Akamai’s Linode Buy Raises Questions for Channel Partners

Linode has agreed to sell to Akamai Technologies.

Akamai will pay $900 million in cash for the 19-year-old independent cloud computing provider.

At first glance, the deal might seem a little odd. Akamai has made its name as a content delivery network provider that now also does security and edge computing. It goes after big organizations. Linode positions itself as an alternative to the hyperscalers – Amazon Web Services, Microsoft Azure, Google Cloud Platform – for developers and smaller managed service providers. For Akamai, though, adding Linode to its services lineup transforms it into “the world’s most distributed cloud services provider.”

Those were Akamai CEO’s Tom Leighton’s words on Tuesday during the company’s fourth-quarter earnings call. He said Akamai primarily wants Linode’s managed virtual machine and managed container capabilities to combine with Akamai’s edge network and 4,000 points of presence (PoPs).

Akamai’s Tom Leighton

“The net of all this is that we believe that Akamai and Linode can solve customers’ needs in ways that are not addressed in the market today, forming a powerful winning combination that will enable customers to build, deliver and secure their apps on the platform that powers and protects life online,” Leighton said.

To that end, Akamai will use Linode to go beyond security and content delivery and add cloud computing. Leighton called it “a breadth and depth of services uncommon in the cloud space today.”

Adam Karon agreed. Karon serves as COO and general manager of the edge technology group at Akamai.

Akamai’s Adam Karon

“[U]nique capabilities can come together when we are able to combine Akamai’s edge platform with Linode’s cloud computing capabilities and then add in our global traffic manager product to route across multiple clouds and cloud locations our global large private network that … connects cloud and edge locations and messaging, bringing it all together, coordinating cloud and edge services,” Karon said on Tuesday. “You end up with the world’s most distributed compute platform from cloud to edge making it easier for developers and businesses to build, run and secure applications.”

Christopher Aker, Linode’s founder and CEO, said joining Akamai addresses some key problems. Customers, he said, “face new challenges as cloud services become all-encompassing, including compute, storage, security and delivery from core to edge. Solving those challenges requires tremendous integration and scale, which Akamai and Linode plan to bring together under one roof.”

Linode’s Christopher Aker

Akamai will split its business into three main groups: security, delivery and compute.

“Compute will include Linode, plus our edge applications and net storage businesses,” said CFO Ed McGowan. “We believe that with strong execution, we can deliver more than $500 million of annual compute revenue in 2023.”

OK, So What Can MSPs and Other Partners Expect?

Channel Futures has reached out to Akamai to ask for insight into its plans for the Linode channel program. We didn’t hear back by the time of publication. However, looking at the company’s comments in the Feb. 15 earnings call, we can make some inferences.

First, as McGowan said, Akamai expects Linode to contribute to margins “as we continue to capitalize on revenue and cost synergies, including leveraging our go-to-market channel and marketing organizations to accelerate revenue from enterprise customers.”

That sounds like a peripheral reference to the channel — until considering Leighton’s input to analysts: “Linode doesn’t really have a sales force, never mind a sales force like Akamai has going after major enterprises. And you combine that with the fact that our major enterprise customers have wanted us to have this capability for them.”

Later, Leighton also said that Akamai is “interested in the developer base for sure because our large enterprise customers, their apps are built and, in many cases, managed, by the developers. So we really care about a developer-friendly solution. But we are going to take this to our large enterprise customers.”

When that happens, Leighton is not fretting those organizations eventually tossing Linode in favor of a hyperscaler. That situation often crops up when an enterprise outgrows a smaller cloud platform. Certainly this would impact any channel partners administering Linode services.

“I think you will not see this be a situation where [customers] migrate from, say, a Linode to a hyperscaler,” Leighton told analysts. “[O]ur customers are interested in alternatives and end-to-end solutions that — maybe there are some functions on hyperscalers today that I think would migrate to Akamai’s new cloud platform. We’ll be the world’s most distributed cloud platform with now market-leading solutions in not just delivery and security but also compute.”

Related to that, Akamai sells direct and through partners including behemoth telecom service providers, as well as Rackspace Technology, Capgemini America and IBM Services. Most Channel Futures readers consider …