Equinix reports that its interconnection revenues are growing faster than its data centre revenues. As applications become increasingly distributed, residing not only in on-premises data centres but also in public clouds, organisations are finding that the parameters of what constitutes a data centre network must be redefined. Louise Frampton reports…
The world is digitising at a rapid pace as major macro, technology and regulatory trends are mandating a business shift to the digital edge. IDC predicts that by 2021, at least 50% of global GDP will be digitised, with growth in every industry driven by digitally enhanced offerings, operations and relationships.
To capture digital value, companies will need to support real-time interactions by more strategically interconnecting the work flows across people, locations, clouds and data. The most recent Global Interconnection Index from Equinix predicts interconnection bandwidth will grow to 8,200-plus terabits by 2021, a dramatic increase on the previous year’s projection. This represents a significant five-year compound annual growth rate (CAGR) of 48%, almost double the expected 26% CAGR of global IP traffic.
Michael Winterson, vice president business development – EMEA, and managing director Equinix Services, comments: “Revenue from interconnections is actually growing faster than our data centre revenue.
“This is a signal to us that enterprises are seriously deploying new network connections – either between themselves or to service providers – to be able to deploy new digital transformation technologies. This may be artificial intelligence, big data solutions and IOT, or truly branching out to totally online applications,” Winterson continues.
“For example, we have a 150-year-old tyre manufacturer that has an entire R&D team spinning off 100% pure app-based solutions to integrate into a vehicle’s ‘infotainment’ system – it has nothing to do with their 150-year-old business. It is a whole new game for them. Is it changing their revenue streams? Not yet. Is it a core function of their board of directors’ vision for the future? Absolutely!”
Executing a digital transformation strategy is a major undertaking, according to Winterson. The digital transformation of a business requires “going back to basics”, making specific decisions around:
• Where is their data centre?
• Where is their data collected?
• How can they connect between traditional data centres and the cloud?
• Where are their users?
“From this, they will have to fundamentally recreate their business. These digital transformation projects will span many years,” says Winterson. He adds that big data, AI, cloud and 5G will remain core components of digital transformation in the near future.
“There isn’t going to be a new ground swell of technology that is going to stop this juggernaut of transformation. It will be more of the same, but we are going to start seeing cooler and cooler applications,” he comments.
Equinix is seeing growth in areas such as: the financial services sector, the trading community and manufacturing.
“All of these industries are expected to show greater than 50% growth in direct interconnection over the next 4-5 years. They are rebuilding the foundations of their infrastructure, to be able to take advantage of AI and big data sets,” Winterson comments.
He adds that fears around globalisation, political alignment, Brexit and trade wars are all overshadowed by the secular trend of digital transformation of businesses.
“Businesses are adopting technology not just to optimise costs or create new business models but also as a means of protecting themselves against what appears to be a slightly more chaotic world. A business that has a digital engine can be much more flexible than one that doesn’t. The adoption rates shown in our Interconnection Index are important signals to us that digital transformation is advancing regardless of geo-politics,” he comments.
According to Winterson, Brexit has had no effect on the rate of interconnections in the UK. In fact, the growth rate in the UK is expected to grow at 52% over the next five years. (This exceeds the predicted growth for the US, which is expected to be around 45%.)
“Business leaders and technology companies still see the UK as a core growth market for interconnection. The reasons are simple. There is already a well-established global network that connects throughout the UK. We are seeing people continue to invest in this. We are partnering with a cable company that is now building the fastest route between London and Paris,” Winterson says.
He adds that the UK still represents 35% of all growth in interconnection in the entire EMEA region and this will continue to increase: “The world will continue to need the services that are available in London. The UK is one of the world’s leading finance trading hubs and is the world’s leading foreign exchange hub. It is also a major hub for legal, consultancy and accounting services.”
Winterson says that 5G will be a core “Lego brick” in the digital transformation of business. “Data aggregation and data analytics (big data), and the vast amount of cloud-based solutions, will be ‘stitched’ together through interconnectivity. Software defined networks and 5G will be important components of this.
“We expect 5G to be quickly deployed across the UK market – the country already has excellent 4G coverage, which can be easily upgraded to 5G. Equinix has good relationships with all four of the major operators – they all have core network nodes in our data centres, so we know their 5G plans are moving forward very quickly.
“However, what you won’t see happening rapidly, is 5G creating the onset of a 100% virtual reality world, such as connected vehicles and remote surgeries. All of these concepts will still require significant upgrades to the fibre backbone and fibre build-out projects.”
Winterson asserts that it is this ‘second wave’ that will see the delivery of 100x bandwidths and ultra-low latency.
“In two to three years’ time, you will see the real innovation happening at an enterprise level. You will quickly see the emergence of smart factories, smart hospitals and smart campuses – we expect to see a large increase in the amount of data that will be collected and brought back to the core network. This is why interconnection is growing so quickly,” comments Winterson.
He adds that the ultimate vision is for systems that enable smart cities or smart supply chains. For this to happen, hundreds of companies will need to adopt digital transformation and the 5G network will need to “enable interoperability between many companies in an overarching system”, says Winterson, adding that this is “still years away”.
However, he adds that a global interconnection platform designed for digital business can accelerate digital transformation efforts by helping enterprises and providers “reach everywhere, interconnect everyone and integrate everything”.
“Equinix collects ecosystems,” comments EMEA president Eugene Bergen Henegouwen. “When you have connectivity density, it never goes away. The internet is connecting at Equinix – 90% of internet traffic goes through one or more of our International Business Exchange (IBX) data centres.”
This gives Equinix a unique insight into digital transformation across a variety of industries. As the early adopters of interconnection, the telecommunications industry is expected to grow at a 36% CAGR as it evolves its platforms to enable digital business, addressing cybersecurity and providing new interconnected services.
As a purveyor of digital capabilities, the cloud and IT services industry is expected to remain a leading consumer of interconnection bandwidth, and is predicted to grow at a 37% CAGR, as these businesses continue to extend the global reach of their platforms, while enabling secure data exchange in a compliant manner with their customers.
As one of the most physically distributed industries, manufacturing is experiencing a renaissance period as digital business unlocks new revenue streams while creating new efficiencies. This is expected to drive interconnection bandwidth usage to grow at a 56% CAGR, as the industry shifts to movement of information and local production of goods.
A perfect digital storm is also brewing for the banking and insurance industry with the convergence of fintech, cybersecurity, data compliance and new competitive ecosystems. This is driving a predicted 65% CAGR, as digital transformation of the industry unfolds.
“We are observing many revolutions taking place across the whole spectrum of industries. One example is the insurance industry. In the past, their business was to pay out claims. They would hedge their risk. There are companies that now collect massive amounts of data and sell this to the insurance industry,” Henegouwen comments.
“By analysing the data, the insurance industry is not just able to pay claims but help avoid calamity – in the case of flooding, for example, populations downstream of a river can be alerted of rising water levels upstream. Interconnectivity is enabling lots of these silent revolutions.”
To support this growth, Equinix is expanding its interconnectivity provision, enabling customers to securely scale their digital business.
“At first, we had the Cross Connect – a point-to-point cable link between two customers in the same IBX data centre. It doesn’t get more secure than this – it connects company A with company B, with no one in between,” Henegouwen explains.
“Most recently, we have connected all the IBX data centres inside a metro. We will have 12 data centres in London – all of them are interconnected. This means that two enterprises that wish to connect do not have to be in the same IBX data centre. They still have a 100% secure connection. We have now taken this even further by connecting all the metros together.”
With the completion of the most recent phase of the Equinix Cloud Exchange (ECX) Fabric build-out, Platform Equinix has now evolved into a global platform connecting businesses at the digital edge.
The SDN-enabled interconnection service allows customers to establish on-demand network connections between the Americas, Europe and Asia-Pacific.
Ultimately, interconnection – direct and private traffic exchange between businesses – is becoming core to operations for companies in today’s digital world. This ‘ecosystem’ is facilitating digital innovation across industries.
Brad Casemore, vice president, data centre networking, IDC, concludes: “The imperative of digital transformation is driving enterprises to adopt multi-cloud strategies, which entail complex management of multi-cloud environments. Indeed, as their applications become increasingly distributed, residing not only in on-premises data centres but also in public clouds, these organisations are finding that the parameters of what constitutes a data centre network must be redefined. In this context, IDC finds that interconnection architectures at the digital edge are becoming integral elements of a comprehensive network for the cloud era.
Equinix plans expansion
Equinix has announced that it will open 12 new International Business Exchange (IBX) data centres and expand 23 existing IBX data centres in 2019, as part of an almost $2bn expansion programme for the year. The substantial investment includes new and expanded sites across Europe. Growth markets include London, Amsterdam, Frankfurt, Hamburg, Helsinki, Madrid, Paris, Sofia, Stockholm, Warsaw and Zurich. By providing new capacity in 2019, Equinix will continue to extend Platform Equinix, enabling companies to deploy their IT infrastructure and services at the digital edge in more than 50 metros across the globe.