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A Forrester Total Economic

Impact™ Study

Commissioned By

Blackbaud

Project Directors:

Michael Speyer

Shaheen Parks

December 2016

The Total Economic

Impact™ Of A Blackbaud

Total Solution Cost Savings And Business Benefits Enabled By Blackbaud

Table Of Contents

Executive Summary ............................................................................. 3

Disclosures .......................................................................................... 5

TEI Framework And Methodology ........................................................ 6

Analysis ................................................................................................ 7

Financial Summary............................................................................. 17

Blackbaud Total Solution: Overview .................................................. 18

Appendix A: Total Economic Impact™ Overview .............................. 19

Appendix B: Glossary ........................................................................ 20

Appendix C: Endnotes ....................................................................... 21

ABOUT FORRESTER CONSULTING

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consulting to help leaders succeed in their organizations. Ranging in scope from

a short strategy session to custom projects, Forrester’s Consulting services

connect you directly with research analysts who apply expert insight to your

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forrester.com/consulting.

© 2016, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited.

Information is based on best available resources. Opinions reflect judgment at the time and are subject to

change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total Economic Impact

are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective

companies. For additional information, go to www.forrester.com.

3

Executive Summary

Blackbaud commissioned Forrester Consulting to conduct a

Total Economic Impact™ (TEI) study and examine the

potential return on investment (ROI) enterprises may realize

by deploying an end-to-end, integrated fundraising, marketing,

and financial solution from Blackbaud, which in this case

included the following Blackbaud applications: Raiser’s Edge

NXT™, Financial Edge NXT™, Luminate Online™, and

everydayhero®. The purpose of this study is to provide

readers with a framework to evaluate the potential financial

impact of the integrated solution on their organizations, to

leverage technology and related process improvements to

provide insight into donors’ behaviors and preferences,

improving their programs and services.

To better understand the benefits, costs, and risks associated with a Blackbaud solution implementation, Forrester

interviewed an existing customer with multiple years of experience using Blackbaud software, Save the Manatee Club

(SMC). SMC is using the combination of applications to manage donor information and fundraising (Raiser’s Edge NXT);

financial and accounting requirements (Financial Edge NXT); email, marketing, and online fundraising campaigns (Luminate

Online); and peer-to-peer campaigns (everydayhero).

Prior to assembling the combined Blackbaud products, SMC had multiple piecemeal solutions for various processes. These

solutions were not integrated, which led to a large number of manual processes associated with transferring data between

them; this also increased the likelihood of errors and out-of-sync information, as information was keyed directly into the

systems based on printouts. These limitations led to both inefficiencies within the organization and restrictions on the ability

to view donors holistically. With the Total Solution, SMC was able to streamline and automate processes across key

functions, including online donations, adoptions, and accounting, enabling it to use staff resources more effectively and

ultimately further its mission. As the director of strategy and operations told us: “Having an integrated solution creates a more

efficient workflow. That saves time, which saves money, which allows us to focus on our programs.”

BLACKBAUD FACILITATES INCREASED DONATIONS AND IMPROVED STAFF EFFICIENCY

Forrester’s interview with SMC, an existing Blackbaud customer, and subsequent financial analysis found that the

organization experienced the risk-adjusted ROI, benefits, and costs shown in Figure 1.1

The analysis points to benefits of up to approximately $140,000 per year versus implementation costs of around $30,000 and

annual costs of $43,000, adding up to a net present value (NPV) of approximately $157,000. With Blackbaud’s solutions,

recurring donations improved 36%, and the interviewed organization also experienced savings associated with productivity

gains and the retirement of legacy applications. Additionally, the organization experienced significant growth in donations

overall after implementing the Blackbaud solution.

Blackbaud’s Total Solution can help increase

donations and improve user productivity.

The costs and benefits for Save the Manatee Club,

a nonprofit organization of 15 employees, are

projected as:

Initial investment costs: $30,505.

Annual costs: $43,349.

Total cost savings and benefits (over

three years): $361,204.

4

FIGURE 1

Financial Summary Showing Three-Year Risk-Adjusted Results

ROI: 114%

NPV: $157,419

Payback: 7 months

Increase in donations: 36%

Source: Forrester Research, Inc.

› Benefits. SMC experienced the following risk-adjusted benefits:

• An increase in recurring donations. Due to an automated follow-up request feature, SMC was able to isolate

donations resulting specifically from the use of Blackbaud’s solutions, which are quantified and included in this

benefit. Forrester notes that this is a single use case, and that it is likely that future use cases would generate

additional avenues to facilitate donations. This is described in greater detail in the Flexibility section.

• Productivity gains associated with data entry. The elimination of manual tasks, including printing out forms,

checking the information for accuracy, and entering the data into another system led to productivity gains for staff.

• Productivity gains associated with reporting. The ability to generate reports on demand, rather than gathering

information from multiple systems and manually tabulating it, also saved time and effort for the organization’s staff.

• Reduced staff. During and after the implementation of the Blackbaud products, two staff members left the

organization; due to the efficiency gains (as well as the reorganization and process improvements), SMC was able

to avoid replacing these employees.

• Peer-to-peer fundraising campaigns. Using everydayhero, Blackbaud’s secure peer-to-peer fundraising platform,

has enabled SMC to run specific fundraising campaigns, which have driven donations and would not have been

possible without the platform.

• Cost savings from legacy system retirement. Blackbaud’s platform replaced multiple legacy solutions, eliminating

the recurring fees associated with those solutions.

• Growth in overall donations (not quantified). In the year following the implementation of the Blackbaud solution,

SMC recognized 60% growth in total donations. While this overall growth could not be tied directly to the solution,

the platform facilitated initiatives that helped drive it; for example, SMC cited the ability to structure campaigns, while

it previously had to use one-off emails to solicit contributions.

• Reduction in errors (not quantified). The prevalence of manual processes in the past led to errors in data entry

that were eliminated by the use of Blackbaud’s integrated solution; additionally, this also eliminated the time delay

when information was not immediately transferred, improving visibility and accuracy. While we have not quantified

the impact of this benefit, the organization identified it as a significant improvement over the prior situation.

› Costs. SMC experienced the following risk-adjusted costs:

• Blackbaud costs. These include upfront costs, recurring subscription costs, and transactional fees for Raiser’s

Edge NXT, Luminate Online, Financial Edge NXT, and everydayhero. The total Blackbaud costs over the three-year

analysis are $145,552. The Costs section, including Table 8, contains detail about the cost distribution over the time

period of the analysis, as well as the present value.

• Third-party software costs. These costs include auxiliary software used by SMC to bridge some of the legacy

platforms to the Blackbaud applications, at a cost of approximately $5,000 per year.

5

Disclosures

The reader should be aware of the following:

› The study is commissioned by Blackbaud and delivered by Forrester Consulting. It is not meant to be used as a

competitive analysis.

› Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises

that readers use their own estimates within the framework provided in the report to determine the appropriateness of an

investment in Blackbaud’s integrated solutions.

› Blackbaud reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its

findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.

› Blackbaud provided the customer name for the interview but did not participate in the interview.

6

TEI Framework And Methodology

INTRODUCTION

From the information provided in the interview, Forrester has constructed a Total Economic Impact (TEI) framework for those

organizations considering implementing Blackbaud’s integrated solutions, including Raiser’s Edge NXT, Financial Edge NXT,

Luminate Online, and everydayhero. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors

that affect the investment decision, to help organizations understand how to take advantage of specific benefits, reduce

costs, and improve the overall business goals of winning, serving, and retaining customers.

APPROACH AND METHODOLOGY

Forrester took a multistep approach to evaluate the impact that Blackbaud’s Total Solution can have on an organization (see

Figure 2). Specifically, we:

› Interviewed Blackbaud marketing and sales personnel, along with Forrester analysts, to gather data relative to Blackbaud’s

software and the marketplace for Blackbaud’s software.

› Interviewed one organization currently using Blackbaud’s software to obtain data with respect to costs, benefits, and risks.

› Constructed a financial model representative of the interview using the TEI methodology. The financial model is populated

with the cost and benefit data obtained from the interview.

› Risk-adjusted the financial model based on issues and concerns the interviewed organization highlighted in the interview.

Risk adjustment is a key part of the TEI methodology. While the interviewed organization provided cost and benefit

estimates, some categories included a broad range of responses or had a number of outside forces that might have

affected the results. For that reason, some cost and benefit totals have been risk-adjusted and are detailed in each

relevant section.

Forrester employed four fundamental elements of TEI in modeling Blackbaud’s Total Solution’s service: benefits, costs,

flexibility, and risks.

Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester’s TEI

methodology serves to provide a complete picture of the total economic impact of purchase decisions. Please see Appendix

A for additional information on the TEI methodology.

FIGURE 2

TEI Approach


Perform due diligence

Conduct customer interviews

Construct financial model using TEI

framework

Write case study

7

Analysis

ORGANIZATION OVERVIEW

For this study, Forrester conducted interviews with a representative from the Save the Manatee Club, which is a Blackbaud

customer based in the US. SMC is an award-winning national nonprofit 501(c)(3) and membership-based organization

established in 1981. Its mission is to protect endangered manatees and their aquatic habitat for future generations;

specifically, the organization’s goals are to:

› Protect ample healthy habitats to support a stable or growing manatee population.

› Reduce manatee harassment, injuries, and deaths from human activity.

› Ensure that sufficient regulations have been adopted to accomplish these goals.

In order to accomplish its objective, SMC concentrates its efforts on reducing the negative impacts to manatees and their

aquatic habitat caused by human activity through:

› Increasing public awareness and education.

› Sponsoring research, rescue, rehabilitation, and release efforts.

› Advocating for strong protection measures, such as boat speed zones and sanctuaries.

› Taking legal action when appropriate.

The use of older, inefficient systems was hindering SMC’s ability to have staff members focus on executing programs and

services to further its mission.

INTERVIEW HIGHLIGHTS

Situation

Prior to the implementation of integrated software from Blackbaud, SMC was using seven different applications for its needs,

including supporting online donations, running its Adopt-a-Manatee program, and managing financial and accounting

requirements. These systems were not integrated with each other, leading to challenges with visibility of information. As our

interviewee told us: “When someone donates on one platform, and then they call and donate another way, we don’t realize

that it’s the same person. Not fully understanding our supporters and all they were giving us was our biggest problem.”

Additionally, staff spent much of their time with manual entry

and moving data from one place to another; not only did this

process take a lot of time, but it was prone to errors. Our

interviewee told us, “They would print [the data] out and hand

enter it into our old database.”

The main goals from the Blackbaud implementation were:

› A holistic view of the donor community.

› Improvement in staff efficiency.

› Reduction in time spent on auditing and financial reporting.

“The better we can understand

our donors, the more we can

grow as an organization and

ultimately serve our mission.”

~ Director of development and operations

8

Solution

SMC selected the Blackbaud platform to address these issues. As our interviewee said: “The most important things were

efficiency and integration. How can we get all the data into one place and know that it’s accurate?” The organization began

by implementing Raiser’s Edge NXT, followed by the Luminate Online platform and then Financial Edge NXT. Additionally,

SMC has used everydayhero to run fundraising campaigns.

The interview revealed that:

› Efficiency of core processes, such as processing online donations and generating reports, improved

significantly. The most significant benefits experienced were in data entry and reporting, where the staff saved a

significant amount of time and errors were reduced.

› Donations increased due to improved campaigns. The organization leveraged capabilities of Blackbaud’s platform to

send more targeted requests for recurring donations, resulting in increased revenue on an annual basis.

› Legacy applications were eliminated. The organization was able to reduce its spending in supporting the older solutions

by eliminating maintenance fees.

9

BENEFITS

The interviewed organization experienced a number of quantified benefits in this case study:

› Increased donations.

› Data entry productivity gains.

› Reporting productivity gains.

› Reduced Staff

› Fundraising Campaign

› Legacy system elimination.

Other important benefits mentioned by SMC were a decrease in errors and more timely availability of information. While our

interviewee was not able to put a value on these benefits, it clearly increased accuracy and visibility of data across the

organization.

Increased Donations

SMC indicated that a key benefit from the Blackbaud implementation was an increase in donations. This increase

was directly tied to an automated welcome email campaign that was facilitated by Luminate Online. When new

prospects connected with SMC online (by signing up for a newsletter or sending an email, for example), they

received a series of welcome emails, and the last one included a request for a recurring donation. Due to this

campaign effort, the organization has seen a significant increase in the number of recurring donations, as

detailed in the table below. In the past year, the organization has seen an additional 80 recurring donations,

which is a 36% increase over the 220 recurring donations not associated with the welcome campaign. The

average value of the donations was approximately $20, donated monthly, for an annual contribution of $240.

Although most donors continue to fund a recurring donation, we estimate that 20% per year drop off. These

calculations are shown in Table 1, leading to a total of $100,608 over three years.

Given that it is possible that some of these donors might have contributed without the email prompt, there is

some risk to associating all of this donation uplift to the use of Blackbaud. To compensate, this benefit was risk-

adjusted and reduced by 5%. The risk-adjusted total benefit resulting from increased recurring donations over the

three years was $95,578, with a present value of about $77,000. See the section on Risks for more detail.

10

TABLE 1

Increased Donations

Ref. Metric Calculation Year 1 Year 2 Year 3 Total Present Value

A1 Recurring donations attributable to welcome emails

80 80 80

A2 Average value of recurring donation

$20/month $240 $240 $240

A3 Percent retention (from previous year)

80% 80%

At Increase in recurring donations

A1*A2+ (A3*previous

year) $19,200 $34,560 $46,848 $100,608 $81,214

Risk adjustment ↓5%

Atr Increase in recurring donations (risk-adjusted)

$18,240 $32,832 $44,506 $95,578 $77,153


Data Entry Productivity Gains

Prior to implementing Blackbaud’s total solution, SMC had a number of disparate systems to track information

about online donations, adoptions, and accounting. In order to transfer information between the systems, staff

relied on a number of highly manual processes; often information was printed out from one system, checked by

hand, and then keyed into the next system. With the Blackbaud solution, including integration between the

different applications, data is automatically transferred, leading to time savings as well as increased accuracy.

Below, we have captured the value of the efficiency gain associated with data entry for online donations,

including adoptions. For each batch of 100 gifts, tasks that formerly took a cumulative 25 hours (on average)

have been condensed to a single 20-minute process. The organization receives an average of 10,000 gifts a

year, leading to 100 batches, or close to 2,500 hours saved annually. See Table 2 below for the exact

calculations. Due to this time savings, the organization was able to avoid replacing several employees who left,

while allowing others to focus more of their time on developing programs.

With efficiency gains, there is always the possibility that time savings may not be used productively. To

compensate, this benefit was risk-adjusted and reduced by 5%. The risk-adjusted total benefit resulting from

improved data entry over the three years was just over $111,000. See the section on Risks for more detail.

11

TABLE 2

Data Entry Productivity Gains

Ref. Metric Calculation Year 1 Year 2 Year 3 Total

Present

Value

B1 Hours saved per batch 25 hr.-> 20 min. 24.7 24.7 24.7

B2 Batches per year

10,000

records/100 per

batch

100 100 100

B3 Hourly rate $16 $16 $16

Bt Time savings: data entry B1*B2*B3 $38,949 $38,949 $38,949 $116,846 $96,860


Btr Time savings: data entry

(risk-adjusted) $37,001 $37,001 $37,001 $111,004 $92,017


Reporting Productivity Gains

As in the previous benefit, much of the reporting done by the organization prior to Blackbaud’s solution involved

highly manual processes. In this benefit, we have captured the streamlining of the quarterly reporting process,

which typically involved three days of effort to assemble, review, and analyze data; this process now takes under

an hour. The calculations shown in Table 3 demonstrate the value of the time savings associated with this

improved process. As in the previous calculation, we apply a 5% risk adjustment to yield a total over three years

of close to $13,000.

TABLE 3

Reporting Productivity Gains


C1 Hours saved per reporting period

3 days -> 45 min.

71.3 71.3 71.3

C2 Reporting periods per year Quarterly 4 4 4

C3 Hourly rate $16 $16 $16

Ct Time savings: reporting C1*C2*C3 $4,500 $4,500 $4,500 $13,500 $11,191


Ctr Time savings: reporting (risk-adjusted)

$4,275 $4,275 $4,275 $12,825 $10,632


12

Reduced Staff

Due to the efficiency gains discussed previously, in addition to recapturing time associated with specific

processes, SMC was able to avoid replacing two staff members who left the organization. Since this benefit was

associated with both the Blackbaud Total Solution as well as improvements in processes and other organizational changes,

we attribute 50% of the benefit to this analysis. Given the uncertainty associated with this attribution, we have risk-adjusted

the total benefit by 5%. The details of this calculation are shown in Table 4.

TABLE 4

Reduced Staff


D1 Leadership position

0.5 1 1

D2 Fully loaded rate $50,000 $50,000 $50,000

D3 Staff member 0.5 1 1

D4 Fully loaded rate $35,000 $35,000 $35,000

D5 Attributable to Blackbaud

50% 50% 50%

Dt Reduced staff (D1*D2+D3*D4)*D5 $21,250 $42,500 $42,500 $106,250 $86,373


Dtr Reduced staff (risk-adjusted)

$20,188 $40,375 $40,375 $100,938 $82,054


Fundraising Campaign

By using everydayhero for peer-to-peer fundraising, SMC was able to run a Name-a-Manatee campaign,

generating approximately $2,600 in the first year; the organization projects it will run similar campaigns in future

years. The total is the amount donated; we have included the associated transaction and percent fees charged by Blackbaud

in the Costs sections (see Table 8). As campaign results may vary from year to year, we have risk-adjusted this benefit by

5%.

TABLE 5

Fundraising Campaign


Et Fundraising campaign $2,500 $2,500 $2,500 $7,500 $6,217


Etr Fundraising campaign (risk-

adjusted) $2,375 $2,375 $2,375 $7,125 $5,906


13

Legacy System Elimination

By eliminating the solutions in place prior to the implementation of Blackbaud’s platform, the organization was able

to save the costs associated with those solutions, as shown in Table 6. These legacy solutions covered data and

functions, including donation and membership information, renewal and action alerts, accounting tasks, and online letter

forms. We have included ongoing costs that were eliminated; these are typically maintenance costs on these legacy

solutions.

TABLE 6

Legacy System Elimination

Ref. Metric Year 1 Year 2 Year 3 Total Present Value

Ft Eliminated legacy costs $11,245 $11,245 $11,245 $33,735 $27,965


Total Benefits

Table 7 shows the total of all benefits across the six areas listed above, as well as present values (PVs) discounted at 10%.

Over three years, the organization expects risk-adjusted total benefits to be a PV of close to $300,000 over three years.

TABLE 7

Total Benefits (Risk-Adjusted)

Ref. Benefit Category Year 1 Year 2 Year 3 Total

Present

Value

Atr Increase in recurring donations $18,240 $32,832 $44,506 $95,578 $77,153

Btr Time savings: data entry $37,001 $37,001 $37,001 $111,004 $92,017

Ctr Time savings: reporting $4,275 $4,275 $4,275 $12,825 $10,632

Dtr Reduced staff $20,188 $40,375 $40,375 $100,938 $82,054

Etr Fundraising campaign $2,375 $2,375 $2,375 $7,125 $5,906

Ftr Eliminated legacy costs $11,245 $11,245 $11,245 $33,735 $27,965

Total benefits (risk-adjusted) $93,324 $128,103 $139,777 $361,204 $295,727


14

COSTS

The interviewed organization experienced a number of costs associated with the Total Solution platform:

› Blackbaud licensing fees.

› Third-party software costs.

These represent the mix of internal and external costs experienced by the interviewed organization for initial planning,

implementation, and ongoing maintenance associated with the solution.

Blackbaud Licensing Fees

The Blackbaud costs incurred by SMC are shown in Table 8. For Raiser’s Edge NXT, Luminate Online, and

Financial Edge NXT, the initial costs include implementation and data conversion, while the annual costs reflect

the ongoing subscription cost. For everydayhero, there are no upfront costs; the usage costs shown are a

combination of transaction fees and percentages of donations associated with campaigns run using the platform.

These fees are sometimes covered by the donors themselves, so we have included only fees incurred by SMC.

As SMC is using the applications together, Forrester has provided the total Blackbaud cost incurred by SMC.

Forrester notes that SMC has also purchased Luminate Advocacy from Blackbaud, which is not included in this

analysis; as we have not quantified the benefits associated with Advocacy, the costs have been excluded from

the financial model.

Software costs vary from organization to organization, considering different licensing agreements, what other

products may be licensed from the same vendor, and other discounts. The costs presented in this analysis reflect

the particulars of SMC’s environment and needs. Additionally, the fees associated with everydayhero depend on

the donations and may vary. The total cost of software over the three years was $145,552.

TABLE 8

Software Costs

Ref. Metric Calculation Initial Year 1 Year 2 Year 3 Total

G1 Implementation costs $30,505 $30,505

G2 Subscription fees $38,109 $38,109 $38,109 $114,327

G3 Ongoing usage Based on donation

amount $240 $240 $240 $720

Gt Blackbaud costs G1+G2+G3 $30,505 $38,349 $38,349 $38,349 $145,552


Third-Party Software

In addition to the Blackbaud costs, SMC incurred costs associated with a third-party application used to bridge

between one legacy application still in use and the Blackbaud platform. The cost for this application was

approximately $5,000 a year.

15

TABLE 9

Third Party Software

Ref. Metric Year 1 Year 2 Year 3 Total Present Value

Ht Third-party software costs $5,000 $5,000 $5,000 $15,000 $12,434


Total Costs

Table 10 shows the total of all costs as well as associated present values (PVs), discounted at 10%. Over three years, the

interviewed organization expects total costs to be a PV of close to $140,000.

TABLE 10

Total Costs (Risk-Adjusted)

Ref. Cost Category Initial Year 1 Year 2 Year 3 Total Present Value

Gtr Blackbaud costs $30,505 $38,349 $38,349 $38,349 $145,552 $125,873

Htr Third-party software costs $0 $5,000 $5,000 $5,000 $15,000 $12,434

Total costs (risk-adjusted) $30,505 $43,349 $43,349 $43,349 $160,552 $138,308


FLEXIBILITY

Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business

benefit for some future additional investment. This provides an organization with the “right” or the ability to engage in future

initiatives but not the obligation to do so. There are multiple scenarios in which a customer might choose to implement Total

Solution and later realize additional uses and business opportunities. Flexibility would also be quantified when evaluated as

part of a specific project (described in more detail in Appendix A).

In this study, we have not quantified the value of future flexibility. However, this analysis is based on very specific use cases

in which the interviewed organization saw clear, measurable results from using the Blackbaud platform. In the future, the

organization plans to widen the number of use cases, which would likely result in both improved productivity gains and

increased donations, ultimately allowing the organization to better fulfill its purpose. Specifically, our interviewee cited the

ability to examine details of donors and their past history to segment the pool of donors, saying, “How can we use these

insights to alter our behavior to serve them better?”

RISKS

Forrester defines two types of risk associated with this analysis: “implementation risk” and “impact risk.” Implementation risk

is the risk that a proposed investment in Total Solution may deviate from the original or expected requirements, resulting in

higher costs than anticipated. Impact risk refers to the risk that the business or technology needs of the organization may not

be met by the investment in Total Solution, resulting in lower overall total benefits. The greater the uncertainty, the wider the

potential range of outcomes for cost and benefit estimates.

16

TABLE 11

Benefit And Cost Risk Adjustments

Benefits Adjustment

Increase in recurring donations 5%

Time savings: data entry 5%

Time savings: reporting 5%

Reduced staff 5%

Fundraising campaign 5%


Quantitatively capturing implementation risk and impact risk by directly adjusting the financial estimates results provides

more meaningful and accurate estimates and a more accurate projection of the ROI. In general, risks affect costs by raising

the original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers should be taken

as “realistic” expectations since they represent the expected values considering risk.

The following impact risks that affect benefits are identified as part of the analysis:

› Donations are difficult to predict and to attribute; while the donations included in the analysis followed the email campaign,

it is possible that some proportion of the donors would have donated anyway; therefore, we have adjusted this benefit to

compensate.

› Productivity gains are not always recaptured productively, so these benefits have been risk-adjusted to account for time

saved that might not be redeployed effectively.

Table 11 shows the values used to adjust for risk and uncertainty in the benefit estimates for the interviewed organization.

Readers are urged to apply their own risk ranges based on their own degree of confidence in the cost and benefit estimates.

17

Financial Summary

The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback

period for the interviewed organization’s investment in Total Solution.

Table 12 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the

risk-adjustment values from Table 11 in the Risks section to the unadjusted results in each relevant cost and benefit section.

FIGURE 3

Cash Flow Chart (Risk-Adjusted)


TABLE 12

Cash Flow (Risk-Adjusted)

Initial Year 1 Year 2 Year 3 Total Present Value

Costs ($30,505) ($43,349) ($43,349) ($43,349) ($160,552) ($138,308)

Benefits $0 $93,324 $128,103 $139,777 $361,204 $295,727

Net benefits ($30,505) $49,975 $84,754 $96,428 $200,652 $157,419

ROI 114%

Payback period

(months) 7.3


($100,000)

($50,000)

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

Initial Year 1 Year 2 Year 3

Cash

flo

ws

Total costs Total benefits Cumulative total

18

Blackbaud Total Solution: Overview

The following information is provided by Blackbaud. Forrester has not validated any claims and does not endorse Blackbaud

or its offerings.

Blackbaud provides software, services, expertise, and data intelligence that empowers and connects people to advance the

social good movement. Blackbaud’s Total Solution combines fundraising, marketing applications, prospect research and

analytics, accounting, and multichannel direct marketing to enable an integrated view of a nonprofit’s activities. Blackbaud’s

Total Solution brings together disparate information — such as annual and capital giving, gift planning, major giving,

volunteer systems, program participants, and advocacy efforts — across various affiliates and programs within an

organization. With a single system of record that can be securely shared, organizations are able to turn their data into

information that can be used to improve fundraising efforts, synchronize campaigns across affiliates and field offices, and

strengthen relationships with constituents.

19

Appendix A: Total Economic Impact™ Overview

Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-

making processes and assists vendors in communicating the value proposition of their products and services to clients. The

TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior

management and other key business stakeholders. TEI assists technology vendors in winning, serving, and retaining

customers.

The TEI methodology consists of four components to evaluate investment value: benefits, costs, flexibility, and risks.

BENEFITS

Benefits represent the value delivered to the user organization — IT and/or business units — by the proposed product or

project. Often, product or project justification exercises focus just on IT cost and cost reduction, leaving little room to analyze

the effect of the technology on the entire organization. The TEI methodology and the resulting financial model place equal

weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on

the entire organization. Calculation of benefit estimates involves a clear dialogue with the user organization to understand

the specific value that is created. In addition, Forrester also requires that there be a clear line of accountability established

between the measurement and justification of benefit estimates after the project has been completed. This ensures that

benefit estimates tie back directly to the bottom line.

COSTS

Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business units

may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the investments and

expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures any incremental costs

over the existing environment for ongoing costs associated with the solution. All costs must be tied to the benefits that are

created.

FLEXIBILITY

Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can typically be

the primary way to justify a project, Forrester believes that organizations should be able to measure the strategic value of an

investment. Flexibility represents the value that can be obtained for some future additional investment building on top of the

initial investment already made. For instance, an investment in an enterprisewide upgrade of an office productivity suite can

potentially increase standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration

feature may translate to greater worker productivity if activated. The collaboration can only be used with additional

investment in training at some future point. However, having the ability to capture that benefit has a PV that can be

estimated. The flexibility component of TEI captures that value.

RISKS

Risks measure the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in two

ways: 1) the likelihood that the cost and benefit estimates will meet the original projections and 2) the likelihood that the

estimates will be measured and tracked over time. TEI risk factors are based on a probability density function known as

“triangular distribution” to the values entered. At a minimum, three values are calculated to estimate the risk factor around

each cost and benefit.

20

Appendix B: Glossary

Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Companies set

their own discount rate based on their business and investment environment. Forrester assumes a yearly discount rate of

10% for this analysis. Organizations typically use discount rates between 8% and 16% based on their current environment.

Readers are urged to consult their respective organizations to determine the most appropriate discount rate to use in their

own environment.

Net present value (NPV): The present or current value of (discounted) future net cash flows given an interest rate (the

discount rate). A positive project NPV normally indicates that the investment should be made, unless other projects have

higher NPVs.

Present value (PV): The present or current value of (discounted) cost and benefit estimates given at an interest rate (the

discount rate). The PV of costs and benefits feed into the total NPV of cash flows.

Payback period: The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs)

equal initial investment or cost.

Return on investment (ROI): A measure of a project’s expected return in percentage terms. ROI is calculated by dividing

net benefits (benefits minus costs) by costs.

A NOTE ON CASH FLOW TABLES

The following is a note on the cash flow tables used in this study (see the example table below). The initial investment

column contains costs incurred at “time 0” or at the beginning of Year 1. Those costs are not discounted. All other cash flows

in years 1 through 3 are discounted using the discount rate at the end of the year. PV calculations are calculated for each

total cost and benefit estimate. NPV calculations are not calculated until the summary tables are the sum of the initial

investment and the discounted cash flows in each year.

Sums and present value calculations of the Total Benefits, Total Costs, and Cash Flow tables may not exactly add up, as

some rounding may occur.

TABLE [EXAMPLE]

Example Table

Ref. Metric Calculation Year 1 Year 2 Year 3


21

Appendix C: Endnotes

1 Forrester risk-adjusts the summary financial metrics to take into account the potential uncertainty of the cost and benefit estimates. For more information, see the section on Risks.

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