Week 3 group assignment performing analysis
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Week 3 group assignment performing analysis
- 1. Bringing the EDGE back to Akamai Presented by: Melanie Lopes, Jessica McLuckie, Alicia Mielniczek, Angeli O’Day-Jordan
- 2. Project Overview Executive Summary Current Issue Analysis Problem Statement Current Status SWOT Analysis PEST Analysis Summary References
- 3. Executive Summary Mission Statement: “In a faster forward world, innovation doesn't wait for technology” (Akamai, 2016). Company Information: Akamai is the global leader in Content Delivery Network (CDN) services. They provide advanced web performance, mobile performance, cloud security and media delivery solutions.
- 4. Problem Statement Re-evaluation of the “Edge” network plan. Management has stuck with the same strategy for years and has never branched out to stay ahead of their competitors. Large customers are realizing their ability to provide their own CDN capabilities. Currently, there is growing tension to aggressively charge for their services. Due to changing technologies, Akamai needs to re-evaluate where they focus their research and development. A decision by management on where and what technologies Akamai should invest their research and development on needs to be made.
- 5. Akamai’s Current Status Not the first Content Delivery Network (CDN); currently market front-runner. Three sources of competition. In 2009, they made up approx. 60% of market share in revenue. Handles 15-30% of web traffic. 1/3 of Fortune 500 companies including top 20 global e-commerce sites. 40-45% of revenue derives from media & entertainment.
- 6. Akamai’s Current Status.. (Cont’d) Have 1,000 servers around the world; very difficult to service. 60% of business is delivering specific content. In 2009, prices twice as high than competitors. Microsoft & Amazon started to build their own onsite networks called server farms. “Edge” program costly; enables faster response times. Diverse group of consumers.
- 7. SWOT Analysis Strengths Infrastructure of Edge Network Faster response times from techs Higher market share than competitors. Income had an increase between 2004-2008. Well-built and reliable customer base. Included on multiple “Best Places to Work” lists.
- 8. SWOT Analysis Weaknesses Largest competitor: Limelight Networks. Have to contact each ISP separately and thus has to build each ISP a server to meet their needs. Akamai customers feel excluded from the process. Management is not open to change. Very expensive compared to competitors
- 9. SWOT Analysis Opportunities Look at possible acquisitions. Research and Development. Bringing in new talent. Established relationship with highly-ranked customers
- 10. SWOT Analysis Threats Another internet company can take Akamai over. Many competitors decreasing their prices. Internet technology constantly evolving. Current customers are developing their own alternatives.
- 11. PEST Analysis Political Factors The Patriot Act/Internet governance
- 12. PEST Analysis Economic Factors There could be an economic downturn. Exchange rates. Cheaper Alternatives.
- 13. PEST Analysis Social Factors More focused on the delivery of their services than the services themselves. Consumer Views. Cultural events can occur in the areas that they have servers which can impact the ability for them to provide services for the clients.
- 14. PEST Analysis Technological Factors Research and Development Budget Strategic Alliance Specialized and Advanced products
- 15. In Summary Akamia holds a strong edge in the market and has opportunities to expand their product line. Akamai must be open to changing strategy if they intend to stay at the forefront of the industry. The Strength The Challenge
- 16. References Akamai. (2015). About us. Retrieved from https://www.akamai.com/us/en/about/index.jsp Akamai logo [JPG]. (1998). Retrieved from https://www.akamai.com/us/en/about/news/me dia-resources.jsp Allani, M., Garbinato, B., & Pietzuch, P. (2012). Chams: Churn-aware overlay construction for media streaming. Peer-to-Peer Networking and Applications,5(4), 412-427. doi:http://dx.doi.org/10.1007/s12083-012- 0161-7
- 17. References … (cont’d.) Cohan, P. (2014). Akamai CEO talks four sources of growth. Forbes Magazine. Retrieved from www.forbes.com/sites/petercohan/2014/06/02/akamai- ceo-talks-four-sources-of- growth/#3826e4857a0b215aa4582b47 Content delivery network (CDN) market worth USD 15.73 billion USD by 2020. (2015, Oct 15). PR Newswire. Retrieved from http://search.proquest.com/docview/1722197656?acc ountid=33575 Cotriss, D. (2012). DANGER WITHIN. SC Magazine, 23(7), 33-34. Retrieved from http://search.proquest.com/docview/1027110399? accountid=33575
- 18. References … (cont’d.) Creeger, M. (2010). Moving to the Edge: A CTO Roundtable on Network Virtualization. Communications of the ACM Vol.53, No. 8, pp.55-62. Deane, J. K., Rakes, T. R., & Agarwal, A. (2012). Designing content distribution networks for optimal cost and performance. Information Technology and Management, 13(1), 1-15. doi:http://dx.doi.org/10.1007/s10799-011-0107-4 Dickson, G. (2007). Broadband: Ready for primetime. Broadcasting & Cable, 137(34), 16. Retrieved from http://search.proquest.com/docview/225314019?accountid=33 575
- 19. References … (cont’d.) Masters, J. (2014). What is internet governance? Council on Foreign Relations. Retrieved from http://www.cfr.org/internet-policy/internet- governance/p32843 PR, N. (2012, December 19). Akamai Ranks as a 'Best Places to Work, 2013' in Glassdoor's fifth annual Employees' Choice Awards. PR Newswire US. Taylor, A. (2005). An operations perspective on strategic alliance success factors: An exploratory study of alliance managers in the software industry. International Journal of Operations & Production Management, 25(5), 469-490. Retrieved from http://search.proquest.com/docview/232363728?acco untid=33575
- 20. Van den Steen, E. "Akamai's Edge (A)." Harvard Business School Case 712-455, December 2011. (Revised April 2013.) VMIX; VMIX expands akamai relationship to serve growing online video customer base. (2009). Journal of Technology, , 153. Retrieved from http://search.proquest.com/docview/208587384?a ccountid=33575 Young, C. (2000). Akamai doubles customer base to 200 in six weeks. Amakai. Retrieved from http://www4.akamai.com/html/about/press/release s/2000/press_010500b.html References … (cont’d.)
Editor's Notes
- Welcome to today’s presentation, “Bringing the EDGE back to Akamai,” brought to you by Melanie Lopes, Jessica McLuckie, Alicia Mielniczek, and Angeli O’Day-Jordan. Akamai logo [JPG]. (1998). Retrieved from https://www.akamai.com/us/en/about/news/media-resources.jsp
- Today we are looking at Akamai, a leading provider of CDN services. While currently a front-runner in the market, with new technological advances come new competitors and challenges. We are committed to addressing these challenges head-on and providing real-world solutions that Akamia can implement, both short and long term, in order to stay on top of an ever-changing market. During this presentation, we will be discussing the following: The executive summary of Akamai The current issue analysis; including the problems and current status of Akamai A SWOT analysis of Akamai A PEST analysis of Akamai A summary of the case The references that were used during our research.
- At first glance it may seem as though Akamai’s Edge Network plan is working for them; however, that may not be the case. Management has stayed with the same strategy for years and has never branched out to stay ahead of the competition. Their competitors are developing their systems to meet customer demands such as higher speed video streaming, up-to-date infrastructures and are keeping up with upcoming trends. Akamai’s larger customers are realizing that they have the ability to provide their own CDN capabilities, which is starting to hurt their customer base. Akamai’s competitors are providing premium pricing for the same services that Akamai provides. Thus, there is growing tension to aggressively charge higher prices for their services, if they provide state-of-the-art services to their customers. Due to the changing technologies, Akamai needs to re-evaluate where they focus their research and development. Therefore, a decision by management on where and what technologies Akamai should invest their research and development in needs to be made. Lastly, there is not enough confidence that they can execute their strategy well enough to maintain their market share. Van den Steen, E. "Akamai's Edge (A)." Harvard Business School Case 712-455, December 2011. (Revised April 2013.)
- The current status of Akamai is as follows: Akamai was not the first Content Delivery Network (CDN); however, they are now a market front-runner. They have three sources of competition: Telecom Networks Potential CDN customers Standalone Central Delivery Networks In 2009 they made up approximately 60% of the market share in terms of revenue (Van den Steen, 2013). Akamai handles 15-30% of all web traffic. (Van den Steen, 2013). 1/3 of all Fortune 500 companies including the top 20 global e-commerce sites, 9 out of 10 of the top social media sites, and al of the top internet portal use Akamai. (Van den Steen, 2013). 40-45% of Akamai’s revenue comes from media and entertainment (Van den Steen, 2013).
- They have 1,000 servers located around the world, which makes it very difficult to physically service. (Van den Steen, 2013). 60% of the business is delivering specific content: Video content, software, and software patches (Van den Steen, 2013). In 2009, prices were twice as high as competitors, but it was believed that in order to not lose business they needed to bring that down to 15-20% (Van den Steen, 2013). Microsoft & Amazon started building their own onsite networks called server farms. They were looking specifically for more advanced services (Van den Steen, 2013). The Edge program is costlier but it enables faster response times (Van den Steen, 2013). They have a diverse group of consumers who regard various features of internet services.
- Some of the strengths of Akamai are: Their Edge Network has a great infrastructure because they have a de-centralized network, which allows for faster response times from their technicians. (VMIX, 2009). Eighty-five percent of the world's Internet users are within a single "network hop" of an Akamai CDN server (Akamai, 2016). Currently, they have a higher market share than their competition. Akamai dominates approximately 50% of the CDN market share. (Cohan, 2014). In fact, Akamai has deployed the most pervasive, highly distributed content delivery network (CDN) with more than 200,000 servers in over 110 countries and within more than 1,400 networks around the world. In 2004, Akamai had reported net income in the amount of $34.4 million by 2008 they reported $145.1 million in net income. (Van den Steen, 2013). This shows that although they went through some rough times, they had the ability to withstand it and come out on top each year. Akamai is constantly building their customer base and have proven that they deliver the best services. Akamai customers are realizing the significance of Akamai's service, which is a testament to what this technology means for delivering a better Internet. (Young, 2000). Akamai is often included on “Best Places to Work” lists, suggesting there is not much internal friction that could hurt the company from inside. Happy employees are engaged and committed to the organization.
- Some of the weaknesses of Akamai are: One of Amakai’s biggest competitors currently is Limelight Networks due to their high tech video distribution. Limelight has some 4,000 servers deployed globally and provides online video distribution for Disney Channel; Amazon's Unbox video download service; Microsoft’s Xbox Live gaming and video distribution service; online movie service Akimbo; and MSNBC.com. (Dickson, 2007). Limelight has taken over a majority of the customer base for video streaming. Having the server closer to the ISP is somewhat a thing of the past. Competitors are renting out space to build data centers, which is more cost efficient than placing a server in each ISP location. (Van den Steen, 2013). Currently, Akamai has 1000 servers located around world, which makes it very difficult to physically service. Akamai customers that feel the company's service operates too much as a black box and that customers have very little transparency into how Akamai's network actually works. (Rayburn, 2011). Akamai is very expensive compared to competitors.
- Some of the opportunities of Akamai are: Between 2000 – 2008, Akamai has acquired 8 internet technology companies. There is a lot of opportunity and capital to expand their operations and acquire other technology companies years down the road. (Akamai, 2015). Furthermore, the industry is continuously evolving, giving the opportunity to create new products. There are a lot of other internet technologies that Akamai could reinvest into research and development. They could look into higher quality video streaming which Limelight Networks has a lot of the market share in. (Van den Steen, 2013). Video streaming is in very high demand and will continue to be this way for years to come. (Allani, Garbinato & Pietzuch, 2012). In any industry, when you have engaged employees who are happy with the organization, people start to notice. Akamai has an opportunity to “brain drain” talent from competitors. Since Akamai already provides services for 1/3 of all Fortune 500 companies, they hold insider-access to discovering what their clients need before competitors can. As Akamai considers new venues for R&D, they can get immediate feedback from customers in order to direct their efforts.
- Some of the threats of Akamai are: Even though Akamai has acquired eight various internet companies there is always a chance that another company can take them over. There has been a growth in the number of Internet users and the size of the typical content delivered is leading to increased expectancy, and often unacceptable response times. (Deane, Rakes & Agarwal, 2012). Thus, many competitors have been able to decrease their pricing in order to increase their customer base and market share. The internet has evolved over the years. It started out as a dial-up connection and has grown into a digital broadband connection. As far as the internet goes, users want a faster and more technologically advanced system to stream high-quality videos and surf the internet. (Deane, Rakes & Agarwal, 2012). Microsoft & Amazon are building their own onsite networks called server farms.
- Some of the Political Factors for Akamai are: The Patriot Act is an act that was put into effect in 2001 and helps protect the United States from terrorist acts like the one that took place on 9/11. This can affect Akamai because the internet is the easiest way that terrorists can communicate and send funds through. Akamai may be required to follow the rules and regulations set forth in this act. Beyond the US, roughly half the world’s internet users experience some level of internet governance by their country (Masters, 2014).
- Some of the Economic Factors for Akamai are: The economy at times can be unpredictable, thus an economic downturn could have an affect on the Internet Technology industry. The way that this can affect the IT industry is that customers may not be willing to upgrade their systems or servers especially if their company is losing money. This would result in Akamai losing revenue. As exchange rates fluctuate, this could adversely affect the CDN market (PR Newswire, 2015). Similarly, as the recession hurts profits, large companies are looking at ways to reduce costs. Considering a cheaper CDN provider could hurt Akamia in the long run.
- Some of the Social Factors for Akamai are: Akamai is currently concentrating more on the delivery of their content rather than the content itself. While this may be okay at the moment, their competitors are one step ahead of them by improving the content and worrying about delivery later. With 40-45% of their revenue coming from media and entertainment, Akamai needs to be sure to keep an eye on how public perception may be changing and evolving as time goes on. Akamia has EDGE servers located around the world. In some cases, in countries experiencing political upheaval or ecological disasters. These servers could be affected, which in turn would hurt Akamai’s network in the surrounding area.
- Some of the Technological Factors for Akamai are: Akamai has to think about the amount of money they want to spend on researching and developing a new service/product. Does Akamai already have money set aside for R&D? Forming a strategic alliance with another CDN company is a critical part in developing and maintaining a competitive lead. It helps in reducing the amount of threat for competition, it creates more choices for different strategies and can reduce the amount of risk for Akamai. (Taylor, 2005). Akamai has the opportunity to change their focus to more specialized and advanced products that companies such as Microsoft and Amazon would still purchase given that they are creating their own server farms and may no longer need the more generic functions of the business. As larger clients are starting to compete, Akamai can begin addressing new venues of revenue.