Transcript Optimizing CDN Services Relationships Tony Greenberg, CEO March 15, 2007 Confidential © 2007 RampRate™ Slide 1

Optimizing CDN Services Relationships
Tony Greenberg, CEO
March 15, 2007
Confidential © 2007 RampRate™
Slide 1
Full-Cycle
Sourcing
Proven
Methodology
RampRate: IT Outsourcing Specialists
Data-Driven Analysis
Accelerated Sourcing
Ongoing Optimization
ITO Best Practices
Cost / Risk Benchmarks
Templated Profiling
Transaction-focused
Auditable Selection Process
Apples-to-Apples Quoting Methods
Business Term Negotiation
Risk Mitigation
Operational Audits
• Experienced ITO Specialists working with client & Accenture team
• Vertical Expertise: Media, Financial Services, Internet E-Commerce
• ITO Focus: Managed srvcs, network srvcs, data center, desktop mgmt, complex telecom
Confidential © 2007 RampRate™
Slide 2
Data-Driven Decisions with SPY Index
Service Provider Intelligence Index (SPY Index)
drives speed and quality of decisions.
1. RampRate’s Historical Data
• Over 280 multi-quote transactions in 4 years
• Thousand of RFP responses distilled
• Ongoing client inputs on actual performance
2. Analyst ‘Research-View’
• Industry trends / best practices vendor ratings
• Inputs from Gartner, Telegeography, Aberdeen,
and others
3. Vendor Capabilities
• Services data, list prices and actual quotes
• Pre-loaded database of over 220 vendors
4. Customer Experience
• Primary research on customer satisfaction
• Ongoing end-user interview program
5. Cultural Compatibility
• Cultural fit matching of clients and vendors
• Global compatibility and success ratios
Confidential © 2007 RampRate™
Slide 3
Capturing Value From Time in IT Outsourcing
 Transaction-focused Fee Structure  We succeed when ITO process succeeds
 Streamlined Vendor Processes  Accelerated procurement process
 Fast, Accurate SPY Index Benchmarks  Concrete data on intangibles
Confidential © 2007 RampRate™
Slide 4
Success Metrics
 Accelerated Time to Market
 Average Time for Sourcing Process: 4-8 Weeks
 Financial: Restructured Existing Hosting Contract to Reduce Costs by 46% in 14 Days
 Gaming: Negotiated $320M+ in 7 multi-national projects in less than 6 Weeks
 Media: Cut Multi-Million Dollar CDN Contract by 50.2% in 7 days
 Risk Protection
 Per-Project Avg of 18 Additional Contractual Protections via Standard SLA Terms
 Media: Tripled # of terms in CDN’s SLA and reduced risk exposure by over 90%
 Financial: Identified and resolved 60+ deficiencies in a shared services corporate data center contract
 Cost Reduction
 Average 32% Net Savings From Pre-RampRate
 Media: Cut $3M in restructuring software licensing agreement
 Financial: Cut 52% of bandwidth costs and 19% of power costs by migrating to carrier-neutral hosting
 Internet/E-Commerce: Cut 22% in network services costs by moving client from direct to channel,
reshaping mid-contract deal
Confidential © 2007 RampRate™
Slide 5
RampRate’s CDN Practice
Industry Leadership
 RampRate CDN Practice Leader Steve Lerner:
 Former VP of Operations at Speedera (now Akamai)- ran global CDN
 Built Speedera’s streaming network
 Wrote one of the first CDN patents
Deep CDN Expertise
 Web caching, whole site delivery, e-commerce optimization
 Download delivery: software, video files, games, audio, patches, updates
 Digital rights managements, secure site delivery, P2P
 Streaming (live & on demand), encoding, satellite feed, content management
 Ad insertion, monetization, web analytics
100+ CDN deals procured
 Hundreds of vendor quotes collected
 Vendor Partners cover all CDN needs
Confidential © 2007 RampRate™
Slide 6
CDN Sourcing Process
1. Needs Analysis / RFQ Creation
 Analyze client’s content delivery
business model
 Examine current content delivery
architecture & performance needs
 Create benchmarks for budgeting
(including in-source vs. outsource or
combination)
 Develop contract profile
 Time: 1-14 days depending on client
2. Vendor Quote Solicitation
 Distributes RFQs and Quote Forms
 Analyze quotes in apples to apples
 Perform clarifications, reference checks,
financial due diligence
 Time: 7-21 days
Confidential © 2007 RampRate™
Slide 7
Successful ITO Process :
Use Data to Narrow Choices
Compare Client Requirements Against Vendor Capabilities
 Partners and Non-Partners are categorized, rated, ranked and assessed
 Needs analysis compares specific parameters against partners to narrow choices
Confidential © 2007 RampRate™
Slide 8
Successful ITO Process :
Assess FULL Vendor in Reponses – Quickly!
Analyze the Quantitative and Qualitative Deal Components
 References, historical performance, vertical expertise, scalability, etc.
 Don’t fall into “analysis paralysis”
Pre-Quote Capability Rating
10
9
8
7
6
5
4
3
2
1
0
Available
capacity
Total reach
Vendor B
Total peering
Median
Historical
uptime
Minimum Threshold
Historical
latency
Historical SLA
adherence
Weight
200
Connectivity Constraints
3,000
2,500
150
2,000
100
1,500
1,000
50
500
0
Confidential © 2007 RampRate™
0
Vendor A
Vendor B Site 1
Vendor B Site 2
Vendor C
Vendor D
Vendor E
Vendor X
Available fiber capacity (Gbps)
90
160
180
180
120
160
90
Lit fiber capacity (Gbps)
15
13
15
6
7
11
22
Current Usage (Mbps)
1,350
2,080
2,700
1,080
840
1,760
1,980
Slide 9
Content Delivery Network Procurement Process
3. Vendor Quote Analysis
 Analyze client SPY Index weightings to
assess vendor compatibility
 Analyze basic and value-added services
(e.g. web caching, download delivery,
streaming)
 Acquire the “behind-the-scenes” technical
facts behind CDN proposals
4. Final Negotiation
 Contract redlines to ensure all required
provisions are contractually guaranteed
 Multi-vendor, single vendor, in-source, or
combination chosen to achieve financial
and performance goals
 Leverage current pricing benchmarks to
optimize negotiation strategies
5. Average CDN Savings: 36%
Confidential © 2007 RampRate™
Slide 10
Successful ITO Process :
Create Contracts with Teeth and Oversight
Actionable SLA are Essential
 Define key performance metrics
 Define boundary performance levels
 Have Risk/Reward = 30%-50% of Contract Value
 Instill proactive or vendor-facilitated credits
Business Terms Must Also Include:
 Term and termination
 Jurisdiction and dispute resolution
 Provisions for growth
Build Governance Structure During Negotiations
 Once the contract is signed, you lose leverage!
Confidential © 2007 RampRate™
Slide 11
CDN Customers
Typical CDN customers include:
 Technology companies delivering software, updates, and patches
 New media businesses creating a delivery platform for video,
audio, podcasts, and Flash.
 Broadcast networks streaming live audio and video
 Online retailers and advertisers who need fast page loads and the
highest uptime
 Social networks with complicated and highly dynamic architecture
 Government agencies that require advanced security and fault
tolerance
 Corporations with global applications and audience
Confidential © 2007 RampRate™
Slide 12
4 Rules of Fast, Efficient ITO Process
Rule 1: Skip RFI / RFP, Go Straight to Request for Quote (RFQ)
 Standardize requests in clear, vendor-neutral language, creating vendor parity
 Require vendor compliance with detailed quote structure
 Separate required components from optional
 More Work up Front Pays off in Decision-Making Process – Detail is Good!
Co-Location Site
Company Name
Date Bid Submitted
Data Center Address
Data Center Facility Owner
Maximum Draw per Square Foot (in watts of breakered capacity assuming
60% utilization)
Bandwidth provider(s)
Guaranteed set-up / installation time (days)
Financial Terms
Current Base Requirements
4-Post Rack (client-supplied cabinets, no power)
OR space charge per square foot
Reserved space for short-term expansion (per rack)
Network and storage rack power: 220V 20A AC Active / Passive pair
Network and storage rack power: 220V 30A AC Active / Passive pair
Render node rack power: 240V / 60A 3-phase AC Active / Passive
IP Transit: 10 Mbps Bandwidth Commit burstable to 100 Mbps -- Cost per 1
Mbps increment.
Remote hands per hour (15 min increments)
Other charges (please describe in comments)
Confidential © 2007 RampRate™
12 month Contract
MRC Per Unit
NRC Per Unit
Quantity
17
Vendor Comments
8
8
2
13
10
5
0
Slide 13
4 Rules of Fast, Efficient ITO Process
Rule 2: Explicitly Set Vendor Commitment to Client Growth
 Ensure Ability to Scale Up
 Demonstrate Client’s Seriousness About Growth
 Reach Vendor Discount Thresholds
2006 RampRate-Obtained Rates by Commit Level -- CDN Mbps
$90.00
$80.00
Cost per Mbps
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
100Mbps
to
149Mbps
150Mbps
to
199Mbps
200Mbps
to
299Mbps
300Mbps
to
499Mbps
500Mbps
to
749Mbps
750Mbps
to
999Mbps
25th Percentile
$40.00
$38.75
$41.24
$40.00
$35.18
$35.00
$35.00
$35.00
$29.75
$28.55
Median
$57.00
$47.95
$50.00
$45.00
$41.00
$40.00
$40.00
$38.25
$35.00
$35.00
75th Percentile
$80.00
$80.00
$65.00
$60.00
$48.75
$45.00
$45.00
$43.50
$39.00
$36.25
Confidential © 2007 RampRate™
1000Mbps 2000Mbps 3500Mbps
6000Mbps
to
to
to
+
1999Mbps 3499Mbps 5999Mbps
Slide 14
4 Rules of Fast, Efficient ITO Process
Rule 3: Pre-Write SLA / Contract Terms
 20% of clients don’t know their SLAs;
 Another 18% Accept “Standard” Provider Terms
 Don’t negotiate SLAs at the last minute
 Demonstrate business value to customer as the Driver
 Particularly important where the “Right Choice” is
at higher cost than others
SLA / Business Terms
Yes / No
Comments
Staged implementation: Customer will not be charged for space and power
before its equipment is installed.
Monetary penalties to apply for failure to meet committed installation
timeline
Monetary penalties to apply for downtime of each service
Physical isolation of data center environment (caged or walled)
50% extra contiguous space with 45 day right of first refusal
Data center has sufficient space and power reserves for 50% growth of the
footprint by the end of 2007
Redundant HVAC and power systems guarantee.
Temperature to be maintained between 64 and 78 degrees F
Confidential © 2007 RampRate™
Slide 15
4 Rules of Fast, Efficient ITO Process
Rule 4: Ask for Help When Needed
 RFQs with strict, reasonable “Not-to-Exceed” rates
 Leverage database of best practices, SLA, and contract terms
 Pre-select vendors that best fit client profile
10.0
9.4
126%
9.0
120%
7.8
8.0
7.0
100%
6.5
6.9
6.3
80%
6.0
5.4
5.1
4.3
3.0
20%
2.5
8%
0%
6%
-9%
1.0
-4%
-20%
0.0
-22%
Vendor 1
Vendor 2
Vendor 3
Vendor 4
Vendor 5
Vendor 6
Cost Ef f ectiveness
6.5
7.8
2.5
6.9
5.4
0.0
SLA Term Acceptance
6.3
4.6
9.4
3.6
5.1
4.3
Price vs. Median
8%
-22%
6%
-9%
-4%
126%
Confidential © 2007 RampRate™
40%
3.6
4.0
0.0
60%
4.6
5.0
2.0
140%
-40%
Slide 16
ITO Procurement Deliverable
 Interactive Negotiation Tools
Savings
opportunities*
Lower bandwidth commit to
match usage
Lower bandwidth rates by
$10/Mbps
Lower per-rack cost by $120
Lower handservice hourly
rate by $20
Lower whip rate by $60
Get T1 loop free of charge
SLA Improvement
Needs
Monetary penalties for
business interruption
No-penalty exit for more
than 3 outages in a month
Retroactive reset of commit
levels
Select
Outcome
Win
% of Total
Opportunity
57.4%
Loss
Win
16.1%
Loss
Loss
Loss
18.8%
6.5%
1.2%
Select
Outcome
Win
Loss
Win
% of
Importance
40.0%
40.0%
20.0%
Savings
Dashboard
Confidential © 2007 RampRate™
% of Original
Last Supplier X Proposal
$5,438,640.00
100.00%
Current Outcome
$4,461,701.85
82.04%
Negotiation Target
$3,894,562.00
71.61%
$133,860.00
$69,600.00
2.46%
1.28%
$64,260.00
1.18%
Total Potential Savings
Money saved so far
Gap to negotiation
target:
Business Term
Improvement
Needs
Select
Outcome
30/60-day rollout period
Loss
2-week free trial
Illinois to be the jurisdiction
for disputes
Win
First Year Costs
$6,000,000.0
0
$6,000,000
$5,000,000.0
0
$4,000,000.0
$5,000,000
0
$3,000,000.0
$4,000,000
0
$2,000,000.0
$3,000,000
0
$1,000,000.0
$2,000,000
0
$0.00
$1,000,000
Proposed Current
Target
$0
Proposed
Current
Target
T1 Loop
Cages
Bandwidth
Remote Handservice
Extra WhipsExtra WhipsRemote Handservice
Bandwidth
T1 Loop
Cages
Annual Cost
% of
Importance
70.0%
20.0%
Win
10.0%
Progress Meter
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
37%
40%
70%
63%
60%
30%
Financial
SLA
% of Potential Achieved
Gap
Business
Terms
Slide 17
Clients from Many Markets
Confidential © 2007 RampRate™
Slide 18
Contact Information
Tony Greenberg
Chief Executive Officer
[email protected]
(310) 985-8669
Confidential © 2007 RampRate™
Slide 19