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Since last year, Akamai (NASDAQ:AKAM) has been working on developing an operator based content delivery product and yesterday, the company officially announced the launch of their new managed CDN offering, which they have branded as Aura Network Solutions. While the company was light on details on how it works, what it costs and which customers they have signed up, they did provide me with their thoughts on the market and some details on their plans for a federated CDN model.

Like many of the CDN vendors in this industry, most notably EdgeCast and Limelight Networks, Akamai plans to have two operator CDN products, one managed and one licensed. Today, Akamai is offering a managed CDN offering only and next month, plans to have their licensed software model in trials. One interesting piece of information the company divulged is that when launched, their licensed CDN product will have transparent caching functionality build in. That's an interesting development because Akamai's platform would then offer all three services to an operator, those being on-net services/software, off-net delivery and transparent caching. (more on why that is important here)

Akamai said they have 6-10 paying customers for the managed CDN offering, with three of those customers being operators and three more being government institutions. While Akamai has been deploying edge boxes inside of private networks for years, the company said their managed CDN technology is something completely different and has been designed just for operators. Akamai was not able to mention any customers by name, but said they expect to be able to give out more details before too long. The company said they are in discussions with most of the major operators, as well as some who are conducting trials, but it's too early for me to know how far along they are until we start hearing directly from customers.

Akamai said that 100% of the technology for their managed and licensed CDN products have been developed in-house and that they have built a "new" software solution for carriers as well as a team of people inside of Akamai to support them. What effect their managed and licensed CDN products will have on their bulk delivery business is unknown, but I could see many carriers competing with Akamai's CDN business over time. The cost of the managed/licensed offerings might offset that, but it's really too early to know since I don't yet have details from any customers on what Akamai is charging for these new products. The company also said they plan to offer a federated CDN model, which they will call "Akamai Instant Federation", with all of their managed and licensed CDN customers, but it's really too early to know what that may look like.

There is only so much myself or anyone else can write about Akamai's new managed CDN offering because we don't just yet know how it works, if it works, or what it truly looks like. But if Akamai does in fact announce a bunch of operators as customers and those operators start discussing details, we're going to have a pretty good idea what kind of disruption they could have in the market. Naturally, their partnership with Ericsson should help as Akamai also announced that Ericsson is selling their Smart Cloud Acceleration solutions to mobile and operator networks, which will be bundled with Akamai's CDN software.

As I have written about before, the greatest challenge that Akamai faces is in convincing operators that their intentions are pure, and that this is not principally a strategy to gain valuable real estate inside the ISP network. Fifteen or so years ago, Akamai sold web caching to ISPs, and used that position to gain an upper hand in the nascent world of CDN. As the value to the ISP began to shrink, network operators began to view Akamai as someone who consumed massive amounts of bandwidth and got a free ride.

Now they have to convince the operators that this time is different, and that the offering is genuinely for licensing technology to the ISP to delivery video and other content. There certainly is a growing market for these services and software, but from many conversations that I have had, network operators are not yet convinced that Akamai is the answer to their problems; both technically, but more important strategically. But if Akamai can show the market that they have customers for these services and be more transparent than they have been in the past on how the technology works, they may change operator's perception.

Akamai wasn't able to share with me what the size of the market opportunity for managed and licensed CDN services is today, or what it may grow to, and I don't know the size of the market either. By my estimates, it's well less than $100M this year, but it is expected to grow pretty quickly over the next few years. At some point soon, I will put out market sizing data for the licensed CDN market like I have done for the video CDN and transparent caching markets.

If you want to learn more about the managed and licensed CDN business and hear directly from carriers and operators deploying these solutions as well as transparent caching products, then check out the Content Delivery Summit, taking place May 14th in NYC. We'll have carriers from all over the world speaking as well as all the major vendors showcasing how their solutions and services work.

Disclosure: No position

Source: Akamai Launches Managed CDN Offering, LCDN With Transparent Caching Coming Next Month