Cloud-Computing Kings Join Forces

As cloud computing grows more competitive, two of the industry's principal providers are teaming up. Akamai Technologies (Nasdaq: AKAM  ) and Rackspace Hosting (NYSE: RAX  ) this week announced that customers of Rackspace's cloud and dedicated hosting services will now get access to Akamai's content delivery network (CDN).

Initially, the two will work together to give customers enhanced access to Cloud Files, Rackspace's online media and file storage service. Long-term, Rackspace plans to resell key Akamai services such as application acceleration and e-commerce support.

Interestingly, the latter may offer the biggest opportunity. In an interview, representatives of both companies cited e-commerce as an area of focus, since they already serve "hundreds" of common customers, many of whom sell online.

The beauty of an extended network
Teaming up also offers technical advantages. By necessity, Rackspace combines its vast server network into a few large facilities, without concern for geographic proximity to its customers. Akamai works in the opposite manner, placing tens of thousands of servers throughout the world to create what amounts to a second Internet. Having Akamai as a partner extends Rackspace's reach.

For e-commerce customers, this extended network offers two benefits. First, faster loading of transactions and static files (e.g., a collection of demonstration videos, an image catalog). Second, delivering transactions over Akamai's network adds security. Why? Akamai's network is a layer removed from the web, enclosing data in a protective cocoon. Think of it as another lock for a digital miscreant to pick.

So both parties benefit from teaming up. Will investors also see gains? That's tougher to say, but a combination makes sense with demand for cloud computing services rising.

Between salesforce.com (NYSE: CRM  ) , Amazon.com (Nasdaq: AMZN  ) , and AT&T (NYSE: T  ) , the choice of platforms for hosting and delivering Web content has become remarkably varied. Every little differentiator is a potential difference-maker.

Now it's your turn to weigh in. What downstream impact will Akamai and Rackspace's partnership have? Use the comments section below to explain your thinking. You can also rate Rackspace Hosting or Akamai in Motley Fool CAPS.

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Interested in more info on the stocks mentioned in this story? Add Rackspace Hosting, Akamai, salesforce.com, Amazon.com, or AT&T to your watchlist.

Akamai, Rackspace Hosting, and salesforce.com are Motley Fool Rule Breakers recommendations. Apple is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of Akamai at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy suggests you and it team up. Watch for traps and all that.


Read/Post Comments (3) | Recommend This Article (21)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 14, 2011, at 5:40 PM, jimkaskade wrote:

    Traditionally, CDN services have been delivered on multiyear, volume-based contracts, by vendors such as Akamai, Limelight Networks, Level 3 Communications and AT&T, which operate globally distributed CDN networks using proprietary technologies.

    This new class of CDN vendor is interesting: "Cloud CDNs", who offer no-contract content delivery services, typically on top of a cloud infrastructure-as-a-service (IaaS) or platform-as-a-service (PaaS) offering.

    Amazon's CloudFront (for files stored in its S3 storage service), Rackspace's partnership with Limelight Networks and NOW Akamai (for files stored in Rackspace Cloud Files), GoGrid's partnership with EdgeCast (an add-on to its Cloud Hosting), and Microsoft's Windows Azure CDN (for files stored as Windows Azure Blobs)....all interesting examples of the "next-gen" CDN in Cloud.

    It's no surprise that Akamai finally joined the "bandwagon" with Rackspace ;-)

  • Report this Comment On January 19, 2011, at 6:25 AM, transplant87 wrote:

    I have always been under the impression that "Microsoft" wants to be the King of Cloud computing because of their connection with and the use of VCSY patends....It's a race for the finish line, you better hurry up boys...imo

  • Report this Comment On January 26, 2011, at 9:33 PM, tomd728 wrote:

    Thank you Tim,transplant and jim.........on re-reading the piece I now know what a CDN is !!!

    Now would someone please step-up and tell this poor un-washed and non-tech Fool just what the

    hell is VCSY.

    I already know what a patend is......falls in with

    copywright, trademark etc.

    mttboy (oh ! that's many thanks to both of you.)

    Tom

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