Blackbaud: Leveraging Relationships

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Already a nonprofit software specialist, Charleston, S.C.-based Blackbaud is looking to reap the benefits of further specialization by setting up a third-party applications development network by using one of its greatest resources-its resellers.

In March, the company launched Developer Network for Financial Edge. “It was created to extend the functionality of Financial Edge,” says channel sales director Steve Dettor. “There are many verticals out there, and they have specific needs. We're looking to the third-party applications from our developers to meet these needs.”

Blackbaud is encouraging its reseller channel to develop and market software enhancements and add-ons. Of the seven firms that have joined the program, all are VARs as well. These firms are working on a variety of applications for nonprofits including document management, fixed assets, gift awards management, grant management, higher education solutions, and inventory and order control. It costs members $2,500 to join and $1,000 for training, with a renewal fee of $3,000.

Partner Insights

Blackbaud has a much broader VAR pool these days from which to enlist developers, the number of resellers having doubled from 18 to 32 in the last eight months. Dettor’s goal is to have 60 resellers within 18 months. Certainly, increased margins are enticing many VARs.

Available to partners for the first time is a software development kit, which includes access to the Component Object Model layer of Blackbaud’s software through an open application-programming interface. It has extensive documentation, an Object Model Viewer, sample code, sample cases, and two developer licenses for Financial Edge.

In addition to the software development kit, each participating development partner receives marketing support, a certification logo, and access to a developer community Web site where firms can share code and ideas.

“Our goal is to turn Financial Edge from just an accounting solution to a platform,” says Dettor.

Calibre CPA Group, a Blackbaud reseller for more than two years with operations in Washington, D.C., and Chicago, provides auditing, accounting, tax, consulting, and technology services for a wide variety of disciplines, including employee benefit funds, labor and not-for-profit organizations, and for-profit entities.

“Each client has pain points. The Developer Network allows us to create solutions that work for each organization,” says Holly Condon, director of business development.

Calibre has developed a Time Allocation System that works with Financial Edge to distribute labor costs across grants and funding sources. TAS tracks an organization’s timesheet and expense report requirements over the Web. TAS also provides online reports and alerts, and facilitates cost allocation, thereby improving productivity. It can be deployed on the organization’s Web server, or Calibre can host the system.

Calibre has found the SDK to be especially beneficial for clients who don’t have staff proficient in software development. “The toolkit allows us to create the customization for our clients instead of them paying for the toolkits. We just charge them a royalty fee. This ends up being much cheaper for the client,” says Condon.

She provides this example: Suppose a client wants to create a business rule where, an account goes over budget, the department head needs to be automatically e-mailed. Normally, a programmer would use Visual Basic Application to create the rule in a couple of hours, and the cost would start at $3,000. However, with the toolkit, Calibre can write the rule for $300 and charge a $100 royalty fee for using the toolkit.

Resellers Double

Blackbaud has been no less active on the more traditional channel front. In an effort to make its program more attractive, the vendor has increased margins, enhanced sales training, and added 11 new staff members dedicated strictly to the channel.

“Our reselling sales [represented] 50 percent of the company’s revenue, and this is up 10 percent from 2001. We are working toward a goal of 80 percent,” says Dettor.

Blackbaud’s efforts to improve its channel started in 2001 when it eliminated exclusive territories, shifted from a direct sales operation to a channel operation, and created the Business Solutions Provider program.

Although the transition is going well, Dettor feels it is important to keep improving the channel, and to extend the functionality of Financial Edge via the Developers Network. Blackbaud’s software focuses on nonprofit organizations, with a particular concentration on educational institutions, and includes Financial Edge, the Raiser’s Edge fund-raising package, and Education Administration. Blackbaud’s BSPs resell the Financial Edge accounting system. While they’re not authorized to sell or service the other two products, they are able to earn referral margins on these products by passing leads to the direct sales teams.

There are an estimated 1.4 million nonprofits in the U.S. McKinsey and Company estimates that nonprofits spend $28 billion annually on software and services.

“This is the market opportunity that our resellers are able to attack using Financial Edge,” says Dettor.

As a Blackbaud reseller, a firm can still choose from three program levels, but margins have increased, training is more intense, and there is more opportunity to receive referral margins for other Blackbaud products.

Prospective resellers must complete a business plan application and training, which costs $5,000 for one person, $3,000 for each additional person, and an annual recertification fee of $2,000.

Benefits from joining the BSP program include the ability to capture all service revenue with the sale and implementation, referral margins of 20 percent on the Raiser’s Edge and Education Administration software, a $1,000 marketing credit for Gold members and $500 for Silver members, and free sales training.

The Silver level is typically for smaller, local resellers who are interested in selling Blackbaud to drive their consulting business. Silver margins range from 20 to 35 percent. Silver partners must have at least one qualified service consultant on staff and sell a minimum of four new systems a year.

The Gold level is for larger local resellers who will receive margins that range from 30 to 52 percent. Gold resellers must have one full-time sales and marketing staff member, one qualified service consultant, and sales of at least $100,000 annually.

Meanwhile, Platinum partners, regional and national resellers, must have the resources to sustain two qualified service consultants. They are also required to have participated in the BSP program for at least one year and exceeded their previous year’s sales quota.

Calibre, a Platinum member, has completed more than 70 implementations. Condon says, “Being a part of the BSP program has helped us better serve our clients using Blackbaud, and also assist our existing audit clients in searching for software. In addition, it gets our name out in the community, because clients who remember the quality work we did implementing the software will call us when they need other services.”

Brand Recognition

Houston-based PKF Texas became a Blackbaud reseller in April and within 60 days made its first sale.

Gregory S. Price, CPA, a shareholder and director of consulting solutions, says, “Blackbaud has such high market recognition that we don’t have to spend time introducing the product to clients. They already know about it.”

Price expects to have ten sales by the end of the year. In fact, PKF attended a presentation sponsored by Blackbaud, where nonprofits were invited to listen to speakers about the problems they might encounter and the solutions that can solve them. By attending the presentation, PKF has gotten several leads. However, Price says, “Nonprofits have taken a hit in the current economy, and many are just waiting until they can afford to install software. Right now, our biggest competition is when a lead doesn’t make a decision.”

Carly Lombardo is Associate Editor of Accounting Technology and can be reached at carly.lombardo@amgpubs.com.

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