Delivering Under Pressure: Business belt-tightening accelerates consolidation and adaptation on the Content Delivery Marketplace

Page 2 of 3

Another important area to address is security and protection against Denial of Service (DoS) attacks. "When distributed computing platforms such as CDNs are deployed in front of a Web server," says Blumofe, "they act as a shield between the public Internet and an enterprise's Internet infrastructure. DoS attacks aimed at a Web site are diluted when distributed across thousands of servers, and hackers are unable to even attempt a connection to the origin site because there are no publicly addressable ports."

Blumofe stresses the importance of making customers aware of such CDN benefits. "Many decision-makers think that CDNs are just a means for distributed caching of static content," he says. "So a major business challenge is educating them on the many additional capabilities that we can provide. For example, a major differentiator for Akamai is that we are getting beyond the delivery of just static content to focus on application delivery, making Web-based applications more robust, reliable, and secure."

A similar evolution is underway at Mirror Image Internet. "I see the role of the CDN evolving into a more advanced platform," says CTO Bob Hammond. "Yesterday's CDN network is changing focus as new services are being deployed, moving from just a delivery platform to an Application Delivery Network with content delivery as a key piece. An ADN enables more sophisticated delivery of static and dynamic content, as well as application delivery and ecommerce fulfillment services, and eventually Web services."

Hammond doesn't expect to see all of his competitors moving toward ADN capabilities, or indeed in any particular direction all together. "The visions are different," he explains. "Some CDN providers are looking to provide distributed application hosting services and other transactional services like ecommerce. But some are looking to provide low-cost, CDN-only services, and others are delivering CDN and other value-added services that are closely aligned to CDN such as video, DNS services, and security."

The Value Pitch
Whichever specific services a CDN offers, its success depends on convincing customers to buy into the notion that the value it adds is worth the cost. These days, the pitch has to be made under very different business conditions from those of the late 1990s. "Two years ago, the customer demanded worldwide performance and paid for that performance," Hammond says. "One and a half years ago, customers demanded low prices and this caused a decrease in overall prices within the CDN market. Today, the customer demands ROI."

 The new reality is universally acknowledged, but opinions are varied regarding its effects on CDN prospects. Speedera's Smith believes that consolidation—"a shrinking number of players in the CDN space over the last two years" —will continue, but that opportunities for surviving CDNs will expand because cost-efficiency is such a high priority for business. "Customers are learning to focus on their core competencies," he says, "and to outsource the rest. This trend bodes well for the low-cost producer."

Smith also points out that the dot-com bust hasn't reduced the underlying Internet load. "Major Web sites are experiencing growing traffic," he asserts, "while Internet traffic overall doubles year after year. Key market sectors such as Internet retail, software downloads, and the federal government are growing strongly. So while there may be fewer potential customers than there were two years ago, the companies that survived or even thrived during the downturn have a greater need for CDN services than ever."

Smith's optimism is shared by Phil Simmonds, senior director for product marketing at content delivery provider Conxion. "The Internet continues to be a key business tool," he says, "and providing the fastest access to their content is a key focus for our customers. We expect the role of CDNs—accelerating Web sites, improving access to content, and thus enhancing the end-user's experience—to continue to be a valuable business service, and we expect the market to grow."

Page 2 of 3