March 10, 2013

Outgoing Blackbaud CEO Marc Chardon Talks About His Tenure, Departure

Brendan Kearney  /  Post and Courier

Blackbaud had been publicly traded for less than 16 months when Marc Chardon was named chief executive officer in November 2005.

The Daniel Island software company's annual revenues that year were $166 million; it had some 13,000 customers and about 940 employees.

Thanks to a series of acquisitions, and despite the Great Recession, the company's customer and employee totals have since more than doubled, and its annual revenues have almost tripled to $447 million last year.

On the other hand, some have said the company has become less innovative. And over the past year, Blackbaud has struggled with its biggest acquisition, former Texas rival Convio, while its nonprofits contend with flat charitable giving.

For better or worse, Chardon has made Blackbaud bigger and perhaps more dominant in its industry than ever. Was this what he imagined seven years ago? "I think I thought we'd be where we are today a little sooner," he said during an interview. "But I'm an impatient guy."

Chardon, 57, talked last month just weeks after Blackbaud announced the end of his career with the company. He will step down at the end of this year or before that if a successor is named.

While the company has said Chardon's exit was a joint decision and not related to the Convio deal, people inside and outside the company assume he was fired. Chardon dismissed such stories.

"I came here for five years; I've stayed for between seven and eight," he said, referring to extensions of his initial contract. "The board believed we needed somebody to sign up for a significant period of time going forward. The company has changed enough, and my desire to stay has changed enough, so the combination of all of that means it's time to find somebody new.

"People are going to make up any stories they want to make up, but they're wrong," he said.

Regardless, as Blackbaud picks its fourth CEO for its fourth decade and contends with the changes in how nonprofits connect with supporters, the company is at a transitional moment.

"I think they're on very solid footing here," said Matthew Kempler, an analyst at Sidoti & Co. who has covered Blackbaud for the past three years.

He views the trimming of more than 200 positions companywide since summer, bringing the overall headcount to about 2,600, as a necessary post-Convio adjustment.

"Now it's more about reinvigorating the top line and ... fine-tuning the technology," Kempler said, specifically better integrating the products and further adopting the software-as-a-service model that is sweeping the industry.

Beyond the 'Edge'

The Harvard-educated grandson of French immigrants, Chardon took over at Blackbaud after serving as a Microsoft executive, first in France and then at the computer giant's headquarters in Washington.

After Tony Bakker founded Blackbaud and Robert Sywolski took it public, Chardon said he was hired to expand the company's "served market," including internationally, and expand the company's products.

Blackbaud now claims more than 27,000 customers around the world and sells everything from its core fundraising software to accounting tools, data analytics and web services.

"When I started, we were primarily the 'Raiser's Edge' company," Chardon said, referring to what is still the firm's flagship software, and didn't have a "real" Internet or event-based product, nor something for the largest nonprofits.

Blackbaud now offers all those things and more on a subscription and service basis than selling a one-time license.

Once "the big fish in a small pond," Chardon says, Blackbaud now is "a relatively smaller fish" in the much larger multibillion-dollar nonprofit technology market.

Buying binge

A big part of the growth strategy was to acquire promising or rival companies, including during the economic downturn that has dominated the second half of Chardon's tenure. Notable acquisitions included Cambridge, Mass.-based Target Software and Target Analysis Group and Indianapolis-based eTapestry in 2007 and San Diego-based rival Kintera in 2008.

But Chardon's biggest buy came at the beginning of last year, the $325 million purchase of Convio.

It was a strategic move to fill gaps in Blackbaud's product suite, specifically online, and take more market share, so much in fact that it led to an extended antitrust review by the U.S. Department of Justice.

Convio's business suffered as nonprofits waited for the merger to shake out. Blackbaud cut 150 employees in January as part of combining the companies and meeting financial goals advertised to shareholders.

It will all eventually pay off for Blackbaud, according to analysts like Kempler, but it has caught customers off guard and even angered some.

Citizen Schools, a Boston-based nonprofit that runs after-school enrichment programs, had been a Blackbaud customer before switching to Convio in 2011.

"I do think, looking at the Raiser's Edge from when I started to when we moved off it, which was three years, there was virtually no innovation on that platform in that timeframe," chief information officer Will Nourse said last week.

Last summer, when Blackbaud announced it was phasing out one of its products, Nourse sounded off on his blog in a post titled "Blackbaud Kills Common Ground: When Bad Vendors Happen to Good People."

"You have nonprofits who have made their decision about what they can afford or what functionality they're using and they've invested heavily in those systems," said Nourse, who was interviewed by Justice Department lawyers as part of their antitrust review. "Why should Blackbaud be the one to say you can't use this platform, use something else?"

Furman University would seem to be more satisfied customer. On its website, Blackbaud says the Greenville school wanted to upgrade its alumni database and web presence, and that the Raiser's Edge and NetCommunity did the trick.

Mike Gatchell, a former Blackbaud salesman and consultant who is now Furman's vice president for development, said that the Raiser's Edge remains "best in class" but that Blackbaud's website product, NetCommunity, is not.

"I just don't know how committed they are to the online community and social media space," he said. "I'm not sure they're ready to help us do some of the things we're trying to do."

But Furman isn't looking to switch just yet because there isn't good competition and because NetCommunity works with the Raiser's Edge. He calls that both "the beauty" of the arrangement and "where Blackbaud has you."

"I feel like we don't know, but I'm not concerned," he said. "I just have an underlying confidence –- maybe it's because I've been there."

The next step

The perception that Blackbaud has pursued a market consolidation strategy over in-house innovation is something Chardon's successor might have to address, but he isn't buying it.

"It's very easy to take a look at someone who's a leader and say they're not innovating," Chardon continued, "but then you have to ask yourself, well, why are they still the leader?"

Soon, Chardon won't be Blackbaud's leader, and he seems to have mixed feelings about it.

"The passion that this organization has for the sector that it serves is what distinguishes ... Blackbaud from any of the dozens of companies I could've gone to," Chardon said. "It's just the best job in the world."

The CEO selection process is still in its early stages, and Chardon has said he expects to be around through at least the spring earnings report in May. As for what comes next, Chardon said he's looking forward to advising his stepson's start-up in Seattle but said he and wife Marnie will remain in Charleston "at least part time."

"Again, ask me more about that when I don't have a job," he said. "Right now, I'm staying here."