading nonprofits spend the most on IT in terms of dollars. Struggling organizations, which need to constantly troubleshoot tech issues, spend more than operating or functioning organizations.

What are they actually spending money on? It’s largely software, IT hardware and networking. For the first time, three out of four size groups (very large, large and medium) spent more on software than hardware.

Very large nonprofits spend the most, in dollar terms, on software, networking, IT consulting and hardware. Large ones spend the most on consulting, outsourced IT services, software and hardware. Medium-sized nonprofits spend the most on software, consulting, hardware and networking. And small ones invest most on hardware, networking, outsourced services and software.

How Nonprofits Approach IT Staffing and Training

Like in the business world, larger nonprofits have more staff members devoted to IT functions than smaller ones.

On average, very large nonprofits have 10.2 IT staff members (supporting 35.9 employees each). Large groups have 3.7 IT staff members on average (supporting 15.6 employees each), medium-sized nonprofits have an average of 5 IT staffers (supporting 13 employees each), and small organizations have just 3.1 IT staff members on average (supporting 4.8 other employees each).

“Not surprisingly,” the report notes, “the larger the organization, the more tech staff in all categories; smaller organizations, however, have a much lower tech-to-staff ratio. This is a useful metric for benchmarking. It can offer a more exact comparison since your staff size may give you a clearer sense of your actual technology needs.”

Notably, the more robust the technology adoption level, the larger the number of tech staff a nonprofit has on average. Leading organizations have sufficiently more tech staff, and the ratio of the number of employees they each support is lower than that of operating organizations. Leading organizations have an average of 8.3 IT staff members supporting an average of 20.4 other employees (2.46 per IT staff member), while operating organizations have an average of 6.6 IT staffers supporting 28.2 other employees (4.27 per IT staffer).

Given the importance of training for success in any enterprise, it is not surprising that well over half of respondents always (20 percent) or often (36 percent) perform technology training for all staff members. Thirty-one percent do so occasionally, while only 12 percent do so rarely or never. NTEN notes that technology effectiveness correlates strongly with training.

Additionally, NTEN reports that 56 percent of respondents provide funding for technology-specific training, and there is a significant correlation between that funding and how well the organization uses IT.