Mar 21 2023

Where Are Nonprofits on Their Digital Transformation Journeys?

A new report reveals that some are further along in adopting cloud computing than others.

Cloud computing has benefits for many industry sectors, but it is particularly valuable for nonprofits, which have numerous technology needs.

But not all nonprofits are embracing digital transformation at the same speed or in the same way. In fact, a two-part analysis recently released by Amazon Web Services (AWS) highlights just how much nonprofits differ in their digital maturity. The findings include a data report and a nonprofit survey; both reveal how nonprofits can more effectively reach their ambitions through cloud infrastructure.

Tech Maturity: Why Large Nonprofits Outpace Smaller Organizations

The survey included 717 technology decision-makers from a variety of fields, mission statements and revenue scales. Two hundred respondents are at annual revenue levels under $1 million, and more than 300 respondents have revenues above $10 million.

The findings revealed that smaller nonprofits were, on average, slower to join the digital conversations, in part because of limited resources to invest. Meanwhile, larger nonprofits are better equipped to deploy the cloud in various capacities and with more effective outcomes. As a result, these nonprofits can embrace more forward-thinking technologies, such as data lakes and machine learning.

Despite this gap, there is real potential for smaller nonprofits to take advantage of cloud computing opportunities, says Allyson Fryhoff, managing director of nonprofit and nonprofit health at AWS.

“One of the advantages of moving to the cloud is that nonprofits with limited resources don’t have to make large upfront investments in hardware or spend time and effort managing that hardware in order to begin their digital transformation,” Fryhoff says. “Instead, organizations can provision exactly the computing resources they need to power their organizations and keep focus on the mission.”

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Fundraising vs. Operational Efficiency: Nearly Equal for Nonprofits

For many nonprofits, weighing improved efficiency and increased funding is complex. In fact, the two priorities are tied, according to the AWS survey: Increased donations or revenues were cited as a top priority by 44 percent of respondents, and improved efficiencies were cited by 43 percent. Nonprofits are asked to manage both in their balance sheets.

Luckily, digital transformation makes room for organizations to have both solutions. Fryhoff points to Share Our Strength, a charity that aims to end childhood hunger in the U.S., which has embraced a data lake solution, allowing the organization to work more efficiently while uncovering new opportunities.

"With all of their data now in one place, they are able to break down data silos and generate real-time business intelligence and visualizations to help understand specific giving trends and donor behavior,” she says.

LEARN MORE: Why the future of energy depends on innovative technology.

Digital Transformation: Turning Talk into Action

One notable finding of the study is that while roughly three-quarters of respondents have been able to integrate digital transformation into their processes, roughly a quarter struggle to do so at all. Nearly 21 percent of respondents talk about digital transformation rather than acting on it, and 4 percent rarely discuss it.

For Fryhoff, nonprofits with slower digital transformation journeys experience a combination of leadership misalignment, goal-setting delays, insufficient training and choice paralysis.

“A lot of the biggest challenges for nonprofits to move to the cloud aren't technical; they’re about people and culture,” she says.

Still, most organizations plan to move forward. Of those surveyed, 53 percent expect their cloud use to increase incrementally over the next two years, and 34 percent expect a larger increase in cloud use long-term.

DIG DEEPER: How organizations can pave the way for digital transformation.

Who’s Leading the Conversation?

The report also breaks down where different types of nonprofits fare on digital adoption. Mature nonprofits are at the stage of “innovating and accelerating,” intermediate nonprofits are at the phase of “launching and learning,” and less mature nonprofits are just “embracing and embarking” on their respective journeys. For each stage of adoption, there’s a slightly different nonprofit technology that might work best.

Finding the right technology solution depends a great deal on who is driving technology decisions. The IT department is the backbone of every organization, and this team is particularly influential, especially for nonprofits at the “innovating and accelerating stage.” In the next one to two years, 47 percent of these kinds of nonprofits expect to markedly increase their spending in digital transformation tech.

For nonprofits who are “embracing and embarking” on cloud adoption, the IT team shares the responsibility with the CEO or executive director and the fundraising development team. For the respondents in this category, “60 percent expect to see a small increase in spending on digital transformation.”

Fryhoff says it’s important to see cloud computing as a cultural change and suggests that a common pitfall of cloud implementations is not engaging stakeholders throughout the organization.

“That’s because the cloud is more than traditional technology infrastructure,” she says. “It’s transforming entire organizations and industries and positively changing organizational models. Cloud helps solve organizational challenges, not just tech challenges.”

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