With the effective deregulation of the domain name industry through the imminent launch of up to 1,000 new gTLD’s, the competitive landscape is going to get a whole lot hotter over the next 24 months. We will likely see some financially and commercially successful ventures. It is likely that we will see many unsuccessful ones as well. The gap between success and failure will be slim.

New gTLD businesses that can base their decision-making on timely, accurate and incisive information stand the best chance of being successful. Their management will have the means to react quickly, execute strategy and alter tactics if need be. Now is the time to start considering what it will take to build and roll out management and financial systems, despite the fact that we are about one (1) year away from this round of gTLD businesses going live.

Part of the line separating the successful from the unsuccessful businesses is drawn between those organizations who will use this lull to plan, design and building out their financial information systems. The reason? Despite the one-year timeline, there is a limited window of opportunity to build a best of breed system, without the burden of live operations to distract management. Your senior management also has the ability, at this phase, to dictate the structure of the reporting data from their back-end provider before operations go live. It will be much harder to influence change or discuss new requirements with your back-end provider in the feverish months leading up to the launch.

In order to help with the kick-off of this process here are some of the areas that financial professionals need to examine:

Understand the Domain Industry

An important first step is to fully understand the idiosyncrasies and complexities of the industry. If you are a new entrant, then consider hiring or contracting experts to help you get up to speed. You have a steep learning curve, and post launch is not the time to find out how it all works, so resist the temptation to be “penny-wise and pound-foolish”. Find out about the operational performance reporting metrics for registry back-end operators, and how your back-end provider compares with the rest. Often they are captured as Service Level Agreements (SLAs) in the registry back-end agreement. However not all operations and performance metrics are defined under an SLA. You will need to know how and how often the metrics are measured? How are they reported and to whom? What constitutes satisfactory performance? How will these metrics be impacted when they will have to serve far more gTLD clients than they will ever have served?

It is vital that your CFO or whoever is in charge of Finance, fully understand the life cycle of a domain, as well as truly understand how the cash versus deferred revenue model works. Many registries have had to restate their financials, specifically because of this one issue, leading to awkward discussions with their shareholders and board for mis-stating their financial figures. If depending on the registrar channel for distribution then the senior management team should gather as much background knowledge on the channel as possible, including which ones plan to offer your designated gTLD and when. Discussions of registrar channel always brings up domain pricing, which is another major decision, Your management team needs to understand the basis for the wholesale price offered the registrars, as well as strategies for running effective promotions. In addition, you will need to understand what the registrars will charge as retail prices, so you will have a good understanding of the margins your gTLD represents. All this can be quite intimidating for the novice but leave nothing to chance and try to gain as deep and as wide an internal knowledge base as time permits—the ROI will become very evident later down the line.

Get to Know Your Back-End Provider

If you have developed a good relationship with your back-end provider during the application stage, then you will likely have been in engaged in ongoing conversations with them on understanding the business. You must also take time to study the back-end service provider agreement in depth in order to get an appreciation of the services they have committed to providing, what the terms are and what the Service Level Agreements (SLAs) are. You should be able to rely on them to effectively fulfill domain orders from go-live date and provide a suite of reports to help you monitor business operations. However, do not expect them to provide a turnkey solution to your entire business operation requirements. There will be gaps between what they provide and what you need to manage your registry effectively. Assess the adequacy of your providers’ services for your business requirements, draft a gap analysis report and make plans for bridging the gaps identified.

Define Your Corporate Reporting Requirements

Once you have considered the above two areas, you should then proceed to defining your reporting requirements. There are 4 broad categories of reporting: Operational, Management, Financial and Budgeting & Forecasting—each with its unique focus, different target user group and therefore require different detailed information to be gathered. Do you have investors, advisors, or other partners for whom you need to provide a regular status report? What about for ICANN compliance? Do you know what information, regularity and format they require? Senior management should collaborate and decide what the reporting requirements/preferences are for each category. Most of operational reporting should be generated by the suite of reports generated by the back-end provider and can be supplemented by your team as required. Shortlist the Key Performance Indicators (KPI’s) that the senior team needs to track as part of reporting. An example would be to develop a balanced scorecard, with metrics on the corporate targets. Your senior management needs to define the makeup of the registry’s financial reporting i.e. the content, presentation and level of detail to be reported periodically as these preferences will have an important bearing in the design of their general ledger’s hierarchical structure (as well as compliance requirements and back-end information factors). It is impossible to design an effective financial information system until you have a sufficient level of detail on the reporting requirements across the 4 reporting categories.

What to Buy? What to Build?

As mentioned previously, no matter how good your back-end provider is, it will only provide part of the reports and information you need to run the business. Once you’ve considered the above factors, then you’ll have a clearer idea about what systems you will need to run a registry properly. You will need to know what systems can be acquired, what 3rd party services can be contracted and which systems ought to be developed in house. To make the “build or buy” decision, you need your desire for independence and control, versus flexibility and conserving up-front cost.. The above process will provide a lot of background information to help with system selection for purchasing a general ledger system, deferred revenue calculator system, a budgeting & forecasting system and a Database management system (for management reporting).
Effective organizations build effective information systems. There is an opportunity for new gTLD players to build world-class information systems by spending the pre-launch time wisely—learning the nuances of the domain industry, gathering intelligence, achieving consensus on reporting requirements and arming itself with sufficient knowledge to make good decisions on the combinations of systems, builds and reports that will empower you to make smart future decisions from real intelligence generated from your information systems.