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Stream This: Application Delivery: Akamai's Secret Weapon?

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In March, Akamai representatives invited me to spend the day with them at their Cambridge, Mass., headquarters to allow me to get a better insight into their business and to give me the opportunity to ask management and others more about the market, pricing, application delivery, and a variety of other topics. They gave me access to more than a dozen individuals including senior management in sales, marketing, engineering, product development, and investor relations, as well as their CTO, Michael Afergan.

During our daylong meeting, we spent a great deal of time talking about the company’s application delivery service. Based on my conversations with others, this product appears to be the least understood of Akamai’s offerings in terms of how it works, the types of content it delivers, and the types of customers that use it. It is also the product that I receive the most questions about in terms of current market size and the potential growth opportunity that Akamai has down the line.

A Burgeoning Market
Over the past 15 years, I have covered only products and services that include some form of video. But moving forward, I am going to start to tracking the application delivery industry very closely.

While this market is just starting out, it will soon become very important to many content delivery networks (CDN) in the industry. Though there is no way to know how big the market is today and what it will be like next year, Akamai’s application delivery product had a run rate of $40 million for 2007, the company has publicly stated.

Through the acquisition of Netli, Akamai is well-poised to offer the product (which it has been developing for at least a year) and have real customers using it today. Because of this, when other companies begin to look at and develop an application delivery product, Akamai will already be ahead of them in development, real customer feedback, and revenue. While I don’t think application delivery is going to make a huge impact on Akamai’s revenue in 2008, I do predict that, come 4Q of this year and moving into next year, Akamai’s application delivery service will be one of the company’s fastest-growing products.

After talking to customers and seeing how content will need to be delivered down the road, I've concluded that Akamai’s application delivery product is one of the most underestimated in its portfolio in terms of revenue growth. The market for these services is just starting out, and already, Akamai is considered the only game in town based on an outsourced model. I don’t know of any other content delivery network that currently offers application delivery. While some vendors do offer hardware-based application delivery or acceleration products, they are not a real threat to Akamai’s service. Application delivery is a fundamental building block that lets Akamai service its current customers’ needs while exploring new markets.

How It Works
So how does application delivery work, and what types of content are delivered through the service? For starters, there are a lot of similar terms used to describe these products and the market, and the two that are most commonly used are application delivery and application acceleration. The terms are pretty much interchangeable, but the difference lies in the approach to application acceleration. An example of this would be a network-managed service approach, such as Akamai’s, in contrast to an appliance-based approach, such as Cisco Systems, Inc.’s.

The problem that application acceleration solves involves content that cannot be cached at the edge and therefore must be accessed at the content owners’ origin. This type of content can be as simple as a base page that calls media or personalized content that cannot be cached, or it can be enterprise data coming from an SAP application and an associated database. In the case of consumer applications, application acceleration drives more page views and video views, and in the case of enterprise applications, it enables application adoption and usage. Because the content cannot be cached, the delivery of that content must be accelerated because of internet protocol inefficiencies.

For example, users who type in www.danrayburn.com are sent to an Akamai edge server 5 to 10 milliseconds away, where their request is accelerated across the internet to an Akamai edge server close to the origin and, finally, to the origin. The origin fulfills the request and responds to the closest Akamai server, then the request is again accelerated over the internet back to the user through the local Akamai server. To accomplish application acceleration, you must control both ends of the network connection: the one close to end users and the one close to the application/content owner’s origin.

In order for Akamai to accomplish this, it needs to have an edge server region close to the end user and an edge server region close to its customers’ origin infrastructure. In both cases, the goal is to get within 5 to 10 milliseconds away from both the origin and the user, thereby creating a binodal overlay network over the public internet. In addition, application traffic is bidirectional as opposed to unidirectional, like most traditional CDN traffic, so optimizations need to happen both ways. From what Akamai tells me, this illustrates the importance of a large distributed network for application acceleration and highlights why CDN vendors with a large data center approach will have a fundamentally difficult time entering this space.

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