Dan Rayburn
October 27, 2016

CDN provider Fastly has announced a new managed CDN offering that combines a customer’s existing network infrastructure with Fastly’s content delivery platform. While many are familiar with what big companies like Apple and Netflix have done with regards to their own DIY CDN build outs, you don’t have to be the size of an Apple or Facebook to benefit from a managed CDN offering. Fastly new offering is targeting the top 300 businesses and content producers responsible for large, dynamic datasets. Fastly says their new managed CDN already provides customers like Spotify full visibility, control and robust security oversight while dramatically reducing delivery and operations costs and improving user experience. Unlike the consumer space, enterprises still have a predictable curve of adoption. It takes roughly 5 years to move from innovation to broad adoption and an area poised to move to broad adoption is managed or in-house CDN. So it makes sense that Fastly wants to capitalize on this new market opportunity. The innovation leaders in this space (Google, Apple, Amazon, Facebook, Microsoft and Netflix) have already significantly invested to bring CDN in-house.

Fastly’s managed CDN offering gives customers more control and targeted performance, when compared to using just a third-party CDN by itself. Commercial CDNs are multi-tenant environments and customer’s content is stored and evicted based on algorithms each customer does not control directly. In a managed CDN, you have full control over what is in cache and you can size the storage and memory to ensure your entire working set is in cache. Improving cache hit rates from 80% to 99.995% represents a 1000-fold reduction in traffic to the customer origins, with commensurate TCO benefits. Also, you can deploy managed CDN caches in the geographic regions where they are needed, ensuring that content is served from within that area, providing low-latency, high performance QoE for end users, regardless of content type.

A managed CDN offering also allows you to control your costs better. The underlying economics of the CDN business are easy to understand. Commercial CDNs buy bandwidth, servers and datacenter space and mix it all together with software. When you have a significant economy of scale in any of the core areas (i.e. bandwidth, servers or datacenter space) or gets some of these for free (i.e. in situations where content providers get free space or network capacity from telcos or where peering relationships can be leveraged), the economic gain from a managed CDN can be very significant. And from a security standpoint, with the dedicated hardware of a managed CDN, businesses are able to keep their TLS certificates in their own data centers, segregate content from other customers, and keep full control over the machines, including who can access them

The DIY CDN topic is one that as an industry, we have been talking about for a long time. Five years ago, Telcos were talking about bringing CDN in-house or On-Net, along with other companies with large content libraries and massive viewership. Since then, a lot has changed. Content libraries continue to grow exponentially, technology has become cheaper and faster, and we are now at an inflection point in which more and more organizations are going to build CDNs themselves for operational, security and financial reasons. Managed CDN is the idea that organizations build caches themselves and deploy them for their own use. This idea can be a totally private CDN like the CDNs built by governments for military purposes or some hybrid model in which some of the content is delivered off private caches and some is delivered off of traditional public CDN. The announcement by Fastly of a managed CDN offering, which accounts for 15%-20% of their revenue and used by customers like Spotify, signals the coming of age for this type of offering.

Fastly’s decision to launch Managed CDN rides the wave of the leading big innovators building their own in-house CDN and provides large companies with a reasonable option to gain the same benefits without having to build it themselves. In the early days of managed CDN innovation, the content was primarily video or software downloads. Today, it’s much more than that; TLS, APIs, Dynamic sites and applications also need better performance, control, security and cost of ownership.

Enterprises are following the big innovators and the trickle down effect is real. This is not a new phenomenon. For the past 10 years the largest and most sophisticated organizations in the world have invested in building managed CDNs and have broadcast their successes:



The trickle down effect in technology adoption is real. On the technology front many of the benefits have been talked at technology events around the world and many engineers use these presentations to model technology decisions for their own organizations. On the people front, we have seen many of the engineers and architects associated with these build outs employed in leadership positions at other large organizations.

A managed CDN is not for everyone and is most appropriate for very large organizations with a large amount of content. For many years, this idea of managed CDN has been explored but judged too small a market to seriously engage providers. The explosion of content, and its associated delivery, across the internet in the past 5 years has dramatically increased the total addressable market for this type of offering. This does not just apply to the likes of Google, Facebook, Apple and Netflix anymore. Fastly says based on discussion with their customers and prospects, this type of managed or hybrid offering could apply to the top 300 content providers in the world.

The initial build-out of a CDN is challenging and not quick at best, it requires sophisticated software at the network and cache layers, and deep and hard-to-find expertise in bandwidth, peering and complex network topology. The ongoing management of the CDN is even more challenging in many cases. Building a 24/7 NOC and employing the diverse skill set required to troubleshoot and maintain this type of infrastructure is far from simple or easy. The availability of commercial technology like Fastly’s managed CDN offering and the capability to not only support the build-out but also provide the ongoing management makes this a possibility for teams who don’t have the skills in-house. A pre-packaged solution like Fastly’s, complete with monitoring and management tools, as well as full API access to the entire platform can also dramatically shorten time to deploy.

Many organizations have some of the economies of scale on bandwidth, server or datacenter but not in all geographical areas. It might make great economic sense to build out a managed offering in North America for example but would not make sense in Asia. The introduction of a way to seamlessly connect private Managed CDN caches and robust, scaled public CDN caches will further widen the addressable market by not forcing a worldwide build out.

Without a doubt, managed CDN adoptions are going to have a meaningful effect on the overall delivery market and the CDN vendors in this space. Managed CDN has been thought of traditionally as a luxury for the top 10 largest customers in the world, as we have seen with Akamai discussing publicly about the damage of loosing so much traffic from their top 6 media customers that have moved traffic to their own in-house CDNs. Losing so much revenue from the top 6 media customers has been very challenging for Akamai but losing a portion of the top 300 is potentially devastating.

This is why all CDNs are going to need to bring a managed CDN offering to the market and so far, Fastly is ahead of everyone in terms of having a real working solution in the market, with large customers. Other than Spotify, Fastly won’t mention other customers by name, but I have confirmed that Twitter is also using Fastly for their managed CDN offering. As I already disclosed back in May, Fastly is on track to do about $100M in revenue this year.

http://blog.streamingmedia.com/2016/...naged-cdn.html