Post-Council: Business development, technical research, NZRS and InternetNZ

As part of ongoing improvements to internal comms, I'll be blogging ‘Post-Council’ on the operational impact or background of a specific Council decision after each Council meeting.

This is the first of the series. It looks at business development efforts at InternetNZ – a process aimed at delivering more resources to do good work for the Internet community.

 

Since 2010, a succession of InternetNZ Councils have engaged with members about diversifying the group’s income. Rather than all the funds which allow InternetNZ’s work coming from the operation of the .nz top level domain, new sources of income could be developed. This would allow us to do more wide-reaching work on our Objects, including the primary one:

to maintain and extend the availability of the Internet and its associated technologies and applications in New Zealand, both as an end in itself and as means of enabling organisations, professionals and individuals to more effectively collaborate, cooperate, communicate and innovate in their respective fields of interest.

InternetNZ’s Objects – section 2 of the Constitution

New sources of income would also allow us to weather any storms in the domain name market, which has become considerably more competitive in the last few years with the launch of hundreds of new top level domains.

Our work includes community grants, events like NetHui, a voice on Internet policy issues, strategic partnerships with others, direct conversation among InternetNZ members and providing a Kiwi voice in names and numbers policy globally. All these activities take money. With higher, more diverse levels of income, we can do more good work for NZ’s Internet community.

Business development

Introducing business development has been a long and gradual process of change. It started off with the creation of a business development policy roughly around 2010-2011, with the most recent version adopted in February 2014.

InternetNZ’s business development policy

More recently, the goal of new income from business development was set out in the Group Strategic Plan that Council and others talked about with members last year. This plan was signed off in December 2014. It set an ambitious target of $1m in group revenue from non-.nz sources by 2020 – an ambitious stretch, but putting a clear target is important.

InternetNZ’s Group Strategic Plan

Council made a further important decision in signing off the Group Strategy – that there should be a published business development strategy for the group, including NZRS, owned and signed off by the Council. More on the strategy later.

At its most recent meeting - held last Friday – Council accepted a planning document from NZRS. The company responded to our Statement of Expectations (signed off in December) with its plans for the 2015-16 financial year: its “Statement of Direction and Goals”. As the Council asked it to do, NZRS is devoting resources and energy both to business development and to technical research. The Council has applied a very considerable degree of scrutiny and due diligence both to the approach, and to how NZRS has implemented it in practice. None of the decisions have been taken lightly.

InternetNZ's Statement of Expectations for NZRS
NZRS's Statement of Direction and Goals

So where is business development at?

So far, the focus of NZRS efforts – under the current policy, and absent a group-wide strategy – has been development of the National Broadband Map. A number of other development projects are being worked through, though for obvious reasons of commercial confidentiality I’m not going to list what they are here. However they all follow the general theme of apps that provide people access to data that they wouldn't have access to otherwise. It’s also clear so far what isn’t on the cards: competition with registrars, a consultancy business, and expansion into Internet access provision.

The bottom line for business development is that NZRS - alongside its core role of operating the Shared Registry System and the .nz DNS at extremely high quality levels - is the commercial vehicle for our business development efforts.

Through its policy, Council has restricted the funds that can be used for this process to $400k, out of turnover over three years of approximately $27m. If efforts to develop new business that delivers a return are not successful – always a risk with any effort of this sort – it will come to an end.

Technical research

Alongside business development, InternetNZ has also asked NZRS to engage in technical research. This includes developing - and sharing - a greater understanding of the .nz domain and the technologies underpinning it, the Internet, and inter-networking more generally.

This research leads to outputs that help improve the quality of the .nz offering, provide useful information to the local Internet community, and might inform commercial opportunities. Jay Daley, the CEO at NZRS, has blogged a bit more about this.

Read Jay Daley's blog post "A year and a bit of technical research"

An expanded role for the registry

One question that springs to minds (and sometimes to keyboards) is concern among members or other stakeholders about this expanded role for the registry. Some believe that NZRS should never do anything but run the .nz system, and minimise the fees. Some believe that InternetNZ should not conduct any activity of its own (the Issues Programme, our Community Programme including grants, NetHui and so on) because in the end, fees for .nz domain names should only be high enough to run the system and that’s it.

I respect that point of view, but I don’t share it. The Councils that members of InternetNZ have elected over the past half decade do not collectively share it, either. There are a variety of views around the Council table about every subject, including this one, but the decisions – and the direction – are clear.

InternetNZ was established twenty years ago with a broader remit than “operate .nz” - it was hoped that the commercialisation of the registry function might deliver some income to advance those broader objectives. There’s quite a list of achievements beyond the narrow confines of .nz.

InternetNZ’s achievements

A collective decision to try something new

We’ve matured as an organisation to the point where we’re giving business development a go, for two reasons: to reduce dependence on .nz as a source of funds, and to increase the pool of funds available to advance our objectives.

The choice faced by members, Councillors, directors of subsidiaries and staff across the group is simple: remain static and keep doing what we’ve been doing, or change and experiment with diversifying our income.

Staying static will see income fall over time - it doesn’t seem likely there will be significant future growth in the market for .nz domain names in the current environment of increasing competition. This means a reduction in what we can do to deliver our objectives. It’s a perfectly legitimate choice to make, if a somewhat self-defeating one.

Trying new things is the approach we’ve chosen. A limited and careful commitment to business development, with a transparent policy and strategy framework guiding it. This makes business development even harder than it would otherwise be, but it’s the right way for us to do it. It’s also consistent with what other ccTLD managers are doing the world over.

It’s not the easy decision, given the inherent commercial risks of business development. Failures come with successes, and wearing that risk is going to be a new experience for InternetNZ. Be assured though that the risk of failure is well understood and there is no chance that it will impact on the provision of .nz, either directly or indirectly. Currently we ensure that by only attempting small steps with careful legal backing. In future as our steps get larger we will look at additional safeguards including new subsidiaries, to partition risk.

It’s not easy, given that any change to what NZRS (or InternetNZ for that matter) does in entering new markets or sectors brings it into competition with new groups of people, some of whom are likely existing members or stakeholders. Or that as we introduce new disruptive services that undermines existing business models, as the Internet has done since its inception.

It’s not easy, given that some parts of the InternetNZ family would rather we didn’t.

Nonetheless: a decision that has been made collectively, carefully and gradually – and that we will see the results of, for better or for worse, over coming years.

Next steps

So what’s the next step?

The policy is in place. The strategy to drive business development is under development. Council will be getting a first draft of the strategy electronically in a few weeks, and it will be up for discussion at their meeting in August.

There’ll also be a chance for input from and discussion among members – including at the Annual General Meeting at the end of July. The strategy will build on lessons learned so far – and will flesh out more detail on the proposed future path, with member discussion helping to shape what finally gets adopted later this year.

Whether it’s today’s delivery of business development or tomorrow’s, it will happen across the group consistent with our responsibilities as good stewards of .nz, and as an organisation founded for and by the New Zealand Internet community.

I encourage anyone and everyone interested in how we go about this process to share their views. To have your say is very simple: join InternetNZ and get involved. Whether in social media or through the internal forums InternetNZ makes available (email lists, face to face discussion), your views will help shape what we do in this area, as in all others.

Comments

john.butt@jonette.co.nz's picture

It would seem unwise to use funds from a protected source like registry income to compete with any existing NZ business. That may limit the options for InternetNZ.

I presume that is behind the "competition with registrars, a consultancy business, and expansion into Internet access provision" avoidance decision?