Akamai solidifies its position in carrier CDN with two moves

OVUM VIEW

Summary

Within a week, Akamai took two steps to improve its position in the carrier content delivery network (CDN) market. First it announced plans to acquire Verivue, which sells licensed and managed CDN solutions that complement Akamai’s portfolio. Second it unveiled a strategic alliance with Orange to provide CDN services to business customers. Both actions build on Akamai’s Aura Network Solutions, announced in February 2012, to address carriers’ CDN requirements

If the all-cash deal for Verivue closes, its operations will accelerate Akamai’s entry into the licensed CDN market and augment the sales and engineering capabilities needed to extend its reach to cablecos and first- and second-tier wireless and wireline carriers. Meanwhile, the partnership agreement with Orange will help validate Akamai’s approach to providing a carrier CDN solution that includes licensed software and managed services.

Akamai’s challenge

The explosion of over-the-top (OTT) applications is driving operators’ investments in both retail and wholesale CDNs to manage quality of service, both of their own pure-play OTT services and hybrid linear and web entertainment services. These investments also enable delivery of Hulu-style services to subscriber households.

Operators’ investment in their own CDNs, rather than leaving the door open for pure-play CDNs such as Akamai or Limelight, fundamentally changes this market. Akamai’s challenge to date has been that, despite its unquestioned engineering competence, its wholesale sales channel has hampered its ambition to move to a managed service model.

A mutually beneficial approach

Akamai’s Aura Network Solutions offers network operators three options:

  • Managed CDN
  • Licensed CDN (LCDN)
  • Smart Cloud Accelerator.

A turnkey CDN, the Managed CDN dedicates capacity to the operator’s business that Akamai manages on its infrastructure. With the LCDN, operators license Akamai’s edge-server software to build and manage their own CDN capacity within their networks. The Smart Cloud Accelerator provides CDN and caching capabilities using Ericsson’s SmartEdge Border Network Gateway and Mobile Packet Gateway.

Akamai’s strategic partnership with Orange shows there is room in the market for Akamai’s approach. According to the partners, Orange will use CDN solutions based on Akamai technology to address the increase in web-based HD video and e-commerce traffic. With Akamai, Orange can deploy a widely distributed network of CDN services without concentrating traffic in a few locations.

The Verivue business operations complement Auraand accelerate Akamai’s time to market by providing a more comprehensive LCDN solution for network operators.We believe operators can use this solution to complement their enterprise and wholesale CDN and cloud offers.

Building Akamai’s credibility

For companies like Akamai, selling to telcos, cablecos, and other carriers requires a great amount of patience as they navigate the hurdles and Byzantine requirements of entrenched purchasing departments. However, market needs change so quickly that newcomers barely have a chance to establish their credibility before these potential customers turn to their long-time suppliers for purpose-built solutions. Additionally, carriers often turn away from new approaches until they see proof of concept; Akamai’s LCDN originally fell into that category.

Besides trying to sell a new idea (i.e. LCDN), we suspect that Akamai often got the cold shoulder from carriers because it sometimes competes with them for CDN business despite its wholesale value proposition.

The deal with Orange adds at least one proof-point to the solution. We expect to see more – especially in the cableco market – in the future.

Additionally, Verivue, a 60-employee company, had some success with its LCDN offer in accounts Akamai considers strategic. That was a key enticement. According to Akamai, both companies have gaps in their LCDN offers; an integrated product set will be more compelling to target customers. Akamai also recognizes that at this point in its development, sales expertise is faster to buy than to build; Verivue provides that expertise as well as additional engineering skills to the established Akamai team.

Overall, we see the acquisition as a win for the two companies and their potential customers. Both Verivue and Akamai have a few customers in the carrier space and they seem to complement each other. As a combination they may well continue to demonstrate the credibility other carriers expect.

With these moves, we see Akamai better positioned along the spectrum of a converging market for CDN, cloud, public, and enterprise networks. It offers its own traditional services along with managed CDN, LCDN, software, and a strategy that allows its customers to acquire the elements they need and connect them as they see fit. In Orange, it now also has a significant reference customer.

APPENDIX

Author

H. Paris Burstyn, Senior Analyst, Wholesale Telecoms

paris.burstyn@ovum.com

Further reading

Akamai shines its Aura on wholesale market (March 2012)

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