The Future of DNS: A Heated Battle

The Competitive Landscape for NS1

From the beginning, NS1 encountered a significant hurdle: entering a well-established DNS market dominated by long-standing companies.

Kris Beevers, along with his co-founders, recognized that virtually all organizations and internet users already utilized some form of DNS technology when they launched the company.

This is a technology with roots stretching back decades, presenting a considerable challenge to new entrants.

Positioning Beyond Traditional DNS

NS1 consistently emphasizes that it is not merely a DNS provider.

Instead, the company offers a comprehensive suite of products focused on application and traffic delivery, alongside enhanced performance and reliability.

Early on, NS1 dedicated considerable effort to educating potential clients about the distinct advantages of its solutions compared to those of established competitors with extensive track records.

Market Overview and Competitive Pressures

The preceding sections of the EC-1 analysis explored NS1’s origins and its foundational products in DNS and DDI.

This section shifts focus to the wider market context and the competitive forces impacting NS1’s trajectory and future prospects.

Understanding these dynamics is crucial for assessing the company’s potential for continued growth and success.

Key Competitive Factors

Market Maturity: The DNS market's age means high customer inertia.
Incumbent Advantage: Established players possess significant brand recognition and customer trust.
Differentiation: NS1's success hinges on clearly communicating its unique value proposition.

Successfully navigating these factors will be paramount for NS1 as it strives to gain market share.

The Ubiquitous Yet Often Misunderstood Role of DNS

A common situation exists where individuals and organizations possess products or services without a complete grasp of their functionality. This is particularly true within the realm of Domain Name System (DNS) services, frequently provided as a standard feature by hosting providers.

Eric Hanselman, a principal research analyst at S&P Global Market Intelligence, highlights a prevalent assumption: that DNS operates seamlessly as an inherent component of internet functionality.

Hanselman emphasizes a significant misunderstanding regarding DNS. He believes many organizations underestimate its crucial impact on both performance and user experience across all technology-driven operations.

Because DNS generally functions without issue, organizations sometimes fail to dedicate substantial consideration to its intricacies. This often leads to the belief that available services and features are largely comparable.

However, Hanselman suggests that even modest effort invested in understanding infrastructure performance can yield substantial benefits through DNS optimization.

Gregg Siegfried, senior research director at Gartner, echoes this sentiment, noting a frequent miscalculation among some organizations. They mistakenly believe that self-hosted DNS servers can provide a comparable service to a dedicated managed DNS provider.

Siegfried points out that this assumption, while surprising, arises quite often in practice.

Consequently, the managed DNS market presents a distinctive challenge. Every entity with an internet presence requires DNS services, yet many remain unaware of the potential for optimization and enhancement.

For any new provider entering this space, overcoming established defaults and existing inertia represents the primary competitive hurdle, a challenge faced by companies like NS1.

The Evolving Landscape of Managed DNS

The managed DNS market is largely divided into two primary categories of service providers. These consist of the offerings from prominent public cloud platforms, including Amazon Route 53, Microsoft Azure DNS, and Google’s Cloud DNS. Alongside these are independent, specialized managed DNS providers like Cloudflare, Neustar, Akamai, and NS1.

DynDNS, a company historically significant in the growth of NS1, is currently undergoing a prolonged period of transition. Oracle’s acquisition of Dyn in November 2016 followed a substantial distributed denial of service (DDoS) attack the previous month. Initially slated for retirement in May 2020, the Dyn Managed DNS service’s closure has been postponed to May 2023.

Competition and Infrastructure Choices

While major cloud providers aim for cohesive service integration, independent providers can effectively compete in the DNS space, and may even be favored by certain organizations.

According to Hanselman of S&P, organizations must carefully determine their infrastructure strategy and the extent to which they wish to rely on individual providers. He believes that companies like NS1 serve a valuable function as intermediaries for those navigating complex environments involving multiple cloud and content delivery network (CDN) providers.

Historical Development of Providers

The DNS offerings from public cloud providers developed alongside the evolution of those platforms. In contrast, independent providers have a more varied history, entering the market at different stages of internet development.

Neustar possesses one of the longest track records in managed DNS, stemming from its 2006 acquisition of UltraDNS, a pioneering vendor established in 1999. The company further expanded its capabilities through the acquisition of Verisign’s Public DNS service in November 2020.

Differentiating Factors Among Providers

Gartner’s Siegfried notes that Akamai and Cloudflare differ from Neustar due to their foundation in CDN technology. NS1 does encounter competition from Cloudflare and Akamai, but NS1 Chief Product Officer David Coffey views the solutions as complementary.

Coffey suggests that while CDNs continually strive to enhance their performance, combining NS1 with a CDN can yield further acceleration and improvements for organizations.

The Rise of Cloud-Native DNS

Siegfried identifies NS1 and Cloudflare as the cloud-native newcomers in the managed DNS arena. Both companies facilitate container-based microservices environments, a capability lacking in older managed DNS providers.

While legacy providers may function adequately, newer offerings are likely to possess a competitive advantage in supporting these modern architectures.

NS1’s Innovative Technology

A key differentiator for NS1, according to Siegfried, is its filter chain technology, discussed in detail previously. This technology introduces conditional logic into DNS queries, moving beyond simple directory lookups to optimize traffic direction.

The filter chain allows for a more intelligent and adaptable approach to routing web requests.

Future Outlook and Market Trends

The increasing adoption of multicloud infrastructure is a significant driver for NS1, as companies seek to avoid vendor lock-in associated with integrated cloud managed DNS solutions. As more organizations migrate to microservices-based web architectures, NS1 and Cloudflare are gaining prominence.

Furthermore, a growing emphasis on performance within the DNS layer is expected to benefit NS1. However, the company faces strong competition, as rivals are actively developing similar conditional features. Despite this, the future appears promising, though not without challenges given the scale of its competitors.

NS1's Entry into the Enterprise DDI/VPN Landscape

The competitive dynamics within the DDI market – encompassing DNS, DHCP, and IPAM – differ significantly from those observed in the DNS sector. NS1 faces a challenge not primarily from financially robust rivals, but rather from established organizational practices.

IT professionals responsible for IP address management within large enterprises typically rely on one of two straightforward methods. These include utilizing the fundamental functionalities offered by Microsoft’s Windows Server, prevalent in many corporate networks, or employing a simple spreadsheet for address tracking.

Some analysts believe this market presents a relatively untapped opportunity, achievable through effective education and a targeted sales approach. A shift away from rudimentary methods is seen as crucial for growth.

“I am consistently surprised by the number of organizations still managing IP addresses using spreadsheets,” stated Siegfried. “Regardless of whether they ultimately choose a solution like NS1 DDI or a more conventional product, migrating off spreadsheets is a priority.”

Key vendors like Infoblox, Bluecat, and EfficientIP are characterized by what Siegfried describes as a “classical” appliance-based architecture. Each of these companies originated with hardware appliances designed to facilitate DDI services.

Men&Mice, conversely, is built upon an overlay architecture, deploying on top of existing networks using a software-defined methodology. This approach offers a different level of flexibility.

NS1’s DDI services, in Siegfried’s assessment, possess a unique architecture that may present a learning curve for some users. “Transitioning from a spreadsheet to the capabilities of NS1 DDI could be initially complex,” he explained.

Coffey of NS1 emphasizes that the contemporary DDI landscape isn’t about simply surpassing Microsoft’s offerings or outcompeting spreadsheets. Instead, the focus is on enabling automation for highly scalable deployments through DevOps-inspired workflows.

The company aims not only to improve existing solutions but also to address a distinct customer requirement within the same market. This represents a strategic shift in focus.

According to Siegfried, NS1 is a viable option for organizations currently using DDI products but seeking a more adaptable solution. Environments characterized by numerous containers, diverse public cloud providers, multiple data centers, and a high proportion of user-owned devices are particularly well-suited to NS1’s offerings.

It’s crucial to remember that NS1 launched its DDI service relatively recently, in 2019. Therefore, its long-term market positioning and ability to expand the total addressable market (TAM) within this category remain important factors to observe.

Investor Perspectives on NS1's Value

Raj Dutt, NS1’s initial investor and a member of the company’s board, highlights the unified nature of the NS1 managed DNS platform as a significant advantage.

Dutt explains that NS1 “evolved to become a more comprehensive traffic management platform,” starting initially with DNS services. He contrasts this with other providers, such as Akamai, who have expanded their offerings by adding features to older, established systems.

As both an investor and a user of NS1 at Grafana, Dutt emphasizes the “conceptual integrity” of the platform. He notes that the NS1 capabilities work together seamlessly, and his development team appreciates its usability.

“We rely on [NS1] for critical operations – specifically, ensuring our service availability,” Dutt stated, “which necessitates exceptionally high uptime from their platform.”

Tyler Jewell, managing partner at Dell Technologies Capital (DTC), an investor in NS1, initially found the company to be a less obvious investment opportunity.

“NS1 was initially identified as a DNS and DDI provider, a sector experiencing increasing commoditization,” Jewell explained. He believes Beevers’ vision centers on efficiently connecting users to applications with minimal latency.

“Delivering a superior application experience requires minimizing latency, and achieving this globally demands visibility into internet traffic and intelligent decision-making,” Jewell, also a board member at NS1, elaborated.

He further emphasized that “DNS serves as the internet’s primary access point, and all internet traffic must pass through DNS.”

Major cloud providers – including AWS, Google, and Microsoft Azure – recognize the importance of DNS, as evidenced by their own DNS services. While the market includes established players and cloud vendors offering similar services, Jewell believes NS1’s approach offers greater dynamism and intelligence, appealing to users prioritizing performance.

“While all systems depend on DNS, most historical DNS implementations are static – providing a predictable response to location requests,” he said. “NS1 is dynamic, offering a range of responses based on intelligence gathered from across the internet.”

Regarding the DDI market specifically, Jewell acknowledges strong competition from established incumbents. However, he believes NS1’s software-based solution will attract organizations seeking greater agility for their internal processes.

Maintaining a Competitive Edge

Despite recognition of distinct qualities within NS1’s offerings by both industry analysts and investors, Kathleen Rohrecker, VP of Marketing at NS1, highlighted the company’s considerable respect for its rivals. Rohrecker stated that while other organizations possess certain aspects of NS1’s capabilities, no single competitor encompasses the entirety of their feature set, nor does NS1 replicate all functionalities offered elsewhere.

NS1’s primary objective isn't centered on simply offering a greater number of features. Instead, the company prioritizes a cohesive and fully integrated suite of tools. Brian Zeman, NS1 COO, underscored that when assessing a potential client’s infrastructure, the emphasis isn’t on a feature-by-feature comparison between platforms.

Zeman explained that NS1 concentrates on anticipating future industry trends. Essential requirements for the evolving digital landscape include robust APIs, a cloud-native architecture, rapid application deployment capabilities, and centralized management with adaptable edge functionality.

The company’s approach involves understanding a prospect’s specific needs and challenges, demonstrating the value NS1 can deliver, and ultimately providing a solution designed for long-term viability. This is the core message conveyed to potential clients.

This customer-centric strategy is further explored in the fourth and concluding section of the NS1 EC-1 series, which delves into detailed customer use cases, clarifying the rationale behind their selection and implementation of NS1.