Interconnection Is at the Center of Ecosystem Growth

Jim Poole
Interconnection Is at the Center of Ecosystem Growth

The digital economy was just becoming a thing when business strategist James Moore wrote an article for the Harvard Business Review that seems current even 25 years later.

“Successful businesses are those that evolve rapidly and effectively,” Moore wrote. “Yet innovative businesses can’t evolve in a vacuum. They must attract resources of all sorts, drawing in capital, partners, suppliers, and customers to create cooperative networks.”

His words from 1993 are more relevant than ever as we get deeper into the digital era, when major macro, technology and regulatory trends – digital business, urbanization, cybersecurity, data compliance and business ecosystems – are driving new business interactions between companies and organizations. Innovative digital companies truly can’t “evolve in a vacuum” today. They need Interconnection with multiple industry ecosystems, and that’s driving the global growth of Interconnection Bandwidth, according to the Global Interconnection Index (the GXI) Volume 2.

The GXI Vol. 2, a market study by Equinix, makes the case that Interconnection – the direct and private data exchange between businesses – is enabling enterprises to build their digital ecosystems by seamlessly integrating a myriad of service providers and business partners. To illustrate this, the GXI looked at five vital business ecosystems and projected the growth between counterparties of Interconnection Bandwidth, the total capacity provisioned to privately and directly exchange traffic with a diverse set of participants at distributed IT exchange points. In each ecosystem, that growth is substantial and accelerating.

Network providers

Network service providers know that they can’t just offer enterprises a single capability these days. They have to deliver multiple value-added services to fill evolving enterprise needs, and they need to work with cloud and other service providers to do it. The goal is to enable the fastest, safest enterprise access to cloud platforms, while creating a new set of services that anticipate and fill gaps in enterprise capabilities. Enterprises, meanwhile, are working constantly to optimize their network topology for digital business and integrate this growing mix of connected services globally.

All of this takes Interconnection, which is why the GXI projects a 42% compound annual growth rate (CAGR) in installed Interconnection Bandwidth between enterprises and network providers to 2021

Cloud and IT providers

“Cloud first” is the default mode for digital business, and it’s becoming increasingly clear that multicloud is its future. That’s because enterprises will always want to keep some data on-premises for a host of reasons, including security. But they also know they can’t rely on a single cloud if they hope to realize the agility, cost-efficiency and other advantages offered by cloud computing.

RightScale’s 2018 survey indicated 81% of enterprises have a multicloud strategy, and we think that percentage will grow. The Interconnection needed to support the proliferation of hybrid/multicloud architectures will fuel a sizzling 98% CAGR in installed Interconnection Bandwidth in that ecosystem to 2021, according to the GXI.

Financial services providers

The expansion of the digital payments market (projected to hit $4.5 trillion by 2023, according to Allied Market Research) is driving Interconnection demand among financial service providers, as they work to support the flow of business transactions across digital ecosystems.

Here are more specifics about how we see Interconnection fitting in: We believe the future of digital payments is “instant, open and everywhere:” People will expect banks to instantly execute individual bank-to-bank transactions, banks will be required to open up customer data to authorized non-banking firms to develop new financial services offerings, and digital payment options will need to be everywhere and anywhere customers want them. None of this happens without direct and secure Interconnection among the range of ecosystems required to execute these transactions (banks, cloud providers, mobile providers, etc.). That’s why the GXI forecasts a 47% CAGR in Interconnection Bandwidth here to 2021.

Content providers

People today expect to watch whatever TV and video they want, whenever and wherever they want, on any device they want, and content providers need to deliver.

With so much video moving over global networks (Cisco says 82% of all IP traffic will be video by 2021), businesses and content delivery companies will need Interconnection to link to content providers to distribution partners and offer a high-quality video experience to viewers across varying devices and geographies. The demand for greater amounts of content is expected to drive the need for Interconnection Bandwidth by a 52% CAGR.

Digital supply chain

No enterprise can complete a digital transformation without transforming its business supply chain into a digital supply chain. But according to IDC, it’s not really happening yet. In manufacturing, for instance, just 9% of companies have digitally transformed their supply chains. But priorities are changing.

IDC notes that transforming supply chains can enhance customer centricity, predictive business, smart automation and total business visibility. It predicts that by 2020, 60% of global companies will be integrating their product, supply chain and service systems. That kind of transformation requires enterprises to directly interconnect to supply chain partners to create secure and compliant data exchange for business workflows. To support this emerging business-to-business digital paradigm, Interconnection Bandwidth is expected to grow at a 41% CAGR.

Interconnection at the center

The strength companies derive from collaborating across ecosystems becomes more critical as digital transformation takes hold globally, cooperation and innovation increases, and powerful new capabilities become business norms. Interconnection will always be at the center of it all. Because private Interconnection is direct and secure, it enables the quality of connectivity ecosystem participants expect and require for growth.

For a closer look at the relevance of Interconnection to global ecosystems, and a glance into the future, download Volume 2 of the Global Interconnection Index.

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