Nonprofits are well known for doing more with less. But when it comes to data systems and information technology (IT), cutting corners can be dangerous and financially foolhardy.
Weakened by outdated systems and delayed upgrades, nonprofits’ failure to invest adequately in IT carries with it many costs, not the least of which is dependency on private technology vendors.
This dependency goes by the wonky name of “technical debt,” defined by writers for McKinsey as the “accumulation of all the technology work a company needs to do in the future.” McKinsey’s survey found technology expenditures that are done merely to “catch up” on this technical debt average between 20 and 40 percent of company technology budgets. For nonprofits, many already operating with thin margins, this burden can be even greater.
The effects are legion: Many nonprofits use donor management systems from decades ago, databases patched across programs, and workflows dependent on staff memory and spreadsheets rather than reliable digital platforms. Sound familiar?
When key staff leave, much of the “glue” that holds systems together also disappears. The numbers highlight this fragility. According to a 2021 report by Salesforce, 76 percent of surveyed nonprofits say they lack a data strategy.
While many nonprofit leaders see technology and data as critical to their work, few nonprofits are digitally sophisticated enough to use metrics that go much beyond measuring basic fundraising and accounting.
These dynamics highlight a nonprofit bind—accountability demands without matched infrastructure investment. Chronic underfunding leads to dependency: When systems crash or compliance looms, nonprofits must turn to private vendors out of necessity, not choice. This pattern paves the way for systemic extraction by vendors of nonprofit firms, often at the expense of nonprofits investing in their missions.
How Vendors Extract Value and Reshape Missions
Private contractors exploit these weaknesses with a set playbook. A crisis strikes—a database fails or a reporting system collapses—and vendors arrive as “emergency responders” with premium-priced fixes.
Vendor lock-in is intentional—nonprofits face high setup costs, staff resistance to new interfaces, and obstacles to data transfers.
Nonprofits, desperate to maintain their services, often sign contracts with little leverage. The company takes advantage and consolidates its gains. For example, Apax Fund’s $2 billion acquisition of EveryAction, Social Solutions, and CyberGrants was deemed efficient by some, but observers noted that the merger would likely lead to less competition, higher costs, and investor-driven motives that undermine nonprofit autonomy.
Too often as a result of such arrangements, essential tools for fundraising, grant management, and case tracking can become controlled by one firm. Such SaaS (Software as a Service) platforms can deepen dependency.
Vendor lock-in is intentional—nonprofits face high setup costs, staff resistance to new interfaces, and obstacles to data transfers. Some vendors have threatened to destroy data without ongoing payments, essentially holding data hostage.
Additional Risks and Costs
Financial costs are one effect of an underinvestment in IT. An equally damaging effect is tech-driven mission drift.
As seen with Facebook, proprietary platforms set assumptions about “success,” pushing nonprofits to optimize for metrics serving vendors, not communities. Over time, this shifts priorities. Staff spend more effort on reports than on building community connections. Funders see charts but lose sight of human impact. The original mission gets lost in the system’s logic.
Even well-meaning corporate programs can add to dependency. Microsoft, Amazon, Google, and others offer nonprofits software at steeply discounted rates or even for free. At first, it seems philanthropic. However, these offers often lock nonprofits into proprietary ecosystems, making future migrations expensive and sometimes impossible.
Nonprofits, built to help communities, instead send resources upstream to private vendors.
Discounts, in other words, cut costs and appear to expand capacity in the short term, but create a structural dependency in the long term. If a company withdraws discounts or changes prices, nonprofits face “digital eviction”—losing access to essential tools.
What begins as generosity often ends in vulnerability, leaving nonprofits to contend with corporate priorities, as happened earlier this year with the elimination of Microsoft’s formerly free nonprofit software donation program.
These vulnerabilities create wider risks. Data quality issues hurt decision-making, and leadership turnover exacerbates fragility. The National Center on Charitable Statistics says 30 percent of nonprofits disappear within 10 years. That’s a higher rate that small businesses (more than half of which fail in the first five years), but it’s still significant.
Weak technology is often a hidden cause. The COVID-19 pandemic exacerbated this situation further. As nonprofits rushed to remote work and higher demand, vendors offered “emergency modernization.” Many organizations signed costly long-term contracts out of fear. Instead of resilience, dependency grew. The result is extraction: Nonprofits, built to help communities, instead send resources upstream to private vendors.
Building Nonprofit-Controlled Alternatives
The first defense is investing in in-house technical skills. Nonprofits need staff who can maintain, upgrade, and secure their systems, rather than outsourcing everything.
This approach is about establishing basic digital literacy and technical responsibility, not copying Silicon Valley. When staff are familiar with their tools, vendor pressure is lessened. This saves money and allows staff to design tools that fit the clients’ needs.
Open-source software is another path that offers practical and political alternatives. Unlike proprietary platforms, open-source tools are adaptable to local needs, are auditable, and can be shared. Pooling resources enables nonprofits to develop cooperative technology—shared platforms designed for collective needs, not profit.
In the United Kingdom, the Catalyst Cooperative invests in in open-source tools for nonprofits, like fundraising or service platforms. Building together minimizes duplication, cuts costs, and ensures data transparency. They use open-source platforms for community organizations, keeping data with them and those they serve. Their success demonstrates that cooperative digital tools can be effective, even with limited resources.
Nonprofits should treat technology as essential to independence, not just a cost to minimize and outsource.
Technology as a Political Choice
A lot of politics and values gets masked in seemingly technical decisions. For instance, efficiency rhetoric has often enabled privatization.
Nonprofit leaders can challenge this by revealing the hidden costs. What looks efficient on a dashboard may reduce service quality and community connection. By focusing on community and organization-driven outcomes, nonprofits can defend their missions against investor-friendly metrics.
Finally, resistance must be collective. Individual organizations cannot match the leverage of private equity firms alone. Coalitions of nonprofits can:
- Document the human costs of vendor dependency
- Advocate for public or philanthropic investment in shared infrastructure
- Form rapid response networks to identify and resist privatization schemes
The Nonprofit Technology Enterprise Network (NTEN) is a vital resource here. The organization offers training, shared standards, and advocacy for nonprofit data rights. NTEN frames technology as an equity issue, shifting the conversation from “tools” to questions of power and control.
Technology, in short, is not just merely about operations—it is a political arena where ownership, accountability, and mission are set. In that context, nonprofits should treat technology as essential to independence, not just a cost to minimize and outsource; and to reclaim control by investing in nonprofit-led, open-source, and cooperative systems that preserve autonomy and accountability.
The stakes are high. Without action, organizations built for the public good risk becoming hollow—serving private gain instead of empowerment. However, with nonprofit-controlled technology, the sector can chart its own course, one where technology is put into the service of strengthening justice, care, and community.
