Attempting to keep supply ahead on demand

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E-Business CaseAkami Technologies: Attempting to keep supply ahead on Demand

In 2018, the amount of Internet traffic generated by YouTube alone was greater than the amount of traffic on the entire Internet in 2000. Because of video streaming and the explosion in mobile devices demanding high-bandwidth applications, Internet traffic has increased over 500% since 2010 and is predicted to nearly triple by 2021 (see Figure 2.18). Internet video is now a majority of Internet traffic and will reach 82% by 2021, according to Cisco. Mobile platform traffic is expected to grow sevenfold from its 2016 levels by 2021. Cisco estimates that annual global Internet traffic will be around 3.3 zettabytes in 2021: that's 3,300 exabytes, or, in other words, 33 with 19 zeroes behind it!

In today's broadband environment, the threshold of patience is very low. In 2018, 53% of mobile users will leave a page that takes more than three seconds to load. Increased video and audio customer expectations are bad news for anyone seeking to use the Web for delivery of high-quality multimedia content and high-definition video. Akamai is one of the Web's major helpers, and an overwhelming majority of the Web's top companies use Akamai's services to speed delivery of content. Akamai serves more than 30 terabits of web traffic per second. Slow-loading web pages and content sometimes result from poor design, but more often than not, the problem stems from the underlying infrastructure of the Internet. The Inter-net is a collection of networks that has to pass information from one network to another. Sometimes the handoff is not smooth. Every 1,500-byte packet of information sent over the Internet must be verified by the receiving server and an acknowledgment sent to the sender. This slows down not only the distribution of content such as music, but also slows down interactive requests, such as purchases, that require the client computer to interact with an online shopping cart. Moreover, each packet may go through many different servers on its way to its final destination, multiplying by several orders of magnitude the number of acknowledgments required to move a packet from New York to San Francisco. 

The Internet today spends much of its time and capacity verifying packets, contributing to a problem called "latency" or delay. For this reason, a single e-mail with a 1-megabyte attached PDF file can create more than 50 megabytes of Internet traffic and data storage on servers, client hard drives, and network backup drives. Web page load times for desktops have also increased significantly as pages become laden with more content of various types. Load times increased by over 60% from 2013 to 2015 and have continued to rise since that time, further complicating content distribution. Akamai Technologies was founded by Tom Leighton, an MIT professor of applied mathematics, and Daniel Lewin, an MIT grad student, with the idea of expediting Internet traffic to overcome these limitations. Lewin's master's thesis was the theoretical starting point for the company. It described storing copies of web content such as pictures or video clips at many different locations around the Internet so that one could always retrieve a nearby copy, making web pages load faster. Officially launched in August 1998, Akamai's current products are based on the Akamai Intelligent Platform, a cloud platform made up of over 240,000 servers in 130 countries within over 1,700 networks around the world, and all within a single network hop of 85% of all Internet users. Akamai software on these servers allows the platform to identify and block security threats and provide comprehensive knowledge of network conditions, as well as instant device-level detection and optimization. Akamai's site performance products allow customers to move their online content closer to end users so a user in New York City, for instance, will be served L.L.Bean pages from the New York metro area Akamai servers, while users of the L.L.Bean site in San Francisco will be served pages from Akamai servers in San Francisco. Akamai has a wide range of large corporate and government clients: 55% of Fortune 500 companies, 19 of the top 20 media and entertainment companies, 91 of the top 100 online U.S. retailers, all branches of the U.S. military, all the major U.S. sports leagues, and so on. In 2018, Akamai delivered between 15% and 30% of all web traffic, and nearly 3 trillion daily Internet interactions.

Accomplishing this daunting task requires that Akamai monitor the entire Internet, locating potential sluggish areas and devising faster routes for information to travel. Frequently used portions of a client's website, or large video or audio files that would be difficult to send to users quickly, are stored on Akamai's servers. When a user requests a song or a video file, his or her request is redirected to an Akamai server nearby and the content is served from this local server. Akamai's servers are placed in Tier 1 backbone supplier networks, large ISPs, universities, and other networks. Akamai's software deter-mines which server is optimal for the user and then transmits the content locally. Web sites that are "Akamaized" can be delivered anywhere from 4 to 10 times as fast as non-Akamaized content. In 2018, Akamai released an improved Image Manager tool, which automates image conversion of large image files to speed load times on image-heavy webpages, as part of a partnership with the BigCommerce e-commerce platform. Akamai has developed a number of other business services based on its Internet savvy, including targeted advertising based on user location and zip code, content security, business intel-ligence, disaster recovery, on-demand bandwidth and computing capacity during spikes in Internet traffic, storage, global traffic management, and streaming services. Akamai announced it would launch a blockchain-based payment network for credit cards and other financial transactions. The network is expected to perform one million transactions per second at latencies of less than two seconds, which compares very favorably to Bitcoin's seven transactions per second and latency of sixty minutes per transaction. The shift toward cloud computing and the mobile platform as well as the growing popularity of streaming video have provided Akamai with new growth opportunities. As more businesses and business models are moving to the Web, Akamai has seen its client base continue to grow beyond the most powerful Internet retailers and online content providers. However, the growth of streaming video has also created new challenges for Akamai, including increased competition from Comcast and Amazon, which have built competing content delivery services. Amazon's CloudFront content delivery network is already bringing in $2.3 billion in revenues. Many of Akamai's largest clients, including Apple, Facebook, Google, Microsoft, and Netflix, are also increasingly shifting their content delivery operations away from Akamai's platforms and onto in-house content delivery networks. Amazon in particular continues to make inroads against Akamai in addition to bringing its own content delivery nearly entirely in-house. Other competitors in content delivery, such as Cloudflare, Fastly, and StackPath, also represent threats to Akamai's continued dominance.

Akamai is also acutely aware of the increase in cybercrime as more traffic migrates to the Internet. Growth in Internet traffic is good news for Akamai, but the company must also now deal with politically motivated cyberattacks, organized crime online, and state-sponsored cyberwarfare, not just against its clients, but against CDNs like Akamai itself. Akamai has continued to improve its Kona Site Defender tool, which offers a variety of security measures for Akamai clients. The tool protects against Distributed Denial of Service (DDoS) attacks and includes a firewall for web applications. In 2018, Akamai rolled out new improvements to Kona's ability to automate app security. With DDoS attacks against CDNs on the rise, Akamai has also taken precautions to ensure that it can with-stand an attack against its infrastructure. With so many businesses now dependent on the uninterrupted flow of content over the Internet, Akamai is in a very strong position to sell security services and analytics to its customers. Akamai has partnered with security companies such as Trustwave and China Unicom to sell products jointly and has also set itself up for future growth by moving into areas of the world with less-developed broadband infrastructure, such as the Middle East. In 2015, Akamai opened an office in Dubai, hoping to bolster its presence in an area where the adoption rate for broadband is skyrocketing. In 2017, Akamai acquired SOASTA, whose flagship product, CloudTest, allows companies to test and analyze the performance of their websites and website applications and is used by Apple, Target, and Walmart. The move will add a valuable new offering to Akamai's Web Performance Solutions group of tools. 

The improvements in Akamai's security businesses have offset much of the slowdown in its content delivery business. Akamai's Cloud Security Solutions business segment grew 32% in 2017, while its Media Delivery Solutions segment dropped 3%. However, Akamai solidly beat Wall Street estimates in the first quarter of 2018 on the strength of its cloud security growth and on slowing losses in content delivery, with Facebook, Google, Apple, Amazon, Microsoft, and Netflix accounting for only 7% of Akamai's media business, far less than in previous years. The company also announced it would cut 5% of its global workforce, mostly from its media segment, and soon after declared that it would rehire a similar number of employees to support higher-growth areas like cloud security.

Case Study Questions

  1. Explain the business types and how their strategy to benefit from mobile platforms and other technologies in their business.
  2. Why does Akamai need to geographically disperse its servers to deliver its customers' web content?
  3.  If you wanted to deliver software content over the Internet, would you sign up for Akamai's service? Why or why not?
  4. What were the challenges for Akami and what was their strategy to face those challenges?
  5. How Akami  solved the Internet today's spending and delay? Explain 

Reference no: EM133049695

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