Marc Chardon, President of Blackbaud

LowcountryBizSC:
Where were you born and what is your education?

Marc Chardon:
I was born in Concord, New Hampshire. I attended Harvard University where I completed an undergraduate degree in economics.  After graduation, I decided to travel to France for three months and stayed for seven years.

LowcountryBizSC:
Do you have family roots in France? 

Marc Chardon:
Both of my grandparents were musicians, cellists, who came to the United States from France in the 1930’s.  They decided to stay here when the Great War broke out in Europe. 

LowcountryBizSC:
What were your first experiences in business?  What were some of the lessons learned from the early part of your career?

Marc Chardon:
I grew up working in the parts department of my father’s heavy equipment business where we sold logging, street sweeping, and ski equipment. I also received my first exposure to computers at my father’s business when we decided to put in an inventory control system.  It was an NCR machine that had a raised floor, a cooling system and people standing around in white lab coats.  Quite different from what we have today. 

When I worked in Europe I was engaged with a company that sold spare car parts to companies in Africa and the Middle East.

I returned to the United States and joined my brother’s solar engineering startup business.  Back at that time, the government was providing incentives to companies to build solar panels etc, so the industry attracted people looking to make some quick money.  But subsidies distort the underlying economic premise of what you are trying to produce. The amount of copper and glass required to manufacture the product meant that it was not cost effective for a typical New England family. Relying on government subsidies for your value proposition is tough!

In 1984 I joined Digital Equipment Corporation (DEC), at the time, the world’s second largest software company in their corporate marketing program.  I held various positions there including strategy and communications manager, Director of the Office of the President, and Managing Director of DEC France. 

When Compaq bought DEC in 1998, I joined Microsoft France as its General Manager. The Department of Justice had initiated the now famous investigation into Microsoft’s alleged monopoly position and I became the point person for the media.  I quickly learned how important it is for companies that have become leaders in their sector to be socially responsible. 

I spent four years as the CFO of the Office division of Microsoft.  Four years ago, I was hired as the President of Blackbaud.

LowcountryBizSC:
What is Blackbaud?  What is its mission?

Marc Chardon:
We provide software and services to non-profits to help them grow and operate more efficiently.  Our mission is to make the world a better place by working with the non-profit community to improve lives.

LowcountryBizSC:
What were the origins of Blackbaud?

Marc Chardon:
The company was started in the early 1980’s when an Englishman living in the New York area named Tony Bakker helped a private girls’ school develop a student billing program for a newfangled thing called the IBM PC.  Tony went over to the school at night and on their one PC, wrote the code for the software program.  He also developed a program to help the school keep track of its donors that would eventually go on to become our first core product, The Raiser’s Edge. The school, Nightingale-Bamford School, is still one of our customers.

Today about 45% of our business comes from fundraising solutions for our clients, just under 25% from Internet applications, around 15% from analytics, just over 10% from financial and accounting solutions and the rest from student information systems for private schools and ticketing applications used by cultural organizations.

LowcountryBizSC:
When and why did the company relocate its headquarters to Charleston?

Marc Chardon:
The company was located on Long Island for its first 7 or 8 years before locating to Charleston.  At the time, no particular software industry existed in Charleston, so the move was mostly a lifestyle decision.  As many people have done, Tony had visited Charleston and fell in love with it. 

LowcountryBizSC:
Who develops your software?  Is it done in-house or outsourced?

Marc Chardon:
Most of the code is written here in Charleston where we have 300 software engineers.  There is also a significant amount of engineering that we do in San Diego, Cambridge, Massachusetts and also Indianapolis. 

LowcountryBizSC:
How has your customer base evolved over time?

Marc Chardon:
We started off in the vertical segment of independent schools, but other opportunities opened up including universities, hospitals, zoos, aquariums, theater groups, relief organizations, faith-based organizations etc.  We serve over 22,000 customers ranging from small groups such as the local food bank, to the world’s largest non-governmental relief organizations, the American Red Cross, to the March of Dimes, St. Jude’s Hospital, the Mayo Clinic, the University of Michigan. We serve over around 900 Canadian non-profits, Oxford University in England, and the Multiple Sclerosis Society in Australia.  Throughout our history, we have always sold our software to non-profit organizations. 

LowcountryBizSC:
What is the ownership structure of the company?

Marc Chardon:
Tony sold the company in 1999 to two private equity firms. In 2004, the company went public and we are now traded on NASDAQ under BLKB.  Blackbaud has an incredibly powerful cash generation story; our decision to go public was not driven by a need to access the public equity markets for capital.

LowcountryBizSC:
What is the business model?  Do non-profits purchase the software, or do they pay a monthly fee.

Marc Chardon:
We offer basically every software delivery system that exists.  You can go to www.bbnow.org and within five minutes you will have a website for your non-profit, an on-demand, customer-driven, service that will allow you to take online donations through PayPal.  The monetization of the system only kicks in if you start accepting donations. At the other end of the spectrum, we also have $1M pieces of software with $3M or $4M worth of professional services implementation.  We have software-as-a-service, licensed sales, and contracts of software solutions with some licensing fees.  We have up front payments, and we have periodic payments. 

In the beginning, we were both a software provider and an original equipment manufacturer (OEM) of hardware. People simply did not have the hardware to run the programs, so we had to provide it. Over time, we exited that line of business to focus on software only.

The typical, sweet spot customer over our first twenty years was mid-sized non-profits raising between $1M and $10M a year – organizations that typically would have a dedicated professional fundraising person,or Development Officer, on staff. Up to 1999, most of what we did was shrink-wrapped, shipped out the door software backed up with a customer service organization to assist our customers with installation and training.

Ten years ago, we started to make some adjustments to the software in order to achieve some of the customization and parameteri
zation in our software programs necessary in order to attract interest from larger organizations. This meant that we had to evolve into more of a professional services organization. Bob Sywolski, my predecessor as CEO, who had run Cap Gemini, one of the largest IT professional services companies in the US, was instrumental in moving us strategically in this direction. Today, a large percentage of our business is providing enterprise resource planning (ERP) solutions, technical consulting, process re-engineering, fundraising, and accounting for large, mission-driven organizations.

LowcountryBizSC:
How is your software different from other customer relationship management (CRM) software programs?  There are lots of them out there: Sage has MIP for non-profits, Siebel, Oracle, SAP, and Microsoft all have CRM solutions.

Marc Chardon:
The typical CRM that is part of an ERP or the typical sales force automation program is about transactions and tracking sales opportunities.  Our programs are designed to help our customers follow their constituents longitudinally over the entire time that they are involved with an organization.

We offer two general value propositions to the non-profits.  First, we know more about non-profits and the relationship with their donors and supporters than anybody in the world. What drives non-profits, the relationships, and where they receive their funding is different from the for-profit world. If the non-profit knows you well, you will feel more connected to that organization, and therefore you will give more of your time and money. Bequests increase, lifetime share-of-pocket for donations increases, and if you are an advocacy-based organization, influence in advocacy increases.
 
Secondly, we offer specialized software that will help non-profits reduce their operating costs and help them be more efficient and effective in achieving their mission. People like to support organizations that are good stewards of their money.

LowcountryBizSC:
What is the key to your success in building up such a large customer base?

Marc Chardon:
First of all, you obviously have to have a product that people need and want.

But you can’t reach 22,000 customers unless you service those customers better than anybody else.  You don’t have to be the very best, in every dimension, for all products, but you do have to be the very best at customer service.  We over-invest in customer satisfaction; it’s economically valuable for our shareholders, our customers, and our employees.  

The most important metric for Blackbaud is our customer retention rate.  That is a critical metric for all companies, but it is especially critical in this economic downturn. When you have 22,000 customers and a 95% retention rate, you are still losing about 1,000 customers a year.  That means that you have to sell 1,000 customers a year just to maintain your top line!   Even small changes in that retention rate number can have big impact on your business.

LowcountryBizSC:
What has been your main strategic focus as President?

Marc Chardon:
The Board hired me to expand into adjacent market sectors and to grow our market share. We acquired Target, a company that offers a large scale direct marketing solution called Team Approach . We acquired Kintera, which brought us the Sphere platform and its Friends Asking Friends technology. Previously we were not heavily involved in these areas of fundraising. We have made five acquisitions, all of which have met or exceeded our objectives that were set out in our strategic planning.

LowcountryBizSC:
True or false.  SC will be successful in becoming a leader nationally in the development of knowledge-based businesses.

Marc Chardon:
The key question is: In fifteen years, will we have successfully transformed all aspects of our educational system – vocational through research – to produce the employees to achieve our goal of high paying, knowledge-based jobs? It’s no accident that Georgia and North Carolina are ahead of us in this regard. They have been investing heavily in education since the early 1970’s.  We also have to identify the business opportunities. The green technologies that are going to save our planet in 50 years is an area that is wide open.

LowcountryBizSC:
In general, what is the most challenging issue for CEO’s running a business in a down economy?

Marc Chardon: 
If your employees feel relatively secure in their positions compared to the outside world, they can focus more on their customer, and therefore your customer retention goes up.  Secure employees produce happier customers who renew their contracts.  The challenge for management these days is keeping that virtuous cycle flowing when you are constantly being buffeted by all this terrible economic news. Employees’ level of anxiety increases during this type of economy and you need to manage costs in order to meet shareholder expectations on return on investment.  Employees’ need for clarity goes up in an economic atmosphere where clarity has gone shooting down.

LowcountryBizSC:
How has the economy affected your customers?

Marc Chardon: 
Cultural organizations are having a hard time.  If you are only going to give $100 this year, are you going to give it to the ballet or the food bank?  Normally, we see about a 2% failure rate in non-profit organizations, and remarkably, that rate has stayed constant despite the weak economy. We have seen no change in the failure rates of non-profits that use our software, so that is a good sign.  Strong relationships from committed donors are the most stable funding source for non-profits.  

LowcountryBizSC:
How has the economy affected your revenue?

Marc Chardon:
We are fortunate to be diversified into many different vertical sectors and sizes of organizations.  While some areas have declined, high end ERP applications have actually grown.  Overall, we are projecting a relatively flat year in terms of revenue.

LowcountryBizSC:
What opportunities do you see for Blackbaud over the next 5-10 years? 

Marc Chardon:
The expansion into the non English-speaking world with non English-language products represents a huge opportunity for Blackbaud. The demand for the services of the non-profit sector is increasing around the world and governments do not have the resources to deal with all of their internal social problems. 
We currently do business in 77 different countries around the world and 15% of our revenue comes from international sales.  However, most of those sales are in English-speaking countries, or to English-speaking schools in non English-speaking countries.  Our next generation of software products is designed to make it easier to localize products. We bought RLC in the Netherlands in April, our first non English language subsidiary and recently rolled out our first non-English language product, eTapestry Espanol. Figuring out how to build a software product that takes into consideration the cultural and normative differences in fundraising around the world will be both fascinating and challenging for us.

Another opportunity will involve Blackbaud taking full advantage of all that Web 2.0 has to offer. Web 1.0 was determined by what corporations published; the Web 2.0 experience is more about what your peers publish. Web 2.0 will shift the focus of fundraising from what has typically been an organization-driven model to more of a donor-driven one. This will put an even greater premium on organizations gaining a full 360-degree view of their constituents, something that our pro
ducts are designed to do. 

LowcountryBizSC:
What are the roadblocks to being successful in these areas?

Marc Chardon:
Execution – the main roadblock for any company is executing.  We are confident that we have the systems in place to achieve our goals.

LowcountryBizSC:
What are you most proud of at Blackbaud?

Marc Chardon:
I am proud that our level of employee engagement has remained incredibly high through these tough times. We have achieved that through higher levels of communication and a stated priority to put employment security as our number one goal. Confidence in the company and in management’s ability to tell the truth is critical.

I am proud of our employees and how they not only serve their customers, but how they offer their time to give back to the local communities in which they live and work. The people who decide Blackbaud’s philanthropic efforts are the first line company employees, not management.  I don’t direct these initiatives; in fact, I see my role as more of simply getting out of the employees’ way!

Building a sustainable non-profit that is self funding and that has the ability to grow beyond one original founder’s vision – that is the largest challenge that the non-profit world faces. We are all proud of what we do here at Blackbaud to help non-profits succeed.