Since its inception, one of the toughest challenges NS1 has faced is the simple fact that DNS is a mature market category with venerable and well-established incumbents. When Kris Beevers and his two co-founders started the company, quite literally every company and internet user already had some form of DNS technology in place. It’s a decades-old technology after all.
Beevers and everyone associated with the company is keen to point out time and again that NS1 isn’t a DNS vendor, but rather a suite of products offering application and traffic delivery, performance and reliability. NS1 in its early days had to constantly preach that message and educate its potential customers on how its offering provided something different than the incumbents with years of performance history.
In the first two parts of the EC-1, we looked at the origins of the company and its core product offerings in DNS and DDI. In this section, it’s time to look at the broader market and the competition facing NS1 and what that portends for the future of the company.
Everyone owns a product they don’t fully understand
Hosting providers typically offer basic DNS services that “just work” out of the box, creating a large challenge for any vendor in the managed DNS space. Eric Hanselman, principal research analyst with S&P Global Market Intelligence, said that among some organizations, there is an expectation that DNS is just part of what happens on the internet.
“I think the largest misconception that I find about DNS in general, is the lack of understanding of how critical it is to the performance and the customer experience of just about everything that organizations do today that is technology related,” Hanselman said.
He observed that because DNS mostly “just works,” some organizations don’t put a serious amount of thought behind it, assuming that all of the services and capabilities out there are roughly equivalent. “By doing a little legwork and investing a little bit to better understand overall infrastructure performance, improvements in DNS can help a lot,” he said.
The misconception about the value of managed DNS is also something that Gregg Siegfried, senior research director at Gartner, sees often. He says some organizations erroneously think they can just set up a couple of DNS servers inside their own data center and end up with a service equivalent to what a managed DNS provider enables. “That comes up, surprisingly often,” he remarked.
In short, this is a unique market. Every company touching the internet needs DNS, but many don’t realize it’s ripe for optimization or improvement. Defaults and inertia are the first competitor for any new entrant, and NS1 is no exception.
A clouded landscape for managed DNS
Two major groups emerge when we look at the landscape for managed DNS. In the broadest terms are the services provided by major public cloud platforms such as Amazon Route 53, Microsoft Azure DNS and Google’s Cloud DNS. Then you have independent providers of managed DNS services such as Cloudflare, Neustar, Akamai and, of course, NS1.
Notably, DynDNS, which played an inadvertent, key role in helping accelerate the growth of NS1, is currently in a state of extended transition. Oracle acquired Dyn in November 2016 shortly after it was the victim of a massive distributed denial of service (DDoS) attack a month earlier. Oracle was set to retire the Dyn Managed DNS service in May 2020, but has since rescheduled its closure to May 2023. In its place is now an Oracle DNS service integrated with Oracle Cloud Infrastructure.
Oracle acquires DNS provider Dyn, subject of a massive DDoS attack in October
While all the public cloud providers attempt to bundle their services together cohesively, DNS is one layer where independent providers can compete effectively and may even be preferred by some firms.
Hanselman of S&P said that organizations need to decide how they want their infrastructure to be built and to what extent they want to have individual providers be part of their stack. In his view, providers like NS1 have a very useful role as intermediaries for organizations that have to deal with a complex collision of environments that might involve multiple cloud and content delivery network (CDN) providers.
Unlike DNS offerings from the public cloud providers, which emerged organically as those platforms evolved and expanded, the history of independent providers is much more heterogeneous, with vendors arriving at different points as the internet matured.
Neustar has one of the longest histories in the managed DNS space, thanks to its 2006 acquisition of UltraDNS, which was one of the first managed DNS vendors, entering the market back in 1999. The company has further bolstered its portfolio with the acquisition of Verisign’s Public DNS service in November 2020.
Gartner’s Siegfried commented that he sees Akamai, and to an extent, Cloudflare, as different from Neustar in that they are both based on CDNs. NS1 does compete in some areas with Cloudflare and Akamai, but NS1 Chief Product Officer David Coffey feels the solutions are complementary. In Coffey’s view, while CDNs are always trying to improve their own performance, by combining NS1 with a CDN, organizations can further accelerate and improve performance.
NS1 and Cloudflare are the cloud-native upstarts in the managed DNS space, according to Siegfried. Both Cloudflare and NS1 are newer entrants that enable container-based microservices environments. Older managed DNS providers weren’t designed to handle this type of architecture, and while they may perform adequately depending on a customer’s needs, newer offerings will likely have an advantage.
For Siegfried, among the key pieces of differentiation and innovation for NS1 is the company’s filter chain technology, which we talked about extensively in part two. The filter chain inserts conditional logic into DNS queries instead of just doing a lookup against a directory to find the right location to send a web request. That chain of conditional logic can then better optimize and direct traffic.
So where does this leave NS1? Adoption of multicloud infrastructure is a major secular tailwind, since companies want to avoid the vendor lock-in that can come with buying an integrated cloud managed DNS offering. As more companies migrate their web architecture to microservices, NS1 and Cloudflare increasingly become a clear favorite against other offerings in the market.
Then there’s the performance consideration. NS1 hopes to attract more customers as more companies consider the value of performance in the DNS layer. Of course, its competitors aren’t just twiddling their thumbs, and they are attempting to add conditional features as well. The future looks bright for the company, but hardly guaranteed given the size and scale of the competitors in this arena.
Into the enterprise as NS1 competes in the DDI/VPN space
Competition in the DDI market (DNS, DHCP and IPAM, explained in part two) is very different compared with DNS. Here, NS1 isn’t really competing on a battlefield of well-funded competitors; the fight here is more against corporate inertia.
IT staff managing IP addressing inside of enterprise environments have long chosen one of two simple approaches: They either use whatever basic capabilities Microsoft provides via its Windows Server that is widely deployed across enterprise environments, or a basic spreadsheet to keep track of addresses. One view here is that the market is relatively “blue ocean” with the right education and sales strategy.
“I’m continually surprised at the companies that manage their IP addresses on a spreadsheet,” Siegfried said. “Whether they end up with something like NS1 DDI, or they end up with one of the more traditional products, I certainly try and get them off a spreadsheet if at all possible.”
Among vendors, Infoblox, Bluecat and EfficientIP all have what Siegfried referred to as a “classical” appliance architecture. They each have roots in some form of hardware appliance to help enable DDI services. Men&Mice, in contrast, is founded on an overlay architecture, meaning that it deploys on top of an existing network in a software-defined approach.
NS1, in Siegfried’s view, has a somewhat unique architecture for its DDI services, which could be challenging for some users. “If you’re coming from a spreadsheet, it’s going to be a little daunting to look at what NS1 DDI is going to bring to you,” Siegfried said.
NS1’s Coffey says that the modern DDI space isn’t about being better than what Microsoft provides or competing against a spreadsheet. Rather, it’s about enabling automation for highly scalable deployments using DevOps-type workflows. In other words, the company doesn’t just want to build a better mousetrap, it also wants to target an entirely different customer need within the same market.
NS1 is a good option for companies that are using existing DDI products and are looking for something more agile, according to Siegfried. Environments with lots of containers, different public cloud providers and data centers, as well those that have a lot of users who use their own devices, are well suited for NS1’s offering.
It’s important to note that NS1 only launched its DDI service in 2019, and so how it fits into the market and whether it can expand the TAM in this category will be a key variable to watch in the long term.
But what does the money think?
Raj Dutt, NS1’s first investor and an observer on the company’s board, feels the cohesiveness of the NS1 managed DNS platform is a key differentiator.
“[NS1] started as just DNS and I think they’ve evolved to be more of a general traffic management platform,” Dutt said. “There are a lot of other vendors out there — Akamai is one of them — that have approached the space by bolting different things onto what’s a relatively old, legacy platform.”
In his view both as an investor and as a user of NS1 at his own company Grafana, NS1’s platform provides what he referred to as “conceptual integrity” in contrast to other DNS vendors. In his experience, the NS1 platform capabilities feel cohesive and his developers like using the platform.
“We’re using [NS1] for pretty mission-critical stuff — we’re using them to ensure our availability, which means their availability has to be super high,” he said.
Meanwhile for Tyler Jewell, managing partner at NS1 investor Dell Technologies Capital (DTC), there are some clear points of differentiation, though that wasn’t his first thought about the company. He stated that NS1 was initially not what he called “an intuitive investment” for his firm.
“They had been identified as a DNS and DDI company, which was increasingly commoditized technology,” he said. In his view, the opportunity in Beevers’ vision is around connecting users with applications in a way that is most efficient with the lowest round trip latency.
“If you want to provide this phenomenal application experience, you have to minimize latency, and the way to minimize latency on a global internet basis is that you have to have visibility to global internet traffic, and then provide intelligent decisions,” Jewell, who also sits on NS1’s board, said.
“What you realize is that DNS is the world’s on-ramp to the internet, and nothing can get onto the internet without having gone to DNS first.”
DNS’ importance is not lost on big cloud vendors like AWS, Google and Microsoft Azure, which is why they all have their own DNS services. The market may have incumbents and big cloud vendors selling what might seem like the same type of service, but for Jewell, the NS1 approach adds more dynamism and intelligence, which can make it attractive to users that need an edge in performance.
“All systems on the planet depend upon DNS, sure, but there’s a difference, you know, with almost all historical DNS being static — meaning you ask for a location and it gives you a predictable response back,” he said. “NS1 is dynamic, in that it can give you a range of responses based upon intelligence that it collects from around the internet.”
Finally, looking specifically at the DDI market, Jewell sees a strong group of competitors and incumbents that have been in the market longer, but believes that NS1’s software-based approach will appeal to organizations that need more agility for internal operations.
Future-proofing competition
While analysts and investors alike see differentiation in NS1’s services, NS1 VP of Marketing Kathleen Rohrecker emphasized that the company has a lot of respect for its competitors. “Other companies have pieces of what we do, but we don’t have everything that others have, and others don’t have everything that we have,” Rohrecker said.
The focus for NS1 isn’t about having more features; it’s about having an integrated set of features. NS1 COO Brian Zeman emphasized that when going into a prospect’s environment, it’s not about comparing 17 features from one platform against another.
“We focus on where the world is going,” Zeman said. “What are you going to need in that world? You need APIs, you need to be cloud-native, you need to be able to roll out applications quickly, and you need to centrally manage them, but with a lot of agility at the edge.”
“We’re talking to a prospect about what they need, what their problem is, the value we can bring, and then we’re also giving them a future-proof solution.”
That’s the pitch to customers, but exactly who is attracted to that message? In the fourth and final installment of the NS1 EC-1, I go deep into the customer use case, explaining how and why customers choose and run NS1.
Outages, pandemics and the reengineering of traffic on the internet
NS1 EC-1 Table of Contents
- Introduction
- Part 1: Origin story
- Part 2: Product development and roadmap
- Part 3: Competitive landscape
- Part 4: Customer development
Also check out other EC-1s on Extra Crunch.
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