Q1) Discuss Akamai's business model and whether it makes sense. Hint: Use Porter's 5 force model.
Akamai had a successful business model which helped it to succeed where several other companies providing similar services failed. Akamai was in the playing field with big corporations but they strategically built relationships in networks for server colocation and they possessed good software and patents that kept them indispensable in the networking layer. They kept out of the software layer where the big corporations were busy battling each other. We can study their business strategy in handling their competition using Porter’s five forces model.
A Threat of new entrants
Akamai had constantly kept track of their competition and the perceived threat from new entrants. In the mid-2001 period, four of the largest internet service providers (ISPs) AOL, EarthLink, MSN and Prodigy served 81% of the US residential internet users. These ISPs with thousands of local networks and POPs, ventured into Akamai’s domain when they started to host CDN servers. Akamai was able to overcome this threat by obtaining data center space and transit bandwidth free of charge from smaller ISPs even though they were costly to the ISPs. By the end Akamai had over 13,000 servers in 954 networks across 63 countries.
Post Internet bubble burst in 2001, a new threat came when several backbone operators like MCI-Worldcom, AT&T and Quest had an overcapacity because of which they tried to offer value added services like content delivery. These backbone operators were not too successful as Akamai had already built up their network with smaller ISPs. The smaller ISPs were not willing to provide similar partnerships with the backbone operators who did not carry as much content as Akamai.
B Threat of substitute products or services
Right from the beginning, Akamai had to compete with a number of competing technologies and with competing services. The technology of caching and mirroring...