A Detailed Look At Akamai’s Application Delivery Product – Part 1

In my day long meeting at Akamai’s HQ a few weeks ago, one of the products we spent a great deal of time talking about is their application delivery service. Of the numerous people I speak to about Akamai, their application delivery product is the one that is least understood in terms of how it works, the type of content that is delivered and the types of customers that use it. It is also the product that I receive the most questions about in terms of the size of the market today and what Akamai’s potential market growth opportunity is down the line. I’ll cover all of that here in part one and give real customer examples in part two next week.

Traditionally, over the past fifteen years, I have only covered products and services that have included some form of video. But moving forward, application delivery is a product and industry I am going to start to track very closely as it is a market that is just starting out, yet over time will become very important to some of the content delivery networks in the industry. While there is no way to know how big the market is today and what the market will be next year, Akamai has publicly stated that their application delivery product had a run rate of $40 million for 2007.

Through the acquisition of Netli, Akamai is well poised to offer a product that they have been developing for at least a year and have real customers using the product today. When other companies begin to go look at and develop an app product, Akamai is already going to 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 Q4 of this year and moving into next year, Akamai’s application delivery product will be one the fastest growing products in the company.

After talking to customers and seeing how content will need to be delivered down the road, my personal opinion is that Akamai’s application delivery product is one of the most underestimated products in their portfolio in terms of revenue growth, for multiple reasons. For starters, the market for these services is just starting out and already, Akamai is considered the only game in town for this service based on an outsourced model. I don’t know of any other CDN who offers application delivery today and while some vendors offer hardware based application delivery or acceleration products, I’ll cover later why those are not a real threat to Akamai’s service. And as the only CDN currently offering the service that I know of, application delivery is a fundamental building block that lets Akamai service their current customer’s needs, while exploring new markets.

So how exactly does application delivery work and what types of content is delivered through the service? For starters, there are a lot of similar terms used to describe these products and the market and the two most commonly used are application delivery, and application acceleration. While the terms are pretty much interchangeable, what is very different, however, is the approach to application acceleration. For example, a network managed service approach such as Akamai’s in-contrast to an appliance-based approach such as Cisco’s.

From a high level, the problem that application acceleration solves is around 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 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 due to Internet protocol inefficiencies.

For example, users type in www.danrayburn.com and are sent to an Akamai edge server 5-10 milliseconds away, where their request is accelerated across the Internet to an Akamai edge server close to the origin, where the request is past on. The origin fulfills the request and responds to the Akamai server closest to it and it is again accelerated back over the Internet to the user through the local Akamai server for delivery. 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, there are three main network components to their application acceleration architecture. An Akamai edge server region close to the end user and an Akamai edge server region close to their customer’s origin infrastructure. In both cases, the goal is to get within 5 to 10 milliseconds away from both the origin and user, thereby essentially creating a bi-nodal overlay network over the public Internet. In addition, application traffic is bi-directional opposed to uni-directional like most traditional CDN traffic so optimizations need to happen both ways. From what Akamai tells me, this also illustrates the importance of a large distributed network for application acceleration and to them, highlights why CDN vendors with a large data center approach will have a fundamentally difficult time entering this space.

So exactly what kind of content can take advantage of application delivery? For enterprise employees, they come into contact with many of types of web applications on a daily basis including expense management systems such as Oracle, contact management systems like Siebel or Salesforce.com, learning management systems and even web-based e-mail. For industry specific applications you can look at things like ad campaign management tools such as DoubleClick DART for online publishers and advertising agencies, supplier/distributor inventory management apps, and project management software like Autodesk.

On the consumer side, they are also heavy users of web apps including online commerce, doing your taxes through an online site like H&R Block, booking online travel with expedia.com and facilitating user generated media for online photo sharing and video sharing. An example of this would be Adobe’s recently launched online version of Photoshop (Express). Akamai’s application acceleration technology also works with a wide range of application architectures such as service oriented architecture (SOA) applications where the communication is machine to machine with no browser rendering and Web 2.0 AJAX/FLEX class applications.

Another question people constantly ask me is how Akamai’s application delivery service is priced and what it costs. I’m not sure yet of the cost as I need to collect more data from customers before I can talk real numbers. But I do know that the service is charged as a monthly subscription per functional application and that Akamai stated that most of their application delivery contracts are 24 months in length and include performance SLAs.

Some will say that hardware and software based application delivery products like those offered by Cisco, Citrix and Juniper will compete with Akamai for those who want to deploy it themselves. For a small percentage of customers, that is true, just like it is for those who may want to do their own video hosting or content delivery. But for the majority of customers who need application delivery, it isn’t practical or in most cases even possible to put an appliance close to everywhere an employee, business partner and customer can access a web browser. By controlling both ends of the network (both near the data-center AND near application users), the optimizations Akamai provides to improve application availability and response times extend far beyond those which are limited to a footprint within the data-center.

Next week in part two, I will give examples of who some of Akamai’s application delivery customers are and talk about the different types of content and applications they are delivering. Please add my RSS feed to your reader to get the new post as soon as it is up.

Note: As I have said before, I have never bought, sold or traded any stock in ANY public company, ever.

  • http://www.scottjberry.com Scott Berry

    Dan,
    Nice summary. I was at Akamai’s last analyst day, and was intrigued by how having that overlay on the Internet is critical to their competitive advantage.
    As I recall, eliminating (or shortening) the “ack/nack” TCP/IP cycle greatly helps their content delivery too–which is why they say they’re also better than the large data center CDNs on pure delivery. Is that how you see it also?

  • http://www.BusinessOfVideo.com Dan Rayburn

    Hi Scott, that is what Akamai says but to be honest, I am not a networking guru nor an engineer so I can’t really talk to the deliver of bits when it comes to TCP/IP and networking. Would have to default to someone who knows more about that than I do.

  • VJ

    Don’t you think a majority of the enterprises will still opt for leased lines to connect their large offices worldwide thank Akamai’s application delivery product? With leased line you get a all-in-one solution, that Akamai doesn’t have unless it acquires Genesys or a company similar to Web-Ex?

  • Dale Peterson

    This isn’t really a new service. Netli did have customers prior to the Akamai acquisition, who most likely account for the majority of the revenue they claim for 2007. It would be interesting to know what other products in their portfolio they consider to be ‘application delivery’. Seems like you could lump CDN under that umbrella.
    There is a somewhat limited market for this service. Companies that utilize VPN’s with IPSEC encryption cannot use application acceleration ‘in the cloud’. It’s limited to SSL for secure transactions. IPSEC still accounts for a large majority of secure communications in the corporate environment.
    There are also appliance solutions that don’t require a device at the remote location. Companies like FastSoft can deploy a single device at the data center and accelerate content delivery to the end user. While there isn’t two way acceleration, most client/server apps tend to push content out from the server to the client, and acceleration from the client to server would provide limited benefit.

  • http://www.straightlinestrategies.com Brian Berlin

    Dan,
    How does this service differ from what Amazon.com is offering to companies who want outsourced application hosting? Amazon is taking on corporate customers and making headway, has brand recognition and obviously understand the economics of application hosting.

  • http://www.huawei.com Prince

    Just by having some optimization in TCP layer, how Akamai achives this? Whatever optimization we do, but if we dont have a high capacity link and not chocked, how acceleration will happen?
    Are they not following a layered and distributed model?