CDNs Expand into Enterprise Space
By Karen J. Bannan
from the June 18, 2001 issue of Broadband Week
Content distribution network (CDN) providers are taking their businesses where many of them have never gone before: the enterprise.
As the dotcom downturn continues and many of the Web sites that patronized CDNs have gone out of business, providers have been forced to change their business model or run the risk of going out of business, like Edgix. The result is an increased focus on the enterprise market, particularly the Fortune 1000 space.
"There's a lot of validity to the charge to the enterprise," says Greg Howard, a principal analyst and founder of the HTRC Group, a market research group. "The enterprise is starting to recognize that streaming content delivery helps with cost reduction and creates savings for businesses. CDNs also help eliminate capacity bottlenecks in a network."
These aren't the only reasons the enterprise market is so appealing, Howard says. There's actually significant streaming media growth going on in corporate America. IT managers are using streaming to disseminate speeches, e-learning, and company data, Howard says.
A recent HTRC Group report says 35 percent of companies will employ streaming media in 2001. By the end of next year, more than 42 percent of companies will jump on the streaming bandwidth. Since network bandwidth is at a premium, many will use CDNs instead of a LAN or WAN. "We see a definite correlation between streaming media and CDNs," he says.
Take iBeam. The company, which has more than 500 customers, sells directly to the enterprise and the dotcom world. Recently, iBeam has seen a jump in the demand for enhanced Webcasts, which include PowerPoint slides, chat, and audience polling, says Tom Gillis, senior vice president and general manager of entertainment for iBeam. "Last year, we did a lot of virtual IPOs [Webcasts]. That market is almost completely frozen but we've more than replaced that business with analyst calls, conferences, debt and equity events," Gillis says. "On the corporate side, companies are looking to save costs on face-to-face meetings so we're doing more events for them, too."
Software provider Inktomi is seeing an increase in its enterprise business as customers look to build their own content networking architecture.
CDNs also are being used to distribute software and files, eliminating the need for FTP servers and contributing to a reduction in bandwidth needs and costs. And both satellite and terrestrial CDNs are benefiting from the new market. More than 50 percent of satellite-based CDN provider Cidera's customers come from the enterprise while hardware provider CacheFlow has seen its business model transform from selling single box caching solutions to broader content delivery systems, says Frank Cabri, the company's director of product management. "We definitely see the demand for executive Web casts as well as the proliferation of remote salespeople and remote office workers driving the shift," he says. "It's a cost-effective way to handle communications."
Cost savings aside, enterprise customers also like that they have control of their Webcasts. Enterprise customers that are using CDNs for streaming and file delivery also benefit from profiling information that lets them see who is downloading their files and gives them the ability to set limits on who can access them as well.
Shane Stewart, the team leader for software developer ACD Systems' Computing Services Group, knows this first hand. Stewart says his company is using Akamai's CDN solution to deliver new versions of the company's software to qualified customers, resulting in an enormous amount of customer good will and a reduction of technical support issues.
Before Stewart signed on with Akamai, he looked into creating an in-house CDN or installing co-located servers in Europe and Asia for use as FTP sites. Neither option was as scalable or as cost-effective, he says. "After lengthy analysis, we came up with Akamai. It's not the most inexpensive option but it helped us avoid buying lots of servers and dealing with support issues," he says. He's also been able to keep tabs on customers, seeing where downloads are originating, something that isn't always possible in the FTP world.
SCD Systems is a prime example of a trend that analysts say is long overdue: customers are finally getting a better understanding of what content delivery and CDNs are and how they can use them.
Whenever a new industry or market emerges, the number one priority of its constituents is education. But two years ago, when CDN providers were first popping up, many weren't sharing their knowledge with customers, citing possible loss of competitive information. However, if a customer can't identify the benefits of a service, they don't have a real reason to use it, something HTRC Group's Howard says hurt the industry.
"We saw lots of branding but no educational campaigns. That's been the feeling for the past two years. The awareness period never took place," he says. "It's only been in the last six months that we're seeing road shows and seminars about what the technology is and what specific vendors bring to their customers."
While increasing demand for CDN services in the enterprise is good news, the sector still has its problems. Companies are going out of business and analysts say there's room for consolidation. The main problem with faltering CDN providers is that many are focused too heavily on content delivering and not enough on services and offerings. Even though a CDN can pay for itself after only two or three streaming events, customers would prefer to get all of their services, including hosting, bandwidth, and managed services, from one place. The most successful CDN providers give their customers an additional reason to stick with them even if content delivery needs slow.
Some customers are willing to look at a CDN that has partnerships with other providers such as Mirror Image, which has an agreement with Exodus Communications. Others want to work with CDNs that own their own hosting and services division such as Globix, a co-location provider who recently added a CDN offering called EarthCache.
Globix is selling its new service to financial services and manufacturing customers, 70 percent of which are in the enterprise, says Philip Levinson, vice president and general manager of Globix EarthCache.
One company may get a boost from being acquired. Dave Farber, chief systems strategist for Digital Island, which was recently acquired by Cable & Wireless is looking forward to expanding his potential client roster once the deal is completed. "We already provide outsourced services for managing [customers'] e-business systems. That's a proposition that resonates with a lot of companies, particularly companies that weren't founded around the Internet," Farber says. Having a rounded service offering makes it easier for the company to continue making inroads with the dotcom crowd, Farber says. The company is continuing its push garnering high profile customers such as Hotmail.
Even hardware and software vendors benefit. InfoLibria, which sells caching appliances to ISPs, is selling content distribution and delivery infrastructure for use in the enterprise.
The benefit of providers who also do hosting is that many are willing to give customers a pay-as-they-go option. Since they already have their business on the hosting side, they can set up and execute streaming events and content distribution when needed, eliminating monthly service fees.
Unfortunately, the biggest competition to CDNs for the enterprise crowd is the enterprise itself. IT managers looking to save money are choosing to build their own CDN, something most CDN providers say is only a fad.
ACD Systems, which has been up and running with its CDN for five weeks now, is thrilled with its outsourced service. "We do so many overseas downloads that our CDN service is really great for us," Stewart said. "Customers aren't losing their connections all the time and if they do, they can resume the download and get the file much faster. We've seen success rates increase by 30 percent. It's been a wonderful thing."
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