US-based content delivery company Akamai has made seven acquisitions over the past four years in order to stay relevant and play a role in the future of Internet.
One of the most significant acquisitions for the $1.8-billion technology company so far is Octoshape, a startup building a platform that enables the delivery of content over multiple screens on broadband networks. This is significant, because Akamai can stay ahead of the game in regions that are focussing on mobile-based services. Over the next five years, India would have more than 500 million unique Internet consumers on smartphones as customers alone. So, it is the market that all Internet companies would go after.
The market opportunity
According to Gartner Inc, mobile connections in India have grown to 880 million in 2015, an increase of five percent from the 837 million connections in 2014. Spending (in constant USD) on mobile services would have reached $21.4 billion in 2015. A large chunk of this growth will be driven by the increasing use of cellular services on data-centric devices, such as tablets and notebooks, through either embedded cellular modems or USB sticks.
“In India, the rise in spending on data-only connections will be driven by two user scenarios – first, to complement users' fixed broadband connectivity, so that they can use their larger-screen data-centric devices, on the go. In other use cases, data-only connections will be the way for consumers to access broadband connectivity because of a lack of fixed networks,” says Neha Gupta, senior research analyst at Gartner.
Newer and faster networks, a rise in the number of users of these networks, and more affordable smartphones will help increase spending on data services, which would also be heavily driven by mobile apps, particularly video apps. Apps and content drive traffic volume, as people increasingly chat with friends and family, watch videos on the move, and listen to streamed music.
By 2030, India will have more digital natives than all of Europe's combined. The question to ask is, therefore, whether the market will be as lucrative as the western ones. “This is an economic question. The per-capita income of the country is rising and we will have more opportunities to build digital services. The mobile is where government and corporate will focus their digital journey,” says Nandan Nilekani, Co-founder and former CEO of Infosys.
How does Akamai view this?
Srinivas Padmanabharao, Director - Marketing, at Akamai Technologies, says,
The story of Digital India is about the demographics, about two thirds of the population is less than 35 years of age and we want to focus on that market, which will shape the future of IT and consumption.
So, here is why they want to work with startups, students and corporates in order to shape the future of Internet in India. The focus is on e-commerce, mobile and security.
- Re-hauling enterprise IT
Today, in the world of connected “everything”, a form factor is never far away from the palms of a youngster. They can control their car telematics, microwaves and their work from their smartphones. They also will shop for 40 percent of their needs, by value, online. This fingertip economy, although convenient, needs information to be delivered by an e-commerce company, and it must align the supply chain and manufacturing in a seamless flow to be up in the game. In a decade, all factories will be operated on tablets or automated platforms. Supply chains will use real-time data of consumption to plan factory output. The amount of data flowing through the pipe will require technology that can accelerate the flow of content (video, images and audio) faster. However, this may require the corporates to ovehaul their vision of IT from a lights-on standpoint to dynamic architecture, which is to connect data of vendors, suppliers, consumers, internal teams with a feed that is real time.
Anything going through a pipe needs security. According to McAfee, the loss from information theft has been estimated to create global losses of $1 trillion on an annual basis. Akamai has focussed its need to build a strong enterprise and web security platform to prepare for this new world of IT.
Akamai has to compete with technology companies that want to take on parts of its business in security and web acceleration. Aryaka Networks, Incapsula and Level3 are some new-age content delivery networks (CDN) that are scaling up operations. Aryaka has raised $89 million so far and Level3, which is a public company, has been working on media streaming platform for a while. Instart Logic is another company that has raised $140 million, and its platforms can deliver applications for e-commerce companies with complete focus on mobiles. For Akamai, this is an opportunity to use its India development centre to work with the best talent and the startup ecosystem to enhance its technology. It has to prepare to scale up the ideas that would eventually keep the Internet companies' shareholders happy. Analysts are upbeat about the stock, trading at $51.67 on Nasdaq, with a market cap of $9.3 billion, and a price-to-earnings ratio that is at 29 times, which essentially means investors would be willing to pay $29 for every dollar of earnings.