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Productivity tools are a very large set of tools intended to increase efficiency and productivity. Online productivity tools can generally be categorized as follows:
See http://lifedev.net/big-list-of-online-productivity-tools/ to see examples in each of these categories.
There are certainly way more tools available for use than can be outlined or recommended here. They key is that you know that such tools exist and that the tools can be used effectively to increase productivity and decrease costs.
To demonstrate the potential of some of these tools, we'll describe a few of the Google productivity tools and how they can increase productivity. Google applications are free for non-profits with less than 3,000 employees.
Gmail is Google's free web-based mail client. Beyond providing an excellent way of handling e-mail, it can also provide functionality for managing contacts, managing tasks, for viewing shared calendars, for sending mailings to distribution lists, and for real-time chatting with contacts. Gmail can often be synchronized with mobile devices to allow remote access.
Gmail for Domains is a free service provided by Google that allows non-profits to have all of their e-mail functionality provided by Gmail, but you can keep your existing .org (or whatever) e-mail address.
Google Calendar is an online calendar. Beyond providing basic calendaring functions, it also allows shared calendars. This can be very useful in an organization for view the events of others and for viewing shared events and meetings. You could, for example, have a personal calendar for non-work events, a shared work calendar for your events that others in your workplace should see, a group meeting calendar that all in your organization can see, etc. Specific calendars can be shared so that only the calendar owner can add or edit events or so that anyone that is given permission can add/edit events.
Google Calendar provides invitation functionality for managing invitations and confirmations for specific events (e.g., you can set a meeting and have participants RSVP electronically).
Google Docs is an online document creation and collaboration application. Beyond providing basic word processing functionality, it also allows others to view and/or edit documents you create. It is an excellent mechanism for providing collaborative documents from simple meeting minutes or agendas to full-scale reports or grant applications. Because Google documents are stored entirely online, there's no chance of the files becoming corrupted or lost, and there's no need to wait for others to complete "their part" of a document - all collaborative edits happen in real-time on the same file.
Beyond plain documents, Google Docs also has a spreadsheet and presentation option that mimic functionality of Excel and Powerpoint, respectively. While Google Docs does not give you the most powerful word processor, spreadsheet, or presentation software available, it is very good at creating and maintaining documents that need to be viewed or edited by many parties.
Google sites provides your organization a very basic web site hosting service. For organizations that currently have no web site, this provides a free, easy-to-use way of getting started. While Google Sites provides a basic web site, most organizations soon find additional needs for their web site that are not provided by Google Sites and will typically find self-hosted or remotely-hosted web sites with a dedicated domain (something.org) to serve their needs better.