The news that internet services company Melbourne IT is looking at cutting management costs and returning cash to shareholders in the face of declining revenues doesn’t come as any surprise to observers of the firm.
In many ways Melbourne IT is a historic relic, one of the last examples of the late 1990s dot com boom where management from those heady days survived unscathed by the realities of the 21st Century.
Melbourne IT story illustrates the poor management and flaw investment strategies of the big dot com float and also illustrates the risk of under-investing in key areas, as anyone using the site or the services of its Web Central subsidiary will understand.
Both companies feature clunky sites and extremely poor customer service. For resellers and customers using the Web Central command center, the experience and technology is straight out of the late 1990s.
While overseas businesses like Rackspace, GoDaddy and Bluehost innovated and invested in their platforms, Web Central and Melbourne IT sat back and how expected their dominant position would guarantee them profits.
Much of that management complacency was born out the founding of Melbourne IT when it was spun off from the University of Melbourne to exploit the then monopoly the university’s computer faculty had on granting Australia commercial domains.
In 1998, as the dot com boom was entering its most heated phase, Melbourne IT was floated and immediately attracted anger and allegations of wrong doing – none of which was proved – as the stock debuted on the stock market at four times its listing prices which generated huge profits for the insiders who were fortunate to get shares allocated before the sale.
Melbourne IT’s huge stock valuation was based on the belief the company would exploit its dominance of the critical domain market – it was similar to other technology floats of dominant players at the time such as accounting giant MYOB in 1999 and Telstra’s spin off of its small business Commander operation the following year.
All of these stock market floats proved to be disastrous as each company’s management showed they were incapable of exploiting their privileged market positions.
Of the three, Melbourne IT’s management survived longest partly because of the riches expected to flow into the company’s coffers through Top Level Domain sales as gullible government agencies and corporates being driven by a Fear Of Missing Out overpay for new online addresses.
Now it appears ICANN’s top level domain river of gold isn’t going to flow, partly due to arrogance and management incompetence in that organisation, so Melbourne IT is now going to have to cull its executive ranks.
Steadily, both Melbourne IT and Web Central have gone from being dominant to irrelevant and provide a good case study of how poor management and complacency can squander a dominant market position.
The failure of Melbourne IT’s management proves that clipping tickets on the internet is not always the path to riches, particularly when you don’t invest or innovate.
Agree Paul – I mistakingly registered a domain name with them a while ago (bad advice from someone) and it took much effort to have it moved to somewhere that was at least 4 times cheaper and provided service. Since then I have been trying to cancel a web hosting service with no luck whatsoever. They either don’t answer phone calls to their help line, or the person who answers can’t help you. Phone calls are never returned. Emails to their help service are also similarly not returned in a timely manner, and actioning a ‘cancel my service’ request via their Console also does not seem to work. Worst.possible.service.ever.