Examining Akamai's Application Delivery Customers - Part II

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Includes: ADSK, AKAM, CAT, PFWD
by: Dan Rayburn

Last month, after spending the day at Akamai's (NASDAQ:AKAM) Cambridge headquarters, I detailed how Akamai's application delivery product works, the types of content it delivers and the importance this product will play in Akamai's revenue for quarters to come. At the meeting, Akamai also gave me an insight into who some of its customers are that use the service which I highlight below. Some of these companies have been featured on the Akamai website in case studies, others haven't.

Of the numerous people I speak to about Akamai, their application delivery product is the one that is least understood in terms of how it works. Let's face it, understanding how content delivery works for video and static content is not difficult, but application delivery is still a new product and the market for the service is only just beginning.

While Gartner says that the market for application acceleration products is expected to reach about $2.3 billion in end-user sales by 2009, Gartner does not break out that number to say where that revenue comes from. Hardware based products from the likes of Cisco (NASDAQ:CSCO) and F5 (NASDAQ:FFIV) for co-location based scenarios are very different than service based solutions like Akamai's. So while there is no way to truly know what the market size is for outsourced application delivery services, it is quickly growing. I'd be willing to bet that we see Akamai do close to $100 million in revenue this year for their application delivery product, up from $40 million last year.

When it comes to retail and e-commerce customers, I really don't need to go into many details on what the value is. Everyone knows that anything that makes e-commerce based searching, shopping carts and checkout go faster is a no brainer and Akamai has numerous examples of such customers on their website.

A variety of customers in the online advertising space use Akamai acceleration services to accelerate both the end user navigation and delivery of stock images and video to journalist and media outlets. Adify has developed a unique build your own network platform that comprises a hosted application (accessed via a portal) through which customers choose their ads and settings, along with a transactional system that streams ads to customers’ sites.

By using application delivery, Adify is able to serve its ads in less than half a second in North American and in less than one second to users in Europe—even though its data center is based in the US. While Adify looked at an application acceleration based co-location solution, Akamai says Adify would have had to spend close to $600,000 annually to build data centers around the world—and the costs would rise as the company factored in equipment and personnel.

Various customers leverage Akamai's acceleration services to accelerate support, B2B commerce applications to enterprise users and partners. While you read about many of these same companies using traditional Akamai services, like software downloads, etc... rarely are the other applications like supply chain management and extranet portals highlighted. Akamai says it has seen an increase in usage of their application acceleration technologies across industries that are new for the company.

Autodesk (NASDAQ:ADSK) uses Akamai's acceleration services for its on-demand Buzzsaw collaborative project management application. Caterpillar (NYSE:CAT) uses the application acceleration service to move the configuration of industrial power generators and used equipment sales online, resulting in improved satisfaction for its worldwide dealer network. Phase Forward (PFWD) uses the acceleration services to optimize the Web connection between Phase Forward's hosted clinical trial electronic data capture solution and global trial sites.

While Akamai won't say exactly how many customers it has for application delivery services, the company did say that it currently has hundreds of customers in the B2B application acceleration business. And as more companies need to speed up the delivery of all kinds of software, applications, transactions, portals and supply chain management systems, the market for outsourced application delivery is only just getting started. When the market starts to get a little bigger, I bet we'll see additional CDNs other than Akamai enter the market with service based solutions.