When Salesforce announced plans back in April 2019 to ‘acquire’ its Salesforce.org philanthropy arm for $300 million, questions were immediately asked about how the move could simultaneously satisfy both Salesforce investors and non-profit customers.
Would investors gripe at the inevitable hit to profit margins that would arise from taking on an independent organization, being run as a public-benefit corporation to offer software for free or at highly discounted rates? Or - as seemed more likely - should non-profit customers brace themselves for unpalatable price hikes?
At Dreamforce last month, I got the chance to sit down with Rob Acker, CEO of Salesforce.org and leader of the non-profit/education vertical within Salesforce, to dig a little deeper into the integration of two quite different organizations.
From what he told me, it seems clear that the move is certainly designed to open up new revenue-generating opportunities for Salesforce, particularly from larger non-profits - but Acker also insisted that these types of non-profits are actively asking for the higher value integration/customization services and support that Salesforce can offer them, as well as greater access to the company’s wider portfolio, including recently acquired technologies such as Mulesoft and Tableau. As he put it:
When you’re looking at a large non-profit and the opportunity and sophistication that exists in their world today, there’s a need to activate supporters and engage with them at enormous scale in order to achieve the impact they want to have in the world. So this move was really driven out of us asking how we could take the full impact of Salesforce and the resources these organizations need to leverage from us in a far more impactful way. And so, through a series of conversations, running over a number of years, it became clear that, by coming together, we could help them achieve that, we could give them the things they really need.
There was also, Acker concedes, a great deal of duplication in the operations of the two organizations, in areas such as R&D and product development, which needed to be eliminated. At the same time, Salesforce had a great deal of internal expertise and connections to which Salesforce.org needed better access.
You know, [at Salesforce.org] we were focusing on donors and supporters and advocates and fundraisers and so on, who are all individuals, just like a customer in retail or in banking is an individual, too. I’m talking about delivering customer outcomes, whoever that ‘customer’ might be. Salesforce has made big bets on customer experience - so we found ourselves [the two organizations] kind of working and innovating in parallel paths, which is a bit redundant, right? You know, why would I be building an independent engineering team, when there’s this whole team over here at Salesforce that we should really be paired up with?”
And it's also a much more integrated strategy, because Salesforce.com has its own impact and sustainability team, experts in government affairs, all of these different groups. Now that we're operating as one unit, we can do a lot more work with, you know, the United Nations, heads of state, and the national and local government organizations that often fund or partner with non-profits, because we’re no longer disconnected.
NonProfit Success Pack (NSPS)
But, Acker insisted, it’s not all about the needs of large non-profits - the likes of the American Red Cross, the Anti-Defamation League, and Habitat for Humanity, for example.
Out of Salesforce.org’s approximately 40,000 customers, there are plenty with headcounts in single figures. They, along with other non-profits of all sizes, can continue to benefit from the free, open source Salesforce NonProfit Success Pack (NSPS), which is developed by Salesforce.org in partnership with a large community of volunteer developers from the nonprofit community. Said Acker:
I have 54% of my engineers dedicated to that open source environment. So yes, there was some concern [among nonprofit customers]: ‘Is that going to go away?’ And the answer is no, we’re absolutely committed to that. It was a big concern, and I think we need to be more clear about our plans here. NonProfit Success Pack, and the community around it, is alive and well and it’s staying.
That said, it’s worth noting that the essentially free NPSP is now part of the paid-for NonProfit Cloud, launched in June 2018. In effect, NPSP acts as the foundation for NonProfit Cloud and is a data architecture on top of Salesforce to support basic non-profit needs, on which volunteer developers have built a range of applications on a largely bespoke basis. Salesforce NonProfit Cloud, meanwhile, extends the range of standardized, productized features/functions available considerably, in areas including engagement, fundraising and programme management.
In short, it’s clear that Salesforce is on a mission to create a more profitable business from serving non-profits - and that’s not a bad thing, if it opens up services and technologies to these organizations. As I’ve written here before, too many non-profits skimp on technology, with the goal of minimising their internal costs in order to pour more money into their philanthropic programs. But, in the process, they miss out on enormous opportunities to create internal efficiencies and extend their reach in ways that ultimately might result in far more funding being available to help beneficiaries.
Salesforce’s leadership clearly believes that nonprofits are ready to invest - and the company’s CFO Mark Hawkins has already assured financial analysts that the dilutive impact on margins from Salesforce.org, which had 2018 revenues of around $250 million, won’t last forever. In an analyst call on the day of the announcement, he said:
This is a business that does have a lower operating margin at this stage… but it’s also going to be on a pathway and convergence over time to our overall Salesforce operating margin over the longer term.
As for the prospect of price hikes, assurances have been given and time will tell. But for non-profits working off of the NPSP platform, the future of this open source community seems secure. Indeed, as the foundation for paid-for, higher-margin products in the form of NonProfit Cloud - and thus a potential gateway to revenue - its prospects may now be brighter than ever.