Will the Cloud Swallow the CDN?
Heavy Lifting Analyst Notes Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation 7/6/2011
In many ways, the essential services offered by both sets of providers are very similar. From a technology perspective, both need massive storage and server requirements and integrate resource management, load balancing, etc.
While there is some debate on what exactly constitutes cloud computing, I think most would generally agree that it helps move the required infrastructure investment from the individual organization to a remote hosting facility, and allows organizations a scalable way to grow without a large up-front investment. CDNs offer many of the same advantages to companies distributing Internet video. Video rights holders can offer large libraries of video by offloading to CDNs rather than making large storage and distribution investments. CDNs can also handle transcoding and other video adaptation requirements, which would otherwise be required from the video rights holder.
Several cloud computing heavyweights already offer content delivery services, such as Microsoft Corp. (Nasdaq: MSFT) with its Azure product and Amazon.com Inc. (Nasdaq: AMZN) with CloudFront. Cloud computing is unquestionably the larger trend, with substantially larger revenue potential. As such, if the two markets are to merge, it probably will be the CDN market that gets subsumed.
However, there are also important differences between the core functions and capabilities of the two markets. The CDN category was launched to improve end-user QoE by replicating content from the origin to edge caches and serving it from closer to the end user. End-user proximity is absolutely critical: Cloud computing does offer data storage, but edge replication is not really core to its function. There are players moving in this direction -- but also in various others. Today, cloud computing is at the "land grab" stage of evolution, where everyone is chasing everything, petrified that they will target the wrong market segment while an adjacent space takes off.
To add to this, everyone that has any video distribution experience is quick to point out that video is complicated -- an "unruly beast," according to one person I spoke to. Specialized video distribution knowledge will be required, which doesn't fit well with a land-grab mentality.
The two sets of customers aren't quite the same, either. Cloud computing is primarily targeting enterprise IT, while CDNs target video rights holders and online content distributors. Still, there are players such as Octoshape -- a cloud-based content delivery vendor -- and Solution Box Inc. -- a Korean company that offers remote cloud-based storage, streaming services and content delivery for operators -- blurring the lines between the two spaces.
Both markets present an opportunity for service providers, but the convergence might actually help them even more. Today, most operators deploying both CDNs and cloud services have different teams addressing each market segment. But there could be an opportunity for operators to combine operations, and use the combined expertise as an important selling point in the future.
— Aditya Kishore, Senior Analyst, Heavy Reading