Light Reading

Hey, Guys, Let's Build a CDN!

Craig Matsumoto
News Analysis
Craig Matsumoto
3/21/2012
50%
50%

If you've got a bunch of data centers lying around, why not tie them together into a content delivery network (CDN)?

Some software companies are looking into the possibility, using customers' or partners' data centers to create an alternative to the services provided by the likes of Akamai Technologies Inc. (Nasdaq: AKAM) and Limelight Networks Inc. (Nasdaq: LLNW).

OnApp Ltd. is one example. Its real business is to provide software for cloud services, which has given OnApp a customer base of more than 400 data center owners in the past 18 months, CEO Ditlev Bredahl told Light Reading in February.

Those customers span the globe, and many of them have unused computing capacity and bandwidth on any given day. So, OnApp is putting those resources to use. In August, it acquired CDN software by buying the assets of a Malaysian company called Aflexi Sdn. Bhd.

Combine that with those data-center resources, and voila: easy-bake CDN. It's done with the data center owners' permission, of course, and OnApp does vet each potential point of presence (POP) for performance issues. As of last month, OnApp had established 50 POPs that could be knitted together to form ad hoc CDNs.

What's in it for the customers is that they get paid for the trouble. "Up until recently, I sent my clients an invoice every month. Now they [sometimes] get a check instead," Bredahl says.



OnApp isn't the only company onto this idea.

Enomaly tried to do something similar with its SpotCloud offering (based on Aflexi software, it turns out). Virtustream acquired Enomaly in December and is hoping to use it as the basis of a federated cloud service, possibly starting late this year, GigaOm reported.

And a startup called 3Crowd, which sells software for building CDNs, has talked about doing its own CDN through an upcoming service named XDN.

One thing these companies can provide is reach, which is the No. 1 barrier to building a CDN. OnApp's target customers are the small businesses that don't happen to own data centers, let alone data centers spread around the country or the world, Bredahl says.

That doesn't mean a CDN with reach is necessarily an easy sell.

"This is a business and more than technology. You need a sales team to sell this stuff, and it's much harder for a smaller operator to invest in a sales team to sell into content owners," writes Heavy Reading analyst Adi Kishore in an email to Light Reading.

Hard margins
The real reason for OnApp starting its CDN business was to deepen relationships with clients, Bredahl says. But as a former CDN customer at previous jobs, he's quick with revolutionary talk about providing a service more cheaply than Akamai does.

"I wouldn't say they're milking it, but -- they're milking it," Bredahl says. "Nobody has disrupted the CDN market. There's no JetBlue there."

Bredahl might consider Akamai's margins rich, but margins for plain CDN services have gotten thin, as some speakers noted at Light Reading's Carrier Cloud Forum, held alongside CloudConnect in February.

"The CDN market is pretty hard now, especially for pure-play CDNs," said Ari Banerjee, Heavy Reading analyst, during a panel on cloud models. "Akamai is making money, but the rest of the other CDNs -- not so much." (Akamai's gross margins are about 70 percent, while Limelight's are closer to 40 percent.)

Part of the reason is competition, a factor that OnApp, 3Crowd and others will be contributing to. On top of that, service providers are getting more serious about running their own CDNs.

"Akamai is in a hard spot, to be honest, because their core business is commoditized to an extent," said consultant Stefan Bewley of Altman Vilandrie & Company during the same panel.

CDN companies themselves are recognizing this and moving into other areas of business. Akamai, for instance, has been emphasizing other areas such as cloud services, and it's getting into mobile-application acceleration with the purchase of Cotendo. (See Akamai Goes Mobile by Acquiring Cotendo.)

— Craig Matsumoto, Managing Editor, Light Reading

(3)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Pete Baldwin
50%
50%
Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:38:29 PM
re: Hey, Guys, Let's Build a CDN!


I like the idea behind this: Data centers have to be built with excess capacity, so why not put it to use? It's the usual story of virtualization.


The business side could be difficult, and of course there's the fact that multiple companies are going to compete in here (and then the margin issues too). I have to admit I'm not sure how far it will go as a business. I do like the "why not" aspect of it, though.

joanengebretson
50%
50%
joanengebretson,
User Rank: Light Beer
12/5/2012 | 5:38:28 PM
re: Hey, Guys, Let's Build a CDN!


The data center business is an interesting one because it's partly about real estate, partly about IT and partly about telecom.


I've always enjoyed thinking about the real estate angle because data centers are basically a big piece of property that can be put to a lot of different uses -- and maximizing profitability is all about figuring out the best use case.


You've just added another possible use case to the list of possibilities.

Pete Baldwin
50%
50%
Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:36:17 PM
re: Hey, Guys, Let's Build a CDN!


3Crowd has launched XDN, its lower-cost CDN, as former Light Reading editor Ryan Lawler reports today:


http://gigaom.com/cloud/xdn-federated-cdn-launch/


Separately, OnApp is mentioning to us that they'll be at Interop. It'll be interesting to see what progress they've made.


Oh, and to respond (belatedly) to Joan's point -- yeah, this is an interesting alternative use for the real estate aspect of a data center.  There's a parallel in the chip industry: selling excess manufacturing capacity to other chipmakers. One thing to watch will be the business side -- how easy is it to set up an arrangement to use data-center capacity, and how easy is the billing and revenue side, making sure the right people get their money?

Educational Resources
sponsor supplied content
Educational Resources Archive
Flash Poll
From The Founder
Ericsson's Hyperscale Datacenter System (HDS) 8000, featuring Intel's Rack Scale Architecture, caused a stir when it was announced at MWC 2015. For more on this revolutionary product, join me on Thursday, April 30 at 12:00 p.m. EST for a Super Webinar event, A New Hardware Paradigm for the Telco Data Center.
LRTV Documentaries
CableLabs' Clarke Updates Cable Virtualization

4|23|15   |   05:41   |   (1) comment


Former BT exec now leading CableLabs' NFV and SDN efforts explains key role of open source and updates efforts to virtualize the home network.
LRTV Interviews
Ericsson's CTO Talks Transformation: Pt. II

4|23|15   |   08:19   |   (1) comment


In the second installment of an in-depth two-part interview, Ericsson's CTO Ulf Ewaldsson talks to Light Reading CEO and founder Steve Saunders about cultural change, network slicing and technology advances.
LRTV Interviews
Ericsson's CTO Talks Transformation: Pt. I

4|23|15   |   09:27   |   (3) comments


In the first installment of an in-depth two-part interview, Ericsson's CTO Ulf Ewaldsson talks to Light Reading CEO and founder Steve Saunders about the incredible transformation underway in the communications networking industry.
LRTV Documentaries
LTE Paves the Way for the 5G Revolution

4|20|15   |   4:20   |   (0) comments


Håkan Andersson, head of 5G product strategy of the Radio Business Unit at Ericsson, discusses the role of LTE, the US and other industry verticals in building a true 5G ecosystem.
LRTV Documentaries
The 3GPP's Road to 5G Standardization

4|17|15   |   4:43   |   (0) comments


Satoshi Nagata, chairman of the 3GPP's TSG-RAN group and a manager at NTT Docomo, explains the standardization process for 5G, as well as the biggest challenges and opportunities.
LRTV Documentaries
AlcaLu CTO Makes the Case for a New 5G Air Interface

4|16|15   |   3:54   |   (0) comments


Michael Peeters, CTO of wireless at Alcatel-Lucent, explains why 5G will require a new air interface to meet its diverse performance targets.
LRTV Documentaries
AlcaLu + Nokia: The New Uber-Vendor

4|15|15   |   2:42   |   (4) comments


Heavy Reading Senior Analyst Gabriel Brown discusses the technological and competitive opportunities and challenges if a merger between Alcatel-Lucent and Nokia comes to pass.
LRTV Huawei Video Resource Center
Huawei's Data Center Power Play

4|15|15   |   6:22   |   (0) comments


Huawei has developed industry-leading energy efficiency capabilities for its indoor and outdoor data center solutions, explains Dr. Fang Liangzhou, vice president of Huawei's Network Energy product Line.
LRTV Huawei Video Resource Center
Huawei’s Routers, Switches Get the Green Mark

4|15|15   |   2:02   |   (0) comments


TUV Rheinland's Frank Dudley explains how Huawei's routers and switches have been successfully tested by energy efficiency experts and have gained Green Mark Certification.
LRTV Documentaries
A Finn, a Frenchman & a Guy From New Jersey Walk Into a Merger...

4|15|15   |   3:17   |   (0) comments


Stop us if you've heard this one before... Light Reading CEO Founder & CEO Steve Saunders weighs in on the technical and cultural implications of a Nokia and Alcatel-Lucent merger.
LRTV Huawei Video Resource Center
Accounting for Better Solutions

4|10|15   |   02:31   |   (1) comment


Murad Yousuf, CTO at Saudi Arabia's Ministry of Finance (Dept. of Zakat & Income Tax), talks about the benefits of deploying router technology from Huawei.
LRTV Huawei Video Resource Center
What's in Store for Huawei & DataCore?

4|10|15   |   05:44   |   (0) comments


At the CeBIT trade show in Hannover, Germany, George Teixeira, CEO of software-defined storage (SDS) specialist DataCore Software, explains why he has just signed a partnership agreement with Huawei Technologies.
Upcoming Live Events
May 6, 2015, Georgia World Congress, Atlanta, GA
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
In its latest survey covering network operators' plans and strategies for ICT transformation, Heavy Reading asked telecom operators worldwide to identify the most important goals and objectives for their ICT transformation initiatives. Heavy Reading also asked operators about the importance of a "digital first" strategy, which enables customers to complete an interaction across different digital channels, such as web and mobile self-service and social media.
Hot Topics
Comcast Formally Ends Its Bid for TWC
Mari Silbey, Independent Technology Editor, 4/24/2015
What if the Comcast Merger Fails?
Mari Silbey, Independent Technology Editor, 4/20/2015
Google's WiFi-First Mobile Service 'Fi' Is Here
Dan Jones, Mobile Editor, 4/22/2015
Comcast Merger May Hinge on Hulu
Mari Silbey, Independent Technology Editor, 4/22/2015
Google Ready to Release Thousands of Loons
Sarah Thomas, Editorial Operations Director, 4/20/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Many leading communications companies can claim to have undergone significant periods of reinvention during their histories, but none have been through more major ...
Data Center Interconnect, or DCI, is one of the hottest sectors in telecom currently. Since coming back to Light Reading last year, prodigal-son style, I've ...
Cats with Phones
Learning Curve Click Here
Pierre could never remember how to use Excel.
Latest Comment