Nonprofit Technology Budgeting: What You Need To Know

Digitally savvy non-profits — those that successfully integrate digital technologies into their organizations — are more likely to outperform their peers, achieve mission goals, and improve operational efficiencies. However, creating a tech budget, aligning investments with organizational goals, and measuring the return on those investments can be challenging. This blog post will help your nonprofit optimize the technology budgeting process because you should be able to focus more on your mission and less on your IT.

Why Do Nonprofits Struggle With Tech Budgeting?

When it comes to allocating funds for digital transformation, you might not have the resources to determine the correct infrastructure and tools, leading to an underinvestment in the latest technology. For example, you won't maximize value from your tech spend if you choose the wrong customer relationship management (CRM) system or marketing platform. 

Another challenge you might run into is a lack of funding for technology investments. Mid-sized companies spend between $50 million and $2 billion — around 4.1% of their revenue — on IT. However, 97% of nonprofits operate on budgets of less than $5 million a year, while 92% have budgets of less than $1 million. With little funds to spend on IT, many nonprofits might feel they have to settle for inferior technologies or rely on legacy systems that slow digital transformation.

How To Optimize Your Nonprofit Budget for Technology

Even if you lack the resources of larger companies or don't have as many funds, you can still get more value from your nonprofit budget through strategic planning. Here are some ways to make your spending more effective.

Define Your Digital Transformation Goals

Whether enhancing funding capabilities or reaching out to new donors,  determining your long-term objectives makes it easier to find the right hardware and software for your nonprofit. 

To start, assess your existing tools and the current value they provide. Ask yourself whether upgrading these platforms will help you achieve your goals or if you need to invest in new technologies to allow your team to fulfill your mission more effectively. Any new infrastructure or software you purchase needs to align with your objectives, so research the market to find vendors and products that meet your future needs. 

Find Cost-Effective Solutions

Effective IT for your organization can fit in your nonprofit budget and does not need to break the bank. The good news is you don't need to invest in costly hardware and software to achieve your organizational goals or improve operations.

Some vendors offer discounts for nonprofits, helping you reduce your tech spending and generate value from the latest technologies. Salesforce, for example, provides its platform at a reduced price for eligible organizations through its Power of Us program. 

To make your IT budget go further, you can also prioritize spending money on the resources you actually need. For example, removing enterprise-level features and functionalities from a software package will reduce monthly vendor subscription costs, allowing you to allocate funds toward other technologies. 

Virtualize On-Site Equipment

Moving in-house technologies like storage and networking solutions to the cloud can further lower your tech spending. Though virtualizing data centers, servers, and other on-site equipment requires an investment, you could reduce labor and maintenance costs for physical devices and save money over time. A cloud vendor will do all the hard work for you, freeing up resources for your IT team. 

Migrating to the cloud involves strategic planning. You'll need to evaluate your current infrastructure and determine:

• Which IT services to virtualize
• How long the process will take
• Whether you will encounter any roadblocks

As 53% of nonprofits planned to increase their cloud usage incrementally from 2023-2025, this type of digital transformation could pay off in the future and help you stay a step ahead of your peers. 

Assess the Effectiveness of Tech Investments

Measure the ROI of your investments in the latest tools to ensure you are allocating funds correctly. Estimate nonprofit technology costs and determine whether existing products generate ongoing value. For example, your current email marketing software might cost hundreds of dollars a month. However, this tool might prove worthwhile if it helps you attract new donors to your organization. 

Consider all the benefits a technology provides your organization when working out its value. For instance, a particular piece of software might not attract more donors but could still be worth the cost if it automates processes and saves time on manual tasks, such as issuing receipts or collecting donor contact details. 

The Importance of Nonprofit IT Budget Optimization 

Nonprofits often lack resources and funds for technology investments. That's why it's important to optimize your nonprofit budget and ensure it aligns with your organizational goals. 

An IT-managed service provider (MSP) like Ripple can help you choose the right technologies for your nonprofit so you spend less time focusing on your IT and more on supporting your organization’s mission. As a result, you can improve your digital transformation efforts and increase the impact of your nonprofit’s goals. Want to learn more about how Ripple can support your nonprofit with IT-managed services? Reach out today to chat with Melissa- yes, we can tell you exactly who you’ll talk with- to discuss if your nonprofit needs additional IT strategy to better support your organization’s mission. 

FAQs

Here are answers to some common questions about IT budgeting for nonprofits:

Why is creating an IT budget important for nonprofits?

IT budgeting can make your funds go further and help you allocate funds to the right technologies. You'll be able to reduce spending, control costs, and get more value from your tech investments.  

How should nonprofits determine their IT budget size?

Small nonprofits typically spend around 13.2% of their overall budgets on technology, while larger organizations spend around 2.8%. The amount you allocate toward the latest technologies depends on your long-term objectives and needs. 

How can nonprofits minimize IT expenses without sacrificing quality?

Look for vendors that offer technologies at a reduced cost for nonprofits and only pay for the IT features you need. For long-term savings, consider moving on-premise equipment to the cloud. MSPs that offer IT services for nonprofits can also help you maximize your expenses.

What cybersecurity measures should nonprofits budget for?

Fifty-eight percent of nonprofit organizations experienced a cybersecurity event in 2021. Of those events, 71% led to a financial loss. That's why it's important to budget for technologies such as endpoint security, firewalls, access control tools, and antivirus software.

What should nonprofits prioritize when allocating their IT budget?

If you have a small budget, prioritize tools that help improve your nonprofit's operations. CRM tools, for example, let you collect and analyze fundraiser information, while marketing automation platforms can increase awareness about your services to potential donors.