[Updated June 29th: Part two of this post is now online: "A Closer Look At Akamai's Strengths & Weakness For A Licensed CDN Offering"]
Over the past few months, multiple telcos have told me that Akamai has discussed with them the possibility that Akamai may get into the software licensing business by providing telcos and carriers with Akamai's own CDN technology to enable telcos to build out their own content delivery services. The product, which Akamai has named LCDN (Licensed CDN) is still being developed and while Akamai couldn't comment on the details of future product plans, the company did go on record with me to say that "we can confirm that this is an area we're exploring." Two carriers I spoke to said Akamai actually pitched them as early as last year on licensing Akamai's CDN platform, but that Akamai quickly realized they needed to build a specific product for service providers before they could come to the market.
From those I have spoken to, including at least a few individuals who have interviewed at Akamai for positions within this new group, it appears as if Akamai might be further along with the offering than I originally thought. For Akamai, offering a new product like LCDN as a software license would be a very different business model for a company that has historically always been a services based organization. Like all CDNs, Akamai has deep roots in software, but I don't ever recall the company offering any of its own technology as a straight software license.
It makes sense that Akamai is looking at offering an LCDN product as all of the major carriers are now partnering less with pure-play CDNs and working to add their own content delivery solutions and transparent caching platforms to their network. Carriers, telcos and ISPs now want to control their own CDN and not partner with or resell a third party. Three years ago content delivery vendor EdgeCast came to the market with an approach to license their CDN software to carriers and to date, had been very successful. The company has signed up ten carriers as customers including AT&T, Deutsche Telekom, Telecom New Zealand and Telus amongst others.
Last month, at the Content Delivery Summit in NYC, I discussed the idea of Akamai getting into the CDN software licensing business with a bunch of carriers at the show and the vast majority of them told me they see it as more of a defensive strategy on Akamai's part than anything else. While Akamai is right when they told me that, "there would be obvious benefits for network service providers in terms of cost savings and even new business opportunities" for such a product as LCDN, service providers paint a different picture for Akamai wanting to enter the market.
With many carriers starting to spend serious CAPEX dollars on their own content delivery build-outs, some are telling me that they don't see the need to allow Akamai to take up more space inside their network. If you're Akamai and you want to stay inside the last mile, the best way to do that is to give carriers and ISPs an incentive to keep your servers around. Akamai has always provided a benefit as the carriers never wanted to get into the CDN business themselves, but that's quickly changing. As soon as carriers and ISPs build and deploy their own CDN solutions, which we have started to see them do thanks to the success of services like Netflix, (see: Netflix Viewers Consume Almost 10 Hrs Of Video A Month, Do Last-Mile Providers Have A Strategy?), Akamai's servers become less important for some of these carriers.
Back in 2009 I blogged that I was starting to see come ISPs that were early in building out their own content deliver solutions denying requests from CDNs to place servers in their network or were kicking out CDNs who previously had gear in their facilities. Some carriers and ISPs have told me that this practice has only accelerated since then as we continue to see and hear about more carriers building out their own platforms for delivering video. I don't know what impact this has had on Akamai but some have suggested to me that Akamai's long standing marketing message of being inside the last mile could be at jeopardy in the future if enough carriers and ISPs build their own CDNs. So one way for Akamai to keep that from happening is by trying to license their own CDN platform to the carriers, thereby keeping Akamai firmly entrenched inside the last mile. Or they could do what Cotendo is doing and work to get their technology on network hardware and embedded into other platforms like from Juniper and others.
If Akamai doesn't offer some kind of LCDN offering, their strategic position inside the network is going to be affected and their value proposition won't be as strong. While Akamai does not always get free release estate from service providers, they get a lot of it and if that goes away, their business model is drastically impacted. How quickly it would be impacted no one knows for sure, but it's very clear that over the next 18 months, telcos, carriers and ISPs are going to drastically impact what the current CDN landscape looks like.
Added 6/22: Akamai currently has 5 open positions listed on their website that they are looking to fill for their new LCDN offering.