Akamai CEO sees opportunity in economic downturn

By Sumner Lemon, IDG News Service |  Business, Akamai, hosted services

With many companies cutting headcount and costs to weather the economic downturn, Akamai Technologies President and CEO Paul Sagan wants his sales team to spend more time with customers, part of a bid to make sure that its content delivery and edge-hosting services don't end up on the list of expenses they consider cutting. At the same time, he said the recession will push some companies, particularly those in the retail space, to accelerate their shift to the Internet.

Sagan sat down with IDG News Service during a recent visit to Singapore to talk about how Akamai is dealing with the recession and the impact it's having on demand for Internet content and services. He also offered his thoughts on U.S. plans to expand broadband Internet access and network neutrality. What follows is an edited transcript of that conversation:

IDG News Service: What is Akamai doing to get through the current downturn?

Sagan: We just came off our global sales kickoff, and we spent a lot of on training and reminding people that it's not just about prospecting for new business, which we're going to do as aggressively as ever. We have a huge emphasis on customer satisfaction and going back and listening to customers. In this region, for example, they've upped the expectation for how often we're going to touch the customer and talk to them, and understand that it's not just every three years or ten years on renewal of the contract. We want to talk to them every quarter or every month and understand what's going on in their business, what's their pain point and can we help with it.

There are a few things you do in a downturn and one of them is listen to your customers and the other is overcommunicate. We're trying and hopefully we'll see results.

IDGNS: Do you think the broadband stimulus package in the U.S. will generate much growth in demand for broadband services and content?

Sagan: I think it's a good thing to do, but if you look at the roughly US$7 billion, it's really targeted towards rural broadband adoption, so just the number of people who will be impacted is relatively small. It's not going to help the majority of the population who still can't get a super high-speed connection in urban areas. But I think the administration was correctly concerned that if at least some level of broadband is available in most urban areas -- and high-speed is available at work -- when you get to the rural areas, in small towns there's often no broadband available, at work or at home. They're trying to incent operators to essentially stretch the cable a lot farther, and obviously bear a higher cost for a potentially lower return.

In some ways, it mirrors the old-world phone system. It falls short of requiring universal access for broadband, but it really incents providers to try to build out in rural areas. I think there's an assumption that they'll do things like tie hospitals to the network, even in rural areas. So the question is, if they do that could you incent them to make it available to the community somehow? In the overall stimulus package, it's a relatively small piece.

IDGNS: What are the long-term growth prospects for broadband services and content in the U.S.? Will growth slow down or continue to grow at a fast pace?

Sagan: It's huge. We continue to see it growing. We see rapid adoption of richer media content, particularly on consumer sites, and not just entertainment sites but shopping and commerce sites as well. If the commerce sites don't continue to richen their sites up, to have product videos, demos, and interactivity, their sites look non-competitive. It's sort of like running a black-and-white TV commercial during primetime. It would look like you were out of the 1950s or 1960s. Particularly for high-profile video events -- sports, for example -- people are starting to offer an HD-like version, in addition to doing a standard 300Kb or 500Kb stream. It's still a single-digit percentage, but there are an increasing number of people who can get a 1Mb stream. That's not a true HD signal, but it's at least as good as standard TV and you could project it up on the wall.

IDGNS: Was the online coverage of President Barack Obama a good example of the potential for this type of content?

Sagan: It certainly was. Most of the video was not at broadband rates, but it was certainly TV quality and we saw one the biggest audiences we've ever seen, the biggest for a single event. We run a public index of news traffic on our site that aggregates 200 leading providers around the world, so its not anyone's individual proprietary data. The peak number of users per minute on those sites was election night at 11pm, which was when they declared the winner. A lot of that was people going for the data, not the video. On the inauguration day, the peak number of users during the middle of the day, when they were doing the swearing in, was 5 million [M] or 6 million [M] users per minute, and the video rates were off the charts for us. I think you really saw, even with it on every television network, you still saw television-size audiences tuning in over the Internet.

IDGNS: Is there a strong correlation between how the economy is doing and demand for broadband services?

Sagan: Yes, but there is an advantage to the Internet side. We saw record online shopping during Q4. In fact, the numbers show there was strong growth in Internet shopping even if the overall retail sector was weak because of the recession and the credit crunch, which is real. I won't pretend the Internet is living in some happy bubble, but I think what we're seeing is more and more people are saying whatever I'm going to do, I'm going to do it on the Internet.

Because the Internet is still a small percentage of total retail, it still has a huge opportunity to grow. Even though people are being much more cautious about spending in this environment, I expect to see people continue trying to grow their online channel. That's where the growth opportunities are and when we come out the other side, that's really what businesses are going to be using.

IDGNS: What are your thoughts on network neutrality? How do we maintain access to the Internet in a way that creates a level playing field between large companies and smaller players?

Sagan: It's a good question. Network neutrality is a term that's been used and abused. At the highest level, it means that a user should be to access anything of their choosing, subject to whatever copyright or subscription rules apply. It wouldn't necessarily be free, but you would have access to it and your Internet service provider wouldn't filter that in any way based on their own business goals or point of view. In general, I think that's an excellent idea.

On the other hand, it's been taken to the point where people say the network shouldn't manage itself: If I can have access to anything, how dare you do load balancing or filtering certain kinds of traffic? Sometimes that's also naive because if you want the network to work, you want it to be fault tolerant, and you want it to not get clogged, of course there has to be management tools applied to that. You don't want one bad actor abusing the system and crashing it for everybody else. I think the key is it needs to be transparent. People need to understand that you are managing the network to make sure it works the way you sold it or for some other reason. And that's where it's been a bit murky.

It's unclear whether Washington will act in an official way on this with the FCC commissioner coming in and unclear whether that's going to be required because a lot of what people are worried about, that network providers are going to put up all sorts of walls, seal off the Internet. That really hasn't happened, so people are watching but its unclear what will actually happen. There's certainly no legislation that's active now in that area, and as far as I know not even any new regulatory frameworks that are on the table. I think the whole economic stimulus program has distracted everybody.

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