Content Delivery Networks (CDN) having been having a tough time recently.

The leader in this space is clearly Akamai Technologies, however even this leader has been seeing its top line revenue remain stagnant at around $206M a QTR over the last year.  The stock which had a meteoric run up in valuation from it’s sub $1 in 2002 to lofty peaks in the $50+ range in 2007 only to languish in the mid $20’s over the last year.

Thanks to CNBC’s Kramer publicity, the stock was the smart and clever (Akamai = smart, clever, knowledgeable in Hawaiian) choice for the right investor during the 2003 time frame.  The company has survived the “dotcom” blowup and a staggering blow of the loss of one of its well-respected founders in 9/11.  Its management team had beaten the odds and built a strong, fast growing company

From 2003 to 2009 Akamai has grown its revenues 5X to an impressive $790M .  The majority of this coming from an explosion in its Media and Entertainment division with the growth of music and video delivery on the net, however a downturn in  2009 CDN pricing has obviously put pressure on top line revenue growth in this sector.

The entry of Limelight networks onto the scene in 2006 seemed to be a thorn in the side of Akamai, who had until this point seen little serious competition in the media delivery space. Limelight’s claim to fame is that it has built a next generation CDN that can deliver Media CDN services at a lower cost due to its “newer” technology.  Despite it’s claims of “newer” technology Limelight network has been embattled in a nasty IP patent lawsuit against Akamai technologies.

Is Limelight’s newer technology really unique and does it give Limelight a cost advantage in the market ?

To answer this question we jumped into the time machine and set the clock back to March 2003 a year where Akamai reports its QTR’s numbers of $36M which is within range of Limelight recently reported $33M Q3 2009 number.

What’ interesting here is that the numbers seem comparable, they certainly do not seem to demonstrate a “major” advantage for Limelight technology, but lets look at this a little closer. Wholesale bandwidth was almost 40X more expensive for Akamai in 2003 than Limelight’s costs today

So where are the economic advantages to Limelight’s technology?

Limelight claims that its technology advantage is based upon three main premises.

1) Massively provisioned delivery centers

2) Direct connections to access networks

3) Global fibre-optic interconnect

The thought behind this is that there is an economic advantage to centrally locating servers at major peering points such as Equinix and exchanging traffic with major networks at these locations. By doing this it doesn’t need to locate 55,000 servers at the edge of the network as Akamai does.

However, what is sometimes overlooked is Akamai does this in addition to its thousands of servers embedded in networks across the world. Whilst figuring the amount of traffic “peered” by  network is an imprecise science it is possible to look at public peering information and get a least a representative picture of the scale of their public peering.

The chart below represents public peering connections as reported on peeringdb.org.

What might surprise many viewers here is that Akamai on the surface actually has more peering than Limelight. However considering that Akamai has been a major player in the Internet for longer than Limelight, it has over time developed long standing relationships when it comes to peering and interconnections with major networks.

Lets roll the clock forward and take a look at Akamai’s last QTR where it reported $206M in revenue with $62M in cost of revenue.

It’s fairly clear that Akamai’s margin continues to improve in comparison to Limelight and has of course improved dramatically from its 2003 levels. However, what also seems clear is that Limelight’s cost advantage in this marketplace seems not to be as clear as you would first think.

It is of course unfair to represent  and assume that “peering” is the only economic variable when it comes to CDN efficiency and margin, there are many more, which we will be covering in later reports. Additionally the extent of private peering that Limelight and Akamai has in place is unknown, since it is by its nature “private”.

A few days ago Google announced “a new experimental protocol for a faster web” called “SPDY” (pronounced SPeeDY) this would seem to, at first glance,  put Google head to head with the major CDN providers out there like Akamai and Limelight.

So what’s the problem that these companies are trying to solve? The protocol that “runs” the Internet is called TCP/IP and its over 30 years old.  TCP/IP was designed for reliability and resilience to perform over low speed telephone lines and make sure that your data got to its destination. Today’s Internet is a far cry from the original design criteria. Modern web applications are bigger and have far more request response traffic and are ‘chatty” in comparison to web pages from 10 years ago.  Google points out in its white paper many of these problems.

TCP/IP Optimization products are not a new idea; many companies have made a great living on making your web pages load faster.  Riverbed and Fastsoft offer specialized appliances to assist in the acceleration of the delivery of content to your end users as well as the CDN services such as Akamai and Limelight.

What’s interesting in this announcement is Google appears to be going it alone and proposing a new project called SPDY to be built into its web browser Chrome that would make web pages load 50% faster. Google certainly is big enough to attempt this on its own without going through and waiting for standards boards.

So is this a threat to the CDN players today? In the short term no, Akamai has a strong business and a diversified portfolio of products however in the long term if browser based optimization becomes the standard, the question needs to be asked if there will there be a continued need for separate Application Delivery Networks or devices?

Update:  Google has also announced that page load times will be a factor in web page rankings ……..

Some results from Google’s testing of SPDY.

“Cloud computing” certainly has the hallmarks and the marketing buzz to become the prevalent IT cost saving innovation for the next decade, however are we ready for the pitfalls and dangers of the cloud ?

For those not up to date on the latest buzz word, “The cloud” can be defined as theoretically vast computing resources that resides somewhere in the internet network rather than your computer room. These resources can be nailed together using an API to produce your applications which can be used as needed.

The benefits revolve around a company being able to increase its capacity in an cost efficient and on demand basis. Whilst today, “start-ups” have been able to realize the most benefits, it is theorized that  enterprises are starting to adopt this technology.

However several challenges exist for mass adoption, not in the least the security aspect of placing large amounts of sensitive data in the globally accessible cloud leaves organizations open to large distributed threats that mean attackers no longer have to come onto the premises to steal data, and they can find it all in the one “virtual” location or potentially “many” of them.

But more importantly the fundamental reliability of systems and applications when moved to a cloud environment.

“In the cloud” too often gives the impression that nothing can go wrong and it is all EASY.  The peril’s within an organization is that  it can lose track of resources, who controls them and who is currently using them.

In the news recently had been the Microsoft / Sidekick / TMobile “where is my data” problems which has caused a backlash in its user base. Danger’s Cloud based solution on the surface looked to be the poster child for cloud type applications. The kids of today could laugh at us “old timers” who had to actually store their data on their own computers.

Whilst this isn’t the end of cloud computing, it brings into the debate that the barriers of adoption of the cloud computing environment is not necessarily a completely technological challenge.

Processes must change with all new technologies. Adoption of these newer technologies requires that we evolve with the distributed compute environment. Service Level Agreements need to be created, people need to be trained that all things are never perfect in the cloud no matter how high your elevation. Oh and by the way guys, if you want to keep the Paris Hilton crowd as users …. its called a backup !!

Mahalo

A few weeks ago we posted a link to a start up who’s operating mantra was to operate on SaaS services and virtual servers. Since that time we have reviewed and tested some great applications and here is our list of the Top 5

1) Google Apps is a Google service that can provide your company with a comprehensive set of services to kick start your business. Google offers these services in a both a free and premium versions. The service provides your company with email, calendar, chat, contacts, Google docs and website hosting for up to 50 users for free. The premium version costs $50 per user per year for those larger startups.

The service is simple to setup and is a good alternative to running Microsoft Exchange for mail, calendar and contacts services. The Google docs service is actually a good alternative to basic word processor, spreadsheet and presentation, however the concepts of online applications like these does take some getting used too.

Google Sites = Google’s webhosting platform does leave something to be desired, its lack of customization and very basic configuration options leave you disappointed when comparing this tool to the other apps, however for a free service it is certainly worth every penny you spent on it. You can sign up for Google apps at http://www.Google.com/Apps/Business

It should be noted that Microsoft has recently launched Office Live in response to Google’s service, however we have NOT reviewed this service at this time.

2) Skype. For those whom haven’t used Skype, it is perhaps one of the best free communication applications out there. Skype includes the ability to talk, instant message, video and conference call to other Skype users for free. It additionally offers  users the ability to connect to the public telephone network through its paid for Skype IN and Skype OUT service. The quality on the service is excellent and is this reviewers VOIP software of choice. Details at http://www.skype.com

3) MailChimp is a FREE easy to use email marketing service that allows you to develop lists and manage those lists to market and pass information to your subscribers. The make it easy to send email newsletters to your customers, manage your subscriber lists, and track campaign performance.  Details at http://www.MailChimp.com. Starting a list is extremely easy since there are nice tools to import or sync with your Google accounts.

4) Freshbooks. If you need a simple easy to use billing solution for your clients www.freshbooks.com is the way to go. Its very easy to track your time, send invoices, manage contractors. This easy to use service provides a professional looking invoice solution for your business.

5) BatchBook. Salesforce CRM with a kick of Social Media. Whilst it would appear at first glance that Salesforce.com & Netsuite are the market leader in the SaaS CRM space, for those of us that don’t need all the bells and whistles of these larger solutions, www.Batchbook.com offers a easy to use cheaper alternative. As the boundaries between personal social networking and business networking continue to blur, the need for a tool to manage these relationships becomes indispensable. BatchBook is the CRM that understands the business of social. You can enter information such as Twitter usernames, blog feeds and LinkedIn profile URLs (plus many others!) on a contact record. When you view the contact record, you will not only have links to social networking profiles, but the last three tweets, last three blog posts, and a LinkedIn summary will appear alongside the person’s contact information and communication history, giving you a more holistic view of their social networking activity.

Top 5