Graeme Philipson
October 15, 2015

Melbourne IT call for open data

Melbourne IT call for open data

Martin Mercer: strongly believes government should not be in the business of picking winners

Melbourne IT’s CEO Martin Mercer believes governments, at all levels, should make their data more available.

That will enable a whole range of possibilities from new apps and new businesses to new ways of thinking, he says.

Most people still think of Melbourne IT as a domain name business. It still does that, but it is now much more. It is increasingly positioning itself as a ‘digital solutions’ business. And those solutions are increasingly varied.

Mr Mercer was appointed CEO in early 2014, replacing long-time head Theo Hnarakis.

InnovationAus.com spoke to him about the company’s challenges and opportunities, and his views on government tech policy in Australia.

“Governments have massive amounts of information, which they often don’t realise they have,” Mr Mercer says.

“We strongly believe they should make this information more widely available. That would enable all sorts of clever new digital applications.

“There are some examples –the Rural Fire Service in NSW makes available bushfire data, which can be integrated into traffic applications. The Queensland Department of Education is part of the Open Data Initiative and shares anonymised data about how students use the internet.”

Another good example, Sydney’s popular TripView public transport app is now endorsed and promoted by the state government, which initially tried to stop it because it was ‘stealing’ timetable information.

“Making this data broadly available will create the opportunity for people to develop new and more effective learning solutions,” says Mr Mercer. “Governments are too protective of information. They need to share it more.”

Mr Mercer has strong views on the way government should treat the tech sector. “We strongly believe that the government should not be in the business of picking winners, but should create the right environment for business to prosper.

“There are a lot of rent-seekers in our industry, and in many others, looking for special treatment from government. We don’t want that – we think it is the government’s broader policy settings that are important.”

Mr Mercer believes one of the key issues is Australia’s rate of corporate taxation. “It is making us uncompetitive.

The government’s own figures show that the corporate tax rates in most of our trading partners have been decreasing, while ours has stood still. But it’s not a zero-sum game, and other issues need to be addressed as well.

“There needs to be less regulation and red tape. The government has made some moves in this direction, but more needs to be done. And visas for skilled workers are a nightmare. There has been a lot of discussion about 457 visas, but they remain far too difficult to get, and the effort and cost involved is astronomical.

“We live in a global economy, particularly in our industry, and we need skilled people to be able to move more easily in and out of Australia. It shouldn’t be that hard – look at the way Singapore does it, and how successful they have been.”

He also believes governments can do more through their purchasing policies.

“They are the biggest purchasers of goods and services in the economy. But in the digital era, the cloud era, they need to move beyond their traditional IT sourcing models and start ‘sourcing for solutions’.

“Governments should look more at ROI and less at total cost of ownership. The world has changed – they need to look at opportunity, not cost.

“That is what innovation is all about.”

Innovation is also what Melbourne IT has been about since it grew out of the University of Melbourne 20 years ago, when it was set up to commercialise the university’s IP. It listed on the ASX in 1999, at the height of the dot.com boom.

Since then Melbourne IT has become one of Australia’s biggest web hosting companies, acquiring WebCentral and NetRegistry. It is still best known as a domain name registration business – it the sixth biggest domain registrar in the world, and the largest in Asia Pacific. But now things are changing.

“We have since pretty well exited the web hosting business,” explains Mr Mercer.

“The market is dominated by global players like Amazon Web Services, and there are economies of scale that we can’t hope to match.

“So we have extended our operations into managed digital solutions, helping people with their web presence and their web marketing. We have two key markets – SMEs and enterprises. We tend to leave the mid-market alone – we don’t want to spread ourselves too thin.”

At the enterprise level Melbourne IT manages the digital presence of companies like Foxtel, Domino’s Pizza, ANZ Bank, Coles Financial Services, and lots of state and federal government departments.

At the SME level it has ”tens of thousands of customers.”

The revenue mix is about 40 per cent enterprise and 60 per cent SME. Mr Mercer says there is substantial room for growth in both markets.

“We estimate the potential market for SME digital presence in Australia to be well over $1 billion annually, and we are still a $130 million company.

“We have a large customer base from our domain name activities. That grew substantially larger when we acquired NetRegistry in early 2014. That is a good business, but it has low margins – our strategy is to move these customers to managed digital services.”

He compares the ARPU (average revenue per user) for domain registration services of around $100 a year with the managed digital services ARPU of around $1500 a year.

“At the moment our revenue breakdown for SMEs is 86 per cent domain services like registration and email management, and only 14 per cent managed services like online marketing and website design. We are looking to reverse those percentages.

“At the moment about 75 per cent of the enterprise business is in providing solutions, with 25 per cent in hosting and infrastructure. We think this mix is about right. So our strategy there is to increase our user base and broaden the number of services we can offer them.”

It appears to be working.

The share price has gone up 50 per cent, from $1.20 to $1.80, in the last 18 months. And despite the company’s name, Mr Mercer is based in Sydney, not Melbourne.

Reality is changing faster than perception – as is so often the case.

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