Steps Internap’s New CEO Could Take To Get The CDN Business Back On Track

With the announcement last week that Internap's new CEO comes from Tandberg Television, Internap will shortly have the best chance they have had in awhile at getting their CDN business back on track. But in order for this to happen, the new CEO needs to make some drastic changes, and quick.

Last Thursday, Internap announced that effective March 16th, Eric Cooney, who is the current CEO of Tandberg Television, will take over as Internap's new CEO and President. This marks the fourth C level executive change at Internap in the past year including the CFO, COO and CSO.

With the new CEO having a background in video, hopefully this is something that Internap will really be able to leverage to get their CDN services back out into the market and growing again. But before that can happen, Internap's new CEO needs to make some quick changes to the CDN product line and to Internap's CDN strategy. Here's what I would recommend.

  • Change the way Internap sells content delivery. Since Internap acquired VitalStream they have always though of their CDN services as something that has to be bundled with other Internap products. While this is great for customers who need multiple products, Internap is missing all of the other customers who don't want a bundled solution and just want CDN. Internap should be able to sell to both sets of customers and while they can today, it's not their focus and not the message they are delivering to the market.
  • Streamline the CDN product line. When Internap acquired VitalStream they also acquired all of the products and services that VitalStream had from their acquisitions of PlayStream and EonStreams. Even with the integration Internap has done since then, Internap has too many systems and services on their plate. The entire product portfolio of CDN services needs to be streamlined for internal benefits and for the services they sell externally. Their CDN services are still too complex for Internap to manage which makes scaling the business very difficult.
  • Pick a customer market and focus on it. Historically Internap has been going after three sets of very different customers. Small business customers which their inherited from VitalStream's acquisition of PlayStream, larger customers that Internap targets for other services outside of CDN and third party resellers. This is a very fragmented sales process and keeps Internap from really focusing their sales efforts in one direction. While many of the smaller customers are ones that can sign up for Internap's services and self-provision themselves without too much Internap involvement, they are not a strategic fit for Internap. They don't generate a lot of revenue and the systems needed to allow them to do things like self-provisioning take up too many internal resources.
  • Get out of the ad insertion/ad sales business. When Internap acquired VitalStream, they got a legacy ad insertion platform that was from the EonStreams days. This platform is geared mostly towards ad insertion for radio stations and provides no value at all to Internap. Last year this product accounted for less than $1M in total revenue and is a huge burden to Internap internally in terms of time and money to keep the platform up and running. The business of streaming radio on the web is a poor one and you can't make money from radio stations unless you are properly setup to really scale this business. The growth, both traffic and revenue wise is coming from video. Internap needs to move away from very niche segments of the market like radio ad insertion and start streamlining their CDN services for video applications. At one time, Internap also had a small dedicated ad sales force which simply does not allign with any of their other products and services and only acts to distract the company.
  • Hire a CDN evangelist. More than anything, Internap needs someone in the company who is going to be their champion for CDN services out in public. When there is a conference, local meetup group or discussion taking place on a blog, website or discussion list, someone from Internap needs to be represented. Nearly all of the other CDNs are in attendance giving guidance on the market and Internap is almost never represented. Someone needs to become the face of CDN for Internap and be able to speak and comment on the market, trends and the company's CDN services in a very public light. This person needs to be someone who loves the CDN market and has a passion for video.
  • Get some senior, experienced CDN sales reps. Since Internap acquired VitalStream their sales force has seen a tremendous amount of churn. As a result, many of the sales reps at Internap today are completly new to the CDN industry and don't have the business knowledge about the market. Without that knowledge and backgroud they can't act as the voice for Internap when out on the street and are not connected into what's going on in the CDN vertical. Internap should grab a handful of seasoned senior sales reps from their competitors and give them the opportunity to really play a role in changing Internap's CDN strategy. Since Internap has not grown their CDN business in at least a year, some may think it would be hard to get senior sales reps to leave a competitor to come to Internap. But if the new CEO can convince them that CDN will be a big focus moving forward and gives these special reps the ability to really drive and shape Internap's CDN business, folks will be interested. Let these reps give direct feedback to the CEO, let them be brutally honest about what they see and ask them for their help in figuring out how to change it. While some of it will be technical in nature, much of it will simply be the strategy and positioning of Internap's brand in the market.
  • Get rid of the red tape and politics. While all companies, big and small have internal red tape and politics, I can't remember the last time I saw so much of this like I have seen and heard at Internap. Things take too long to get done, too many procedures are in place to keep folks from doing their job and sales needs to be able to respond to RFPs and get pricing out in the market fast.
  • Make Internap a fun place to work. I don't work at Internap yet I feel for a lot of the folks who work there. For some time now, talking to many folks at the company gives you a very depressed feeling. Many don't seem to be excited about what they are doing, lots of executive changes have taken place, lots of churn has happened and things feel very unsettling, even for an outsider. From those I have spoke to I get a sense of confusion and disappointment and things being stagnant. The new CEO needs to re-energize the company and really make folks excited again about what can be accomplished if they all buckle down and work together.
  • Re-brand the CDN product line. When Internap acquired VitalStream, they never re-launched or re-branded any of VitalStream's services. They just replaced VitalStream's logo with Internap's. Many customer I spoke to months after the VitalStream acquisition told me that they knew VitalStream was no longer in the market, but didn't know what happened to them. Internap's management at the time thought that since folks already know of the Internap name for services outside of CDN, that would somehow translate over to the CDN product as well. It would not hurt Internap to re-brand the entire company and give it a new look and feel, but if that can't happen, it at least needs to happen to the CDN product line.

While Internap's CDN business has been flat since the VitalStream acquisition, I think Internap still has a shot at growing their CDN reveue and having it be a more important part of their overall business. The window of opportunity is not closed yet, but time is running out. Some say Internap's CDN business will never become what Limelight's is today, but the folks who say that are missing the point. Internap does not need to be, nor should want to be Limelight. Internap gets the vast majority of their business from services outside of CDN. The value in the CDN business to Internap is to leverage assets they already have to be able to nicely grow their CDN revenue organically. Doing so will enable them to diversify their revenue over time to many products and services that all show signs of growth.

And keep in mind, even with Internap not growing their CDN revenue last year, they still did more CDN revenue than two thirds of all the other CDNs in the market. Internap new CEO already has a base to work with. The real question is whether or not he can streamline the offering, re-brand the products and get the right people on staff to sell them quickly enough, before the window of opportunity for Internap's CDN business completely closes. They still have time, but will need to successfully execute a plan this year. For I fear that if Internap can't get their CDN business growing again and get their name back in the market in 09, it will then be too late.

  • http://www.thedrmblog.com Christopher Levy

    Nice work Dan. I echo many of your comments here.

  • GreenField

    Dan,
    All good points.
    However, the general problem is still not “going to happen overnight” –> InterNAP has a Telco mindset with the telco approach to solving problems and signing up new customers. You know – lots of TPS cover letters, provisioning of new service is rated in days not hours or minutes, sales commissions are meager, bad processes and stagnant policies tie-up every bit of potential new revenue in legal, etc. Very contrary to the new world order of a CDN, automated provisioning, excellent knowledgable human-to-human support, you know the paramount idea is one thing – net new revenue.
    I totally agree with your point of their internal knowledgebase and experience pool – it is depleted, no strick that – it is flat out gone to other CDN’s. The good people are all gone from InterVitalNAPStream long ago.
    Have you heard any rumors that FeedRoom is “in talks” with sewing soemthing up with ‘NAP. Historically, ‘NAP can’t integrate with partners/aquisitions, so go down that road again feedroom? Going up the stack will only prove to be more confusing to their market focus or lack thereof.
    Oh Boy…

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

    Agreed, no major changes happen overnight, but the tone that can be set from the new CEO can happen immediately and start to make an impact right away. I think folks at Internap will once again be excited to work on their CDN offerings.
    I don’t think all of the talent is gone out of Internap and I think that Internap should have gotten rid of some of the original VitalStream folks a lot faster. When you buy a company for almost nine times revenue and bring employees on board, what incentive do they have to make it work when many of them have already been compensated in the buy out? We’ve seen this before many times.
    I think Internap can still be successful with CDN if they have a clear strategy and game plan moving forward that encompasses product, sales and marketing. They have many of the pieces already in place.

  • http://www.telecomramblings.com Rob Powell

    Nice list Dan, but it really brings home to me how many things they’ve been doing wrong for the last two years, and that’s a long time in this business. That a new CEO can solve that laundry list of problems may be too much to ask, especially in a market that just has way too many CDNs. Even if he did succeed in rejuvenating their CDN he’d still face a tough market to grow in, has Internap missed the window to join the top tier? Maybe he’ll sell it off instead…

  • Surprising development

    They need to tear down the entire network and start over. Vitalstream had a horrible, really bad network and it just didn’t work. I know INAP supposedly rebuilt it but it still doesn’t seem to work.
    Good luck Eric, I hope they are paying you a lot of $$.

  • R Ward

    Hi Dan,
    Finally, this is making some sense. I am glad someone is finally steering them away from the ad-insertion market. INAP never really seemed to have any direction in that arena anyway. INAPs focus really seems to be on the bigger picture, where it should be. I like what they have done with their website. I think it speaks to who they are. When you visit, it takes you right to their services…you don’t have to hunt for them anymore. It makes you believe that they are a fun, energetic, creative group of people working together to create something wonderful.
    I like the way you think about how INAP can turn this around. It’s unfortunate that current employees have had to endure some relatively unpleasant working conditions, but with the new CEO coming on board, it’s the perfect time for climate change. Just curious if you think that one person would be able to handle all of the companies public appearances including webbased blogs and discussion forums and conference and local meetups? Seems like there would be more public opportunities than one person could handle. Any ideas on how they might manage that? Also, how would they go about recruiting a person like that? I wonder if they would hire someone internal who already knows what Internap is all about, or if they could hire someone external and have them ready to go fairly quickly.

  • keith

    I know this is a CDN blog but seriously why wouldn’t it make more sense for INAP to get OUT of the CDN biz? CDN is a commodity biz where scale and network matters and what value add does Vitalstream provide over everyone else esp. the tier1 players???

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

    Hey Keith, you raise a fair question. Should Internap get out of the CDN business all together? I think since they have already paid for the VitalStream business and took a write down of about $100 million on it, they are now at a point where they can slowly grow the business and not have to put that much in the way of resources behind it anymore. If they can run it lean, but still have a good service and it brings in $20-30 million in 2009, then that makes sense.
    At the same time, Internap is not trying to compete with the Tier1 networks for CDN services. Ask Internap’s management and they will tell you they are not trying to compete with an Akamai for CDN and going after a very different set of customers.

  • F Thakur

    I too think INAP should get out of the CDN business. Their attitude and the red-tapism will surely bring them down. They can’t seem to figure out the difference between a commodity biz & their other offerings.

  • Jim Brown

    Hello Dan,
    So, Cooney is nearly 2 years in now. Do you have any updates on your opinion of the progress to date? Would you say that he has done any on what you have recommended and if Internap’s CDN has gained any traction, or if Cooney really cares that much about CDN? With the Q3 CC coming, it would be interesting to see your views on Internap today vs when you wrote this article.
    Thanks