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Akamai case master
- 1. Peter Immediato, Scott Linden, Billy Monks
- 2. Agenda • Executive Summary • Current Issue Analysis • Problem Statement • Current Status • SWOT Analysis • PEST Analysis • Pareto Analysis • 5 Forces Analysis • Recommendations • Alternatives • Recommendations • Summary • References
- 3. Executive Summary • Incorporated in 1998 • Provides content delivery and cloud services. • Leading provider of cloud services. • Ads, Business transaction tools, streaming video, and websites. • 137,000 servers in 87 countries. • Analyzes and manages web traffic.
- 4. Problem Statement • Mounting pressure to aggressively price their services • Decide where and what technologies to invest in R&D • Should Akamai leave their high quality “Edge” network strategy.
- 5. Current Status Akamai: • Not the first CDN, but is now the Market Leader • Decentralized server infrastructure • “No, never, [the importance of being on the Edge] is a religious belief here at Akamai. Anyone who thinks differently just sinks away in this organization.” • 3 sources of competitors • Different customers value different aspects of internet service • Media and Entertainment is 40-45% of Akamai’s revenue
- 6. SWOT Analysis • Useful tool for a quick and efficient identification and understanding an organizations strengths, weaknesses, opportunities and threats. • One strength of the analysis is that it actually 4 analyses in one, analyzing both internal and external aspects of the organization. This allows an organization to get a better grasp of itself and the market or industry it competes in.
- 7. Swot Analysis Strengths • Edge infrastructure • Extensive, close to the customer • Expensive, really faster with tech, • Large Market share • Revenue increase from 2004 - 2008 • Large and loyal customer base Weaknesses • Rival competitors such as Limelight Networks. • Akamai has to negotiate with each ISP individually, and then custom build servers for the needs and contract with each ISP.
- 8. Swot Analysis Opportunities • Acquisitions • Emerging Markets • R&D Threats • Hostile take overs • Competitors aggressive pricing • High Tech industry evolves
- 9. Pest Analysis • Political, Economic, Social, and Technology • Spot opportunities and significant threats • Reveals the direction of change • Avoid starting projects • Break free of unconscious assumptions
- 10. Pest Analysis Political Factors: • Indirect Involvement • Patriot Act Economic Factors: • Hard to predict internet traffic • Past Failures • Economic Slowdown
- 11. Pest Analysis Social Factors: • Akamai is focused on delivery of content, not the content itself • E-Learning experience • Social Media Speed Technological Factors: • Strategic Partnerships • R&D budget • On-demand and streaming video • Takeover Rumors
- 12. Pest Analysis Environmental Factors: • Reduce energy • Recycle and proper disposal • Suppliers and partners with the same vision Legal Factors: • Several past patent lawsuits • Most recent Supreme Court ruled against Akamai
- 13. Pareto Analysis • Joseph Joran • Wilfredo Pareto • Law of the vital few, 80:20 rule or Pareto Principle • Vital few factors from the trivial many factors
- 14. Pareto Analysis # Problem Root Cause Score 1 Internet needs to be faster Consumer Demand 10 2 High demand for high speed video streaming Consumer Demand 10 3 High cost of maintaining Edge network Edge Network 3 4 Engineers take longer to adjust to the Edge network Edge Network 1 5 Centralized systems are becoming faster with new technology Centralized Network 5 6 There is a relative low cost of entry for a centralized network Centralized Network 3
- 15. Pareto Analysis Root Cause Score Plan of action Consumer Demand 20 Invest in R&D to improve internet speeds and build up state of the art infrastructure to service the growing demand. Centralized Network 8 For the most part ignore the Centralized networks. Edge Network 4 Invest in R&D to improve efficiencies in the Edge Network and implement a variety of green initiatives.
- 16. Five Forces Model • Simple but powerful tool • Covers many sectors of the industry • Good at looking at both positive and negative aspects of an industry
- 17. Five Forces Model Bargaining Power of Suppliers: • Fierce competition among suppliers • Parts can be easily substituted • Changing technology
- 18. Five Forces Model Bargaining Power of Customers: • High cost of switching • Akamai’s focus on customer’s needs • Akamai’s superior quality
- 19. Five Forces Model Competitive Rivalry: • Akamai has a large market share • Competitors are smaller • Akamai continues to grow
- 20. Five Forces Model Threat of Substitutes: • Threats of Substitutes • Inferior products of competitors • Low performance of competitors
- 21. Five Forces Model Threat of New Competitors: • Huge investment for starting in industry • Akamai focus on maximizing the building of the products • New competitors struggle to match quality
- 22. Recommendations Alternatives • Agressive pricing VS premium pricing • Invest in R&D VS Wait and See • Stick to the Edge VS Leave the Edge
- 23. Recommendations Aggressive Pricing Reduce pricing but not dramatically Competitors have inferior products Still have a big market share Invest in R&D Outspend the competition Improve Video & Live Streaming Remain Vigilant for new and upcoming trends
- 24. Recommendations Expand Globally • Form Strategic Alliances • Acquire Smaller Companies Edge Network Stay with Edge technology Faster than consolidated server structure Close to the customer
- 25. Summary • Akamai provides a number of solutions • Paul Sagen is facing a number of issues • Pricing, R&D, Edge Network • 4 Analyses: • SWOT, PEST, Pareto, and 5 Forces Model • Recommendations: • Agressive pricing, R&D, Expand Globally, Edge Network
- 26. References • 2013 report on the international video CDN market - forecasts to 2016. (2014, Jan 22). M2 Presswire Retrieved from http://search.proquest.com/docview/1490894709?accountid=33575 • “About Akamai” N.p., n.d. Web. 17 Oct. 2014. <http://www.akamai.com/html/about/>. • ACCORD NETWORKS: Accord and akamai forge relationship to optimize web-based business communications; companies agree to enable seamless automation of high-quality streaming video for web conferencing users worldwide.(2000, Dec 05). M2 Presswire, pp. 1. Retrieved from http://search.proquest.com/docview/443988708?accountid=33575 • Akamai; akamai strengthens rakuten's eCommerce business. (2009). China Weekly News, 48. Retrieved from <http://search.proquest.com/docview/199180460?accountid=33575>. • Akamai could see 20-30% growth from mobile internet in 5-7 years - regional. (2011). Business News Americas, Retrieved from <http://search.proquest.com/docview/880174645?accountid=33575>. • Akamai launches specialized delivery solution for the game publishing industry.(2011, Mar 02). PR Newswire, Retrieved from http://search.proquest.com/docview/854368739?accountid=33575 • Akamai Press Release. (2014, February 8.) Akamai completes acquisition of Prolexic. Retrieved from http://www.akamai.com/html/about/press/releases/2014/press_0218.html. • Akamai Provides NCAA March Madness On Demand.(2011). Wireless News, Retrieved fromhttp://search.proquest.com/docview/861509056?accountid=33575. • Akamai reports market share. (2013). Wireless News, Retrieved from http://search.proquest.com/docview/1429289192?accountid=33575 • "Akamai's State of the Internet." Akamai's State of the Internet. Akamai, 1 June 2014. Web. 17 Oct. 2014. <http://www.akamai.com/dl/akamai/akamai-soti-q114-exec-summary.pdf>. • Akamai sustainability. <http://www.akamai.com/dl/sustainability/Environmental_Sustainability.pdf>.
- 27. References • Akamai technologies, inc.; Akamai introduces new cloudlets to simplify the development and delivery of fast and secure multi-screen web experiences. (2014). Journal of Engineering, , 341. Retrieved from <http://search.proquest.com/docview/1609116638?accountid=33575>. • Akamai touts adoption of its solutions by social media sites.(2008). Wireless News, , 1. Retrieved from http://search.proquest.com/docview/210142049?accountid=33575 • Akamai: Quality Video Streaming for a Hyperconnected World. (2012.) StreamingMedia, WP34-W35. • Akamai website. <www.akamia.com>. • Burrows, Peter. (2011, February 10.) Empire-Building at Akamai. Bloomberg Business Magazine. Retrieved from: <http://www.businessweek.com/magazine/content/11_08/b4216032345752.htm>. • Bunkley, Nick (March 3, 2008), Joseph Juran, 103, Pioneer in Quality Control, Dies, New York Times • Eischen, E. T. &. K. (2003, Aug 26). The Geography of Cyberspace. M/C: A Journal of Media and Culture, 6, <http://www.media-culture.org.au/0308/03-geography.php>. • Friendster nearly triples performance and page views served by implementing akamai solution; improved performance directly correlates to increased demand for leading social networking site, resulting in higher revenues.(2006, Apr 11). Business Wire, pp. 1. Retrieved from <http://search.proquest.com/docview/445247529?accountid=33575>. • Grigore, A. (2014). Book publishing business in romania - an analysis from the perspective of porter's five force model. Revista De Management Comparat International, 15(1), 31-47. Retrieved from http://search.proquest.com/docview/1545872066?accountid=33575 • Krause, R. (2012, Apr 25). Akamai Q1 profit up 8% on internet video demand. Investor's Business Daily, Retrieved from http://search.proquest.com/docview/1009294915?accountid=33575
- 28. References • Lionbridge Joins Forces With Akamai to Provide Superior Global e-Business Solutions. (2000, April 7). PR Newswire, p. 0899. Retrieved from http://go.galegroup.com/ps/i.do?id=GALE%7CA61379707&v=2.1&u=mlin_b_necbusin&it=r&p=AONE&sw=w&asid=2df479ea06826 536ecc801fcfcb113f8 • Jordan, Edmiston Group announces two acquisitions. (2009, January). Information Today, 26(1), 8. Retrieved from <http://go.galegroup.com/ps/i.do?id=GALE%7CA191477011&v=2.1&u=mlin_b_necbusin&it=r&p=AONE&sw=w&asid=d3bc7d34834 bead6026546c8f29f5d37>. • Manktelow, James. PEST Analysis: Identifying Big Picture Opportunities and Threats. Retrieved October 26, 2014, fromhttp://www.mindtools.com/pages/article/newTMC_09.htm • Morrison, S. (2009, Mar 18). Akamai fends off challengers. Wall Street Journal Retrieved from <http://search.proquest.com/docview/399105287?accountid=33575>. • Onstream media expands business with bonnier corporation, one of the largest consumer-publishing groups in the U.S.; - recent upgrades to onstream media's digital media services platform provides complete video infrastructure solution for bonnier corporation -.(2007, Jul 19). PR Newswire, pp. 0. Retrieved from <http://search.proquest.com/docview/453389084?accountid=33575>. • PR, N. (2014, October 8). Akamai Ion Web Performance Solution Now Faster, Easier and more Intelligent. PR Newswire US. • PR Newswire. (2012, December 6.) Akamai and AT&T Forge Global Strategic Alliance to Provide Content Delivery Network Solutions. PR Newswire US. • Stevenson, W. J. (2000). Supercharging your pareto analysis. Quality Progress, 33(10), 51-55. Retrieved from http://search.proquest.com/docview/214772679?accountid=33575 • SWOT Analysis a powerful framework. New Straits Times (Malaysia), 2003, Retrieved fromwww.lexisnexis.com/hottopics/lnacademic • Van Den Steen, E. J. (2011). Akamai's Edge (A). Harvard Business School Cases, 1.
Notes de l'éditeur
- Hello we are Peter Scott and Billy, and this is our case analysis on Akamai Technologies from a 2009 framework.
- In our presentation we will present Akamai Technologies then discuss their problems and the current status of the company and industry. After presenting Akamai, we will delve into 4 different analyses on Akamai: the SWOT Analysis, PEST Analysis, Pareto Analysis, and then the 5 Forces Model Analysis. After we examine and analyze Akamai Technologies we will present our recommendations, alternatives and summary.
- Incorporated in 1998, Akamai provides a number of solutions for content delivery and cloud services. “Akamai is the leading provider of cloud services for helping enterprises provide secure, high-performing user experiences on any device, anywhere (“About Akamai).” Akamai’s technology allows the delivery of digital content and applications, such as business transaction tools, streaming video and websites. Akamai has over 60,000 servers in 1000 networks around the world, allowing them to analyze web traffic and share that crucial information with their customers. (Van Den Steen, 2011)
- Akamai’s CEO, Paul Sagan’s problem is developing a plan for the future of the CDN market. Paul Sagan is facing mounting pressure to aggressively price their services. He needs to decide where and what technologies to invest R&D resources in, and whether Akamai should leave their high quality “Edge” network strategy (Van Den Steen, 2013). This case analysis will be performed with the goal of answering these problems.
- Akamai arose in 1998, lead by Tom Leighton, an MIT professor, to find a solution to internet delays and congestion. While Akamai was not the first CDN, they quickly became the market leader due to their elegant solution to decongest the internet: the Edge. The decentralized server infrastructure known as the Edge created a faster response time and less congested internet for the end user, and Akamai is able to market this “highly distributed computing network” over the competitors “traditional big data center” (Van Den Steen, 2013). When considering leaving the Edge, Akamai’s CEO Paul Sagan said “No, never, [the importance of being on the Edge] is a religious belief here at Akamai. Anyone who thinks differently just sinks away in this organization.” (Van Den Steen, 2013) Akamai has 3 sources for competition: Standalone CDNs, Telecom networks, and potential CDN entrants (Van Den Steen, 2013). Almost all of the competition uses the cheaper centralized networking approach that is improving all the time. Different customers value fast response times differently. Some are focused on uninterrupted service, whereas others maybe focused purely on a fast response time (Van Den Steen, 2013). About 40-45% of Akamai’s revenue comes from Media and Entertainment data streams. This market segment is expected to have explosive growth over the next 5 years (Van Den Steen, 2013).
- The SWOT is usually a page split into 4 quadrants. The top half is the internal analysis and "is a comprehensive evaluation of the internal environment according to its strengths and weaknesses. A firm's strengths are its resources and capabilities that can be used in developing a competitive advantage (SWOT Analysis, 2003)".
- Here is the first half of the SWOT analysis. The strengths and weaknesses represent the internal aspects of the analysis. This solution enables delivery of a true High Definition (HD) Internet experience for users whose local environments can support it, while offering a dynamic, buffer-free experience that delivers the best picture quality possible when conditions are less than ideal. Enhanced stream encryption adds greater security and high-definition video stream protection. (Van Den Steen, 2011) By 2009, Akamai was the market-leading CDN with approximately 60% market share in terms of revenue. It operated more than 60,000 servers in approximately 1,000 networks around the world (Van Den Steen, 2011). From 2004 to 2009 Akamai increased their revenue by 262% from $210 million to $791 million. During this time Akamai began working with Rakuten Ichiba a leading online shopping portal in Japan. "With Akamai in place, we can spend less money and effort on infrastructure related tasks. It enables us to re-direct our resources to eCommerce development activities that improve our online shopping experience and increase our sales, allowing us to offer more stable, high-quality online customer services to our customers. (China Weekly News, 2009) Rivals such as Limelight Networks Inc. have managed to grab market share and push down prices for commodity video-streaming services. (Morrison, 2009) One obvious cost was that Akamai needed to negotiate with each individual ISP, which was more complex than simply renting more space in a datacenter, as other CDNs did. (Van Den Steen, 2011)
- Here is the second half of the SWOT analysis. The opportunities and threats represent the external aspects of the organization. Akamai has the ability to acquire companies that are synergistic with their company or even have technology that Akamai might not have. For example, Akamai recently signed an agreement to acquire acerno, Inc., an online cooperative of shopping and purchase data, for about $95 million. The acquisition will bolster Akamai's new Advertising Decision Solutions products, which combine real-time anonymous web browsing information with anonymous online purchasing information from advertisers' websites to present relevant advertisements. (Jordan, 2009) Mobile traffic could represent 20-30% of growth for internet optimizing provider Akamai Technologies in the next 5-7 years, with much of that growth coming from emerging markets like Latin America. (Business News America, 2011) Akamai has 425 employees currently dedicated R&D and could easily invest more resources or acquire firms with high levels of R&D already in place (Van Den Steen, 2011) With telecommunications companies stepping up their Internet services, some analysts say the world's biggest carriers might consider buying Akamai to grab the company's expertise and market share. (Morrison, 2009) In early 2009, Akamai pricing were up to twice as high as these of the competition. Industry observers believed that Akamai could charge on average about 15-20% above competitors without losing business. (Van Den Steen, 2011) Based on these numbers Akamai would have to cut their prices dramatically or it would lose business to its competition. This would cut into their margins if they did make these price cuts. Some industry observers questioned, however, whether - given the fast evolution of technology and communication speed - there was still much benefit to be had from being located so close to the final user. They viewed the Edge network design as something of the past. (Van Den Steen, 2011)
- The PEST Analysis is a simple tool to help analyze the Political, Economic, Social and Technological factors facing an organization. "It helps you to spot business or personal opportunities, and it gives you advanced warning of significant threats. It reveals the direction of change within your business environment. This helps you shape what you're doing, so that you work with change, rather than against it. It helps you avoid starting projects that are likely to fail, for reasons beyond your control. It can help you break free of unconscious assumptions when you enter a new country, region, or market; because it helps you develop an objective view of this new environment. (Manktelow, 2014)"
- Here we look at the political and economic factors of the PEST analysis. Although Akamai has not been directly affected by political pressure, the company has been indirectly involved in lawsuits and political action because the company’s main focus has been securing customers/other company’s computers and files. (Akamai website) The U.S. Government instated a surveillance program under the continued Patriot Act to monitor data going through the six data points that exist in the United States. (Eischen, 2003) The largest economic factor for the company is transparency. It is hard to estimate the number of users worldwide and even more difficult to predict the internet traffic. Therefore, investors are timid about investing in the company’s technology. For example, investors spent heavily on increasing speed and security in the 1990’s; the investment provided limited return due to other factors beyond Akamai’s control. The investment was deemed not to be a successful due to this issue. (Akamai website) Other factors have included was has been deemed a worldwide recession. Investors want rock solid guarantees before investing. Obviously, anything related with the internet is always going to be a risk.
- Now let’s take a close look at the social and technological factors. Akamai focuses on how the content is delivered not the content. But, the company has been involved in several projects that have developed monitoring software with slowing the delivery of the content. In fact, Akamai speed of delivery of content has helped social media internet companies increase page views and ultimately revenue. (Friendster, 2006.) Akamai has worked in conjunction with numerous companies to further the electronic learning(e-learning) experience. The companies and Akamai has focused on business e-learning products in several different languages. (Lionbridge, 2000.) Although Akamai does not own a social media website, their products are responsible (in large part) for the speed of access to social media. The company has developed products that not only focus on the speed of the connection but also on storage of information. (Akamai touts adoption of its solutions by social media sites, 2008.) Akamai has creating strategic partnerships with companies for years. This allows for shared knowledge of existing products and shared cost of future R&D. The company states that it expects heavy cost of R&D over the next few years. (Akamai website) Akamai is expanding into new countries and markets continually. Akamai has strived to become a leader in the field of on-demand and video streaming. In 2011, Akamai become one of the first companies to provide the NCAA basketball tournament in HD through on-demand and live video streaming. (Akamai Provides NCAA March Madness On Demand, 2011.) In fact, Akamai has been target by numerous companies for takeover. Some of the companies include: AT&T, Cisco Systems, Google and Apple. The CEO states that he feels the company is able to function better by itself rather than part of a larger company. (Burrows, 2011.)
- And finally we will discuss the environmental and legal factors of the PEST analysis. Akamai has incorporated being a partner for the environment in several ways. First, the company focuses on conserving and using the least amount of energy possible. Also, Akamai focuses its products produce the lowest greenhouse gases possible. Next, the company has created ways on the removal of waste. Also, the company looks for suppliers and partners with the same commitment level as Akamai. (Akamai Sustainability) Akamai has been involved in several patent lawsuits over the years as the plantiff and defendant. The latest case was heard by the U.S. Supreme Court, Akamai v. Limelight case. Akamai stated that Limelight had not copied several of the patented steps in the internet delivery process but not the entire process. The Supreme Court overruled the lower court’s decision in found in favor of Limelight. (Vaughn-Nichols, 2014.)
- Our third Analysis will be the Pareto Analysis. The Pareto analysis was developed by Joseph Juran, based on Italian economist Vilfredo Pareto, who noted that 80% of the land in Italy was owned by 20% of the population in 1906 (Bunkley 2008) (Stevenson, 200). The Pareto Principle states 80% of consequences stem from 20% of causes (Bunkley 2008). This can be applied to business in the sense that 80% of a company's profits from 20% of its customers, or 80% of sales come from 20% of its products. A Strength of this analysis is the ability to sort out various factors in an issue and then identify the vital few from the trivial many factors (Stevenson, 2000). With this analysis we will identify and list some problems, identify their root cause, give a score to each problem, group the problems by root cause, total the scores, and offer suggestions or actions to take to remedy the root problems facing Akamai when deciding to keep the Edge network.
- We have listed 6 issues Akamai needs to address, identified their root cause and then assigned each issue a score between 1 and 10, 10 being most important and 1 being least important to deal with. Our first issue is the internet needs to be faster. This is a consumer demand and providing the fastest internet solution is the highest priority for Akamai with a score of 10. The second issue is the consumer demand for high speed video streaming. With the projection of the entertainment web traffic to grow to $1.5 billion, Akamai can not afford to fail to deliver this expectation and assigned it a 10 as well (Van Den Steen, 2011). Issues 3 and 4 relate to the Edge Network. There is a higher cost to maintaining the Edge network because there are more physical locations consuming power and requiring periodic upgrades and monitoring (Van Den Steen, 2011). We rated this a 3. The 4th issues is how long it takes to train new engineers at Akamai. Due to the dramatic differences between centralized network solutions and the Edge network solution, engineers have a harder, longer time adjusting and adapting to the network and how it works (Van Den Steen, 2011). We rated this low with a 1. The last 2 issues are caused by competitor centralized networks. The centralized networks are becoming faster with new technology, and could undermine the power of the Edge network. Akamai should consider this to be a threat and rate it at a 5. The final issues is the relative low cost of entry for centralized networks. It is possible to start a CDN for $20 million like Panther Express did in 2005 (Van Den Steen, 2011). Panther Express was able to build a network servicing 45 locations. We think this threat deserves a rating of 3.
- At the end of the day, the most important issue for Akamai to deal with is the consumer demand. If Akamai is able to satisfy the consumer better than the centralized networks, Akamai will continue to lead in market share. To help Akamai meet and exceed consumer demands, we recommend investing heavily into R&D to improve the Edge network and improve the infrastructure already in place. While investing in Edge network R&D for the consumer demand it will also help improve the Edge network problems and increase efficiencies in the network. Akamai can also implement a variety of green initiatives to reduce the cost of the Edge network and stress it’s commitment to the consumer by being eco-friendly and sharing those saving with the consumers. We recommend ignoring the Centralized network competitors for the most part. While Centralized Networks are becoming faster with new technologies, the Edge network is also becoming faster in pace with the Centralized networks. As for new CDN start ups having a relative low cost of entry like Panther Express, before being in the market for 5 years, they ran out of cash and were forced to merge with CDNetworks to survive (Van Den Steen, 2011). This can be a huge opportunity and advantage as Akamai can purchase start ups if they have anything to offer Akamai, or Akamai can watch them struggle, merge or whither away.
- Porter's Five Forces model is a simple but powerful tool for understanding where power lies in a given business situation. Although the strength of each force can vary from industry to industry, the forces, when considered together, determine long-term profitability within the specific industrial sector. (Grigore, 2014)
- The bargaining power of suppliers is low. Akamai can switch suppliers easily for most components. Also, suppliers are in fierce competition due to the market. This is true because six months after a part is made it loses value. Also, technology in this field is almost always changing.
- The bargaining power of customers is low. The number one reason for this is the high switching costs. Akamai requires proprietary software and hardware that are not compatible with its competitors. Akamai focuses on the customer’s product to ensure high quality standards are met. Next, Akamai provides a premium product compared to its competitors. Numerous companies have made alliances with Akamai. Also, the customer base continues to grow. (Accord Networks, 2005.)
- Akamai has a large market share while its competitors have a smaller market share. The market continues to grow and expand which keeps the competitive rivalry to a minimum. Akamai recently took over a competitor named Contendo. Contendo provided service to several big name companies to include Facebook and Google. Akamai is one of the largest in the field. Akamai profits and market share continue to improve. (Krause, 2012.)
- The overall threat of substitutes is low. First, Akamai industry has a limited number of competitors. Next, the quality of the competitor’s product is inferior. The main reason a company switches to Akiamai products is superior quality. Along with the lower quality is the lower performance (slower internet connectivity and speed.) (Akamai: Quality Video Streaming for a Hyperconnected World, 2012.)
- The overall threat is low. First, the industry has high requirements for funds. It takes an enormous amount of money to start in this industry. Also, the new competitors would have to build parts at a higher cost of production due to just starting out. Next, Akamai competitors (current and new) struggle to compare to Akamai products and services. For example, Akamai recently started producing video game products and could produce game disks at a higher quality and a cheaper price than competitors. (Akamai launches specialized delivery solution for the game publishing industry, 2011.)
- Now we have performed 4 different analyses on Akamai, we will identify some strategies and their alternatives, discuss their pros and cons, and then share our recommendations. First, when it comes to pricing products and services, Akamai can Aggressively price, or opt for a premium pricing. Aggressively pricing their products and services will allow Akamai to compete on a price level with premium products, however this will eat away their profits (Van Den Steen, 2011). Akamai can price their products at a premium, probably maintaining their profit levels, but losing market share at the same time. Second, there are 2 main options for new and emerging technology: wait and see or invest in R&D. Technology futures are hard to read as technology evolves at a rapid pace (Van Den Steen, 2011). An organization could invent a useful product, but at the same time another organization could invent something that is faster or more efficient making the first technology useless. That second company will benefit and profit from that technology, while tertiary companies can wait, save their money and then pay for the better technology as it emerges. Third, Akamai can stick to the Edge or leave the Edge. By leaving the Edge, Akamai would switch to either a Centralized network, or something new. By leaving the Edge Akamai would be giving up on their flagship product, and might not go over well which consumers who have been sold on the Edge network (Van Den Steen, 2011). By going to the Centralized network strategy, Akamai will be just another CDN company.
- The first issue we will address is if Akamai should drop their pricing dramatically in order to compete with the lower priced competitors. We believe they should lower their prices, however not drastically, just enough to remain an attractive price for the speed of their rivals. Akamai dominated the market until 2009, but the company is now witnessing immense competitive pressure from vendors such as Level 3 Communications, Limelight Networks, and CDNetworks. As a result, Akamai, has reduced its prices, still attracting a large number of customers but are compromising profit margins. (M2 Presswire, 2014). As the five forces model shows under competitive rivalry they still have a big market share and need to stay the course as the leader in the industry. Under threat of substitutes we feel that the competition has inferior products and it not a big threat as a substitute to Akamai’s products. Akamai has increased its market share of the cloud video service market serving Media and Entertainment companies to nearly 30 percent in early 2013, from about 27 percent in 2012, with no close competitor - other companies competing in the market all have less than approximately 5 percent market share. (Wireless News, 2013) Next, Akamai needs to continue outspending and focusing on research and development (R&D.) As Akamai past prospectuses have stated, this recommendation is how the company has continued to grow and outpace the competition. (Akamai website.) The R&D should focus on improving video and live streaming. Akamai has a competitive advantage in this area and this recommendation should continue to provide the advantage. In the future, the company should remain vigilant on any upcoming trends to focus future R&D projects.
- Third, the company should expand globally with 2 main focuses. The first focus is to form strategic alliances with startups in emerging markets. Akamai previously formed strategic alliances that have and will generate success. For example Akamai and AT&T formed an alliance that combined Akamai’s products and services with AT&T’s equipment on a global scale. Both companies think this will help expand and grow their companies on a domestic and global level (PR Newswire, 2012.). The second focus for Akamai is the continued acquisition of smaller companies. Proplexic is a recent acquisition that brings knowledge and products focused on internet security. This acquisition allows Akamai to bring improved internet security to the customers without spending thousands of employee work hours building the security applications from scratch (Akamai press release, 2012.). If Akamai can acquire companies globally, then this will reduce start up costs and grow the Akami’s international customer base. 3The biggest question facing Akamai in 2009 is: Should Akamai stay with its Edge technology or move to the more popular centralized server network? Based on our analyses, our recommendation would be to stay with the Edge technology. When looking at the SWOT analysis under strength we put that the Edge technology is faster and close to the customer which benefits the customer in many ways. Akamai Technologies, Inc. (NASDAQ: AKAM), the leading provider of cloud services for delivering, optimizing and securing online content and business applications, today announced several new capabilities within the company's flagship Web Performance Solution, Akamai Ion. (PR Newswire, 2014) Akamai is still on the cutting edge of technology. In the Pareto analysis we ranked the internet speed to be faster and high demand for high speed video streaming both to be a 10. This demonstrates that the Edge technology is a great asset to Akamai since it gives the customer what it needs. Having the servers close to the customer is also still a very important aspect of the Edge technology which is also part of why it is so much faster. Another major issue that we see is it would be difficult to go back to their clients after they have touted their Edge technology for years and tell them they are just going to be like everyone else.
- In summary, Akamai provides a number of solutions for content delivery and cloud services. “Akamai is the leading provider of cloud services for helping enterprises provide secure, high-performing user experiences on any device, anywhere (“About Akamai).” Akamai’s technology allows the delivery of digital content and applications, such as business transaction tools, streaming video and websites. Akamai’s CEO, Paul Sagan’s problem was developing a plan for the future of the CDN market. Paul Sagan was facing mounting pressure to aggressively price their services. He needed to decide where and what technologies to invest R&D resources in, and whether Akamai should leave their high quality “Edge” network strategy (Van Den Steen, 2013). We preformed 4 analyses to help solve these issues. We performed the SWOT analysis were we identified numerous strengths and weaknesses within Akamai and the external opportunities and threats. We analyzed the external factors further wight the PEST and 5 Forces analyses to really understand the competition, the market, and the consumers. We also identified critical factors and issues to deal with in the Pareto analysis. All 4 analyses lead us to our recommendations: adjust pricing to be at an aggressive premium, invest heavily in R&D, expand globally with strategic alliances and mergers/take-overs, and to remain on the Edge.