As nonprofits lose funding and staff, their outsourced IT partners could be positioned to help.
Despite widespread financial headwinds facing U.S. nonprofits, their technology investments are moving forward, opening the door for third-party IT service providers and advisors. A 2026 study by the Center for Effective Philanthropy found that 30% of nonprofits are considering sharing operational functions such as tech with another organization. Only 6% already do so, according to the survey of 380 nonprofit leaders and CEOs. A quarter of nonprofits have implemented a strategy to outsource administrative, finance or technology in the last year, per a Grassi survey of 207 respondents conducted in June 2025.
Outsourced IT providers are eying a nonprofit market that is lagging behind on AI adoption, laden with unique cybersecurity concerns and facing existential budget concerns.
“A lot of times it's been so dramatic that it's almost an all-or-nothing situation where a 40-person organization has to go down to four people, and they just need to take a break for a couple years to figure stuff out,” Matt Woestehoff, CTO of MSP Personified, told Channel Dive.
Follow the money
Reduced funding is the main concern for nonprofits and a key opportunity for managed service providers.
One-third of nonprofits have experienced a government funding disruption, per an Urban Institute Center analysis. The Trump administration’s freezing of federal grants in January 2025 was a key move in a series of federal actions that fueled a funding downturn. CEP’s study found that 57% of nonprofits are finding it harder to get money from foundations, and major individual donations have grown more elusive.
The financial consequences are material. Nonprofits are increasingly in the red, with 39% reporting a budget deficit in 2025, compared to 35% a year prior and 22% in 2022. Their most common solution is to trim staff. Some 30% of nonprofits have reduced their headcount.
“Labor is typically one of the most expensive costs,” FusionTek CEO Brian Miller said. “What can we do to empower those people and set them up for more success from a technology perspective?”
The impact to IT budgets is often indirect. On one hand, nonprofits are still investing in technology. BDO's Nonprofit Standards Benchmarking Report published in October found that 64% of nonprofits are increasing their technology spending to better deliver their programs and services. Using technology to improve operations and efficiencies is a priority for almost half of nonprofits, with education-focused firms tracking ahead of their peers, Grassi found.
However, tech investment doesn’t always equate to IT investment. If an organization reduces in size, the economics of using an MSP may no longer make sense.
“What we find is typically as they become larger, we can help be a sort of a force multiplier, but typically, the smaller nonprofits are operating on a really tight budget, and an external IT partner usually isn't in the cards,” Miller said.
AI adoption lags in nonprofits
Nonprofits don't seem as eager as their commercial counterparts to implement AI, according to studies and MSP perspectives.
CEP's study found that 20% of nonprofits are considering using AI tools to reduce operational costs. Grassi’s survey found that AI adoption in the sector grew from 31% in 2024 to 48% in 2025.
Woestehoff said many orgs were hesitant to explore GenAI and agentic AI at first.
“But a lot of them, especially in the last six to nine months, have realized that they're going to get left behind if they're not taking it seriously,” Woestehoff said.
Woestehoff said Personified is pitching AI to clients as one of the many software tools they can put to use.
“We're having a lot of really good conversations about how to use it responsibly and take advantage of some of the efficiencies and some of the things that it can be used for appropriately,” he said.
The industry’s laggard status on AI adoption can be attributed in part to its reliance on volunteers. Those individuals are prone to use consumer-grade LLMs that they use in their personal life, according to Miller.
“[We need to be] making sure that we're using the tools that are the right tools for business organizations and to have things dialed in, not just the same thing I might use like my Gmail calendar at home, because I'm looking for a different level of security, data tracking and auditing,” Miller said.
BYOD policies that arise from a volunteer-heavy workforce become a security problem of their own.
“We find many folks in nonprofits might use their personal computer for business use, and because of that, we can't necessarily apply the same security tools, and so we have to take a different approach and secure maybe more the web environment or whatever data is being accessed there,” Miller said.
The problem bears out with cyber insurance claims. Cyber policies may require an organization to use a specific set of tools, but the person at the nonprofit may not understand that.
“If a claim does happen or a challenge does happen, they may have given the insurance carrier the wrong information, which gives the insurance carrier the opportunity to deny the claim,” Miller said.
The call for the MSP is to educate nonprofits about the risks associated with using consumer tools and keep them apprised of their insurance requirements. If a nonprofit is relying on a disparate smattering of consumer tools, IT partners can help it understand how much it actually costs to govern the technology.
“Realistically, they're going to spend more money in the longer run,” Miller said. “What we want to do is make sure we understand the totality of where they're looking to go, where they currently sit, and then craft a roadmap so we can be good stewards of their IT dollar.”
