Need someone to lead product or development at your software company? I lead product and engineering teams and I'm looking for my next opportunity. Check out my resume and get in touch.

CloudFront and the CDN market

Freshness Warning
This article is over 11 years old. It's possible that the information you read below isn't current.

Amazon released CloudFront, their Content Delivery Network, earlier this week. It’s being touted by many as a game changer for content delivery services.

In PCWorld’s "Amazon CloudFront: No Threat to the Incumbents" Bernard Golden argues that Amazon’s CDN won’t hurt existing CDN vendors. Golden says that existing vendors have better products than Amazon offers and won’t find their larger clients moving to CloudFront.

He compares the CDN market to the automobile industry. Hyundai and BMW both sell cars, but obviously appeal to different segments of the market. People who buy the inexpensive option aren’t talking away from the luxury vendor. Lower-end cars expand an existing market by making autos accessible to more people.

That’s an inaccurate analogy, though. Cars aren’t commodities. There’s significant and obvious differentiation between different car brands. CDN delivery is quickly approaching the status of a commodity, where each vendor is offering a nearly identical product. There’s subtle differences in quality, but just like the bandwidth market, those differences aren’t appreciated enough by buyers to cause them to attribute significant value to them.

Existing CDN vendors have seen this coming for some time as is evidenced by the addition and bundling of premium services. They’ve attempting to make it harder to price shop by ensuring that the whole product they offer doesn’t have a perfect substitute in the market. If you can’t compare apples to apples, you can’t truly know how much of the total cost you are paying is for the delivery and how much is for the add on services.

Most CDNs currently charge up to $2.50 per GB if you have very low traffic. The more you deliver, the lower your prices, to the point that if you have massive traffic, your cost per GB will approach 2 cents. CloudFront destroys that low end of the market. Smaller businesses will have trouble justifying upwards of $1/GB when CloudFront provides an excellent alternative for $0.19/GB.

Golden says that at a really large scale, Amazon is more expensive than existing providers. Amazon’s lowest published rate is $0.09/GB in the US. Golden points out that in the existing CDN marketplace the largest users are able to negotiate lower prices. Data that I’ve seen from CDN vendors indicates that in order to get pricing lower than $0.09/GB you must use 750 terabytes of data each month. To get $0.09 from CloudFront, you only need to transfer 150 terabytes. Using the vendor numbers I have, it would appear that Amazon is less expensive until you’re transferring between 500 and 750 TB per month.

It’s likely that CloudFront will expand the CDN marketplace overall. Amazon’s lower initial prices, lack of long term commitments, lack of minimum purchases, and ease of implementation will help many smaller businesses start taking advantage of what a CDN has to offer.

(On a side note, this marks the first Amazon web service with a marketer-friendly name. Before CloudFront, we had geekier names like Elastic Compute Cloud (or EC2) and Simple Storage Service (S3). Does this signify the growing importance of AWS inside of Amazon?)

Recently Written

A framework for onboarding new employees (May 15)
There’s no single good way to onboard an employee that works for every role. Here's a framework for creating a process that you can adapt to each situation.
TV hosts as a guide for software managers (May 10)
Software managers can learn a lot from journalists or late night TV hosts and how they interview people.
The Improvement Flywheel (Apr 29)
An incredible flywheel for the improvement of a development team. Fix a few things, and everything starts getting better.
Managers and technical ability (Dec 26)
In technical fields, the closer you are to the actual work being done, the closer your skills need to resemble those of the people doing the work.
Dysfunctions of output-oriented software teams (Sep 17)
Whatever you call it, the symptom is that you're measuring your progress by how much you build and deliver instead of measuring success by the amount of customer value you create.
Evaluative and generative product development (Aug 30)
Customers never even talk to the companies that don't fit their needs at all. If the only product ideas you're considering are those that meet the needs of your current customers, then you're only going to find new customers that look exactly like your current customers.
Product Manager Career Ladder (Aug 19)
What are the steps along the product management career path?
Building the Customer-Informed Product (Aug 15)
Strong products aren't composed of a list of features dictated by customers. They are guided by strong visions, and the execution of that vision is the primary focus of product development.

Older...

What I'm Reading

Contact

Adam Kalsey

+1 916 600 2497

Resume

Public Key

© 1999-2020 Adam Kalsey.