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The “why” of Openprovider

Many companies, including ourselves, are very good at telling what they do and how they do it, but much less often why they do what they do. This is calledthinking from the outside to the inside.

However, it is much more inspiring to think from the inside to the outside. This is called the Golden Circles theory, devised by Simon Sinek. If you want to know more about it, check out the TEDx contribution of Simon Sinek on Youtube.

What is your WHY? What is your organization’s reason for existence?

Every company has a WHY, but getting it just right so that customers, employees and suppliers understand why you do what you do, is not easy.

In my 20 years as an entrepreneur, I have had several companies and business models and the main conclusion I have drawn is that nothing stays the same. Certainly not in the IT industry, but also not in reality. Well-known retail brands in all kinds of industries no longer exist or are dying out. Yet the products provided by these companies are still purchased through other platforms, and in the case of music and video with a completely different distribution method and business model.

Who would have thought 25 years ago that we would be reading books on e-readers which can be bought through Amazon, streaming music through Spotify or watching series through Netflix?

The hosting industry is also changing. From shared hosting to dedicated servers and from there to virtualization. Virtualization to IaaS, PaaS, SaaS and more fancy terms.

How do you, as a hoster who is currently running your own hardware, see the future? What are the ideas towards the future to get out of the red ocean and enter the blue ocean?

We have also asked ourselves what Openprovider’s reason for existence is, as our business is changing as well.

Products

In 2004 we were the first pure Domain Registrar in the Netherlands and therefore we received business. We registered .nl and .be domains ourselves directly through the registry and the remaining extensions we did through a foreign competitor. We got customers simply because we were there and provided good support. Well, anyone can do that. In that field there’s no value to add for a wholesale provider like Openprovider. Wholesalers only have the right to exist in distribution if they actually add extra value, otherwise one would prefer to deal directly with the supplier or even the bigger wholesaler where your wholesaler purchases products. Not exactly a viable model.

Openprovider is slowly but surely acquiring more and more accreditations at registries. We are ICANN accredited which not only means we are able to purchase more than 1.000 (new) extensions (gTLDs) such as .com, .net and .xyz directly through the registry, but are also well insured, meet certain financial requirements and have all of our technical affairs sorted out.

We also have accreditations with almost 100 ccTLDs (country code domains) and we are investing in continuously connecting to new registries. Thus we have secured the reason of existence of the wholesale: we have contact with all of the suppliers and in turn our customers have only one contact and that is with us.

Yes, domains are very important (and for many of our customers the ‘most important secondary business’), but that does not necessarily mean that we add extra value to a domain name. Yes, we do have free DNS and we support DNSSEC and IPv6, we are also compliant with all of the ICANN rules and have automated tools to assist in the transfer process etc etc… Yet, that does not justify that prices for domain names are sometimes 100 to 200 percent higher than the cost price. That is not a sustainable model, definitely not for a wholesaler which adds extra value only by saving his customers direct and indirect costs (lower cost prices in combination with more ease and less effort).

Early on we saw that with domain names alone we would not have a long-term business model. We started adding more products such as SSL certificates, software licenses and hosted spam filtering.

Ultimately, in terms of product range, we want to be the Amazon for the IT industry.

Business model

First, a few facts: Openprovider is financially very healthy, we do not have any bank loans or money from investors. We finance everything from the exploitation of our own resources. Since the founding of Openprovider in 2004, we have been profitable. Hosting Concepts BV, which Openprovider is a part of, was a hosting company up until mid 2012. This hosting company was sold in 2012.

The equity capital of Hosting Concepts is low in comparison to the income. This has two reasons:

  • In 2006 and 2007 there were huge losses in our hosting department. After 2007, the only period there was a loss, was in 2010 when we invested enormously.
  • Furthermore we invest a lot in software development which we do not add onto the balance sheet but book as costs in the year within which they are made. In 2014 the development team almost doubled to 15 pax. These costs weigh heavily on the short-term results, but they give our customers a guarantee that we will still be here in 10, 20, 30 and 40 year’s time. With a little bit of luck, I will reach the 40 years. That would be fantastic. Do what you enjoy, let it grow and flourish and make others (colleagues, customers and suppliers) happy with what you do.

Some figures:

  • The turnover growth in 2014 was 34%
  • The turnover growth of Openprovider from 2009 to 2014 was 275%
  • The gross margin in 2014 was 29%
  • The net profit is low and will remain low

We prefer to invest in the long-term:

  • Train and educate our people
  • Hire more and better people
  • Grow internationally
  • Invest as much as possible in development

Openprovider is focussed on the long-term. Software development will remain the main objective in our focus: we enjoy that, but it is also a necessity. The market is changing rapidly and to continue giving value to our customers we must continue to develop.

As mentioned above, we do not add much extra value to domain names. Additionally, we find that many registries of domain names make too much profit which actually belongs to the customer. These two reasons have led us to transition to a new business model:

We charge a subscription fee to use our software platform and do not charge any margin on the domain names.

This is a simple form of subscription which companies in other industries have successfully used:

  • Amazon has Amazon Prime
  • Netflix: unlimited movies and series for a fixed monthly fee
  • Spotify: equal to Netflix but then for music.
  • Costco (supermarket chain with more than 40 billion dollars in revenues) where you pay a yearly subscription and can shop for very competitive prices.

The Costco and Amazon Prime models most represent the model which Openprovider has devised for domain names.

The “why”, “how” and “what” of Openprovider

Our “WHY” is:
We believe that all companies must re-invent themselves regularly. 

Our “HOW” is:
We do this by continuously investing in our people, our software and our business models.  

Our “WHAT” is:
Our platform where all domain names and other products can be registered and managed, and our business model where you can purchase domain names for cost price and pay for the use of the platform.

I am curious about your WHY’s, HOW’s and WHAT’s! Share this with us through blog@openprovider.com.

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