AT&T: Not Very Cloudy

Cloud computing, though the best technology I've ever seen, has a huge problem: It's easily misunderstood. Firms can say they provide cloud computing services, even when they don't. AT&T (NYSE: T  ) is just the latest example.

Yesterday's edition of The Wall Street Journal ran a feature in which Ma Bell touted an agreement with the U.S. Olympic committee to deliver video and event results over the Web. But this isn't cloud computing -- it's content delivery, the sort of work that Akamai Technologies (Nasdaq: AKAM  ) and Limelight Networks are also performing.

Cloud computing is not the delivery, or hosting, of content on servers connected to the Web. Cloud computing is using the Web to deliver software to your browser -- software you'd otherwise install on your PC or in a network you own. Think of Google's (Nasdaq: GOOG  ) Applications, which are an online alternative to Microsoft's Office, or salesforce.com (NYSE: CRM  ) , whose online customer tracking software is an alternative to Oracle's (Nasdaq: ORCL  ) Siebel.

It is, of course, possible that AT&T will one day provide the sort of infrastructure that Akamai, Amazon.com (Nasdaq: AMZN  ) , IBM (NYSE: IBM  ) , and others provide now -- infrastructure that enables the webification of install-and-manage software applications.

Till then, let's be clear: AT&T may be hosting and serving Olympic-sized chunks of data, but it is not a player -- not even a bit player -- in cloud computing.

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Fool contributor Tim Beyers had positions in Akamai, IBM, Google, and Oracle shares -- and Google's 2010 LEAPs -- at the time of publication. When not typing up articles for Fool.com, you'll find him picking growth stocks for Rule Breakers, which counts Akamai and Google among its holdings. Get a daily dose of his Foolish musings via this feed for your RSS reader. The Motley Fool's disclosure policy can see clearly now, the rain is gone.


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  • Report this Comment On August 07, 2008, at 10:32 PM, foolfanuno wrote:

    omg I so agree. If anything, this is beyond even a normal CDN, this is I and O. I think that some of the more recent CDNs have this ability, I don't think that Akemai has it, they are one direction. Excellent commentary.

  • Report this Comment On August 08, 2008, at 2:19 PM, LarryCable wrote:

    "Cloud computing is using the Web to deliver software to your browser -- software you'd otherwise install on your PC or in a network you own"

    This is *not* cloud computing either I'm afraid, "cloud" computing is about proving a large group (10,000's++) of computational nodes (computers) that can host client applications (and data) (scalably, securely, reliably) in a utilty style economic/payment model ...

    Take a look at Amazon EC2+S3 and Google AppEngine for example ...

    I can develop an application, package it upload it to either environment and have it hosted/executed and only pay for the CPU+memory+storage+network resources I use or want to retain for use.

    It has absolutely nothing to do with either content hosting/delivery or client application provisioning ...

    - Larry Cable,

    Architect Java Platform Group,

    Oracle Corp

  • Report this Comment On August 08, 2008, at 8:47 PM, Internettech wrote:

    Tim with all due respect, let's clarify the language and models. Here he states:

    "Cloud computing is not the delivery, or hosting, of content on servers connected to the Web. Cloud computing is using the Web to deliver software to your browser -- software you'd otherwise install on your PC or in a network you own. Think of Google's (Nasdaq: GOOG) Applications, which are an online alternative to Microsoft's Office, or salesforce.com (NYSE: CRM), whose online customer tracking software is an alternative to Oracle's (Nasdaq: ORCL) Siebel."

    Actually, this partially correct; Larry is partially correct. There is something else at work here. Cloud computing can be really anything in the Internet cloud which includes hosted content, CDN content, hosted security filtering, supercomputing or calculation engines, the use that Larry describes or the ability to deliver finished software to your browser (like Google apps). The reason for the confusion is that the CDN's like Akamai and Limelight want the investor to believe that CDNs can only be done in the distributed model/ method that they use. This is clearly no longer the case. Distributed datacenters can do the exact same thing and more just by loading CDN software and/or CDN hardware as another outsourced service; this is considered Cloud Content Distributed Datacenters (CCDD). Companies like AT&T, IBM, AMAZON, or GOOGLE can provide any sort of software service in Internet attached computing center. This is why we have a sell recommendation on Akamai.

    Perhaps an example would help:

    EBay uses several CDN services but when one is logged into my.ebay.com the page that one gets in the web browser is coming from a combination of sources; the original site my.ebay.com and a CDN domain called ebaystatic.com from Akamai and possibly a few advertising sources or tracking sources like Omniture. For clarity, I will omit discussing the latter two. The original source static pictures and graphics content for the webpage are hosted at EBAY on servers there, which are copied to the CDN under the ebaystatic.com domain. If you login to my.ebay.com and go to view>source you can see the domains in the page's html code. This content is replicated into the Akamai CDN so that the picture and graphics are nearer to the end user. Akamai does this with CNAME records in the DNS server so that when you request the page it finds the nearest instance of the ebaystatic.com domain. eBay can push out the content it wants to and cache the graphics that don't change that often with the CDNs. If you look at the eBay ISP BGP peering they only publically connect in a few places mostly in Silicon Valley. Akamai, ATT, Level 3, Verizon,Google peer all over the United States and the world. eBay has invested less in bandwidth and connectivity and more in their trading platform.

    What Akamai and Limelight want you to believe is that having a bunch of single servers inside an ISPs firewall is somehow better than having the same content hosted in a cloud computing center with much better firewalls, load balancing, massive connectivity, and massive scale. This really is not true. If you create 32000 servers on 3200 blades in 800 chassis using VMware, one could recreate the sheer number of Akamai servers in this example in 4 to 10 Cloud Computing centers with as many as 200 chassis per cloud or as few as 80 chassis per cloud center. A cloud center is easier and cheaper to support then the distributed model. The fault tolerance in a cloud-computing center makes up for the one millisecond, one hop out-of-the-ISP router delay one could incur versus the distributed model. However since the traditional CDNs are inside the ISPs firewalls, if the ISP’s upstream bandwidth is consumed in a burst, the ebaystatic.com on the inside Akamai server will starve, miss, and the page won't display properly so that 1 millisecond advantage goes away fast.

    Therefore, if eBAY hired AT&T, LEVEL3 or IBM and had them load up the caching and BIND software, they would get the same distributed content regionally on much faster wholesale connections and the customer would get a better experience. The original changing content would still come from my.ebay.com as it does now but the ebaystatic.com would replicate the static pictures to the servers in each of the datacenters where the cloud staff can keep an eye on loading balancing, sticky cookies, bandwidth demands, firewall farms etc. In the cloud datacenter a defective computer can be removed much more easily and maintaining cyberdefense against network attacks or worms is much, much easier. Finally, in our example, it is possible to have a CLOUD CDN composed of two or more vendors for the eBay CDN by purchasing resources in more cloud datacenters for effective global coverage and price competition.

    The result is that the older dialup era Akamai CDN architecture and static CDN server business model is becoming less effective and the CLOUD CDN Model for content is rapidly becoming the faster, scalable solution. This is why companies like IBM are building these centers and spending $400 million.

    I’ve provided no detail about the other uses of the CLOUD CENTERS mentioned above which would be a longer reply but the reader should get the idea that these are flexible Internet datacenter facilities with multiple dynamic uses.

  • Report this Comment On August 09, 2008, at 12:13 PM, TMFMileHigh wrote:

    Thanks for the comments, everyone. Larry is right in that distributed, rentable usage is key to cloud computing. Internettech is *sort of* correct in that the sheer volume of server capacity that Akamai and Limelight wield is easy to replicate. But I'm surprised to see common myth repeated as fact: Server volume plus cloud distribution software *does not* equal or what Akamai does. Instead, Akamai derives the bulk of its value through a content distribution algorithm. That's why margins are relatively stable and ROIC and average revenue per customer continue to rise.

  • Report this Comment On August 09, 2008, at 8:17 PM, Internettech wrote:

    Let us try again. The content distribution algorithm is not such a big deal anymore. Caching content from one origin site to many cloud servers is actually a very simple process now with faster networks and bigger routers. Others have created content distribution algorithms (such as Cisco, that get loaded on servers or which are in CDN hardware. Building a CDN is not rocket science anymore when using off the shelf solutions.

    Akamai has done a great job of convincing media people that CDNs are a requirement or the math is still complicated and they can't do it themselves. A lot of new technology has happened in the last 10 years that allows for greater content control and distribution. In fact if you look at sites like the Wall Street Journal, the content presentation and bandwidth and load balancing are much better and more reliable using cloud datacenters then the New York Times or the Washington Post which uses Akamai. CLOUD DATACENTERS ARE BETTER FOR CYBERDEFENSE OF CONTENT then isolated servers in the older AKAMAI Architecture.

    My point is that Akamai hardware and software can be replicated cheaply and has been replicated by ATT, Level 3 and soon by IBM. Google is still an unknown but they certainly have the capacity to jump in and start offering this service alongside their Doubleclick division and they have the video distribution caching experience with YouTube.

    I think you are seeing the rise of Cloud Content Distribution Datacenters as a more effective solution. It provides better protection for content since the content is in a protected firewalled datacenter. I no longer blindly believe that Akamai is the only CDN solution in the space. Therefore I believe the Akamai CDN business model is coming under attack from all sides. I believe this is why the CEO sold 40,000 shares of stock since 6/30/08 for total proceeds of $694,200.00 and 650,000.00. If he thought things were going to get better, he would hold the stock or certainly sell a lot less of it.

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