The oil rigs, power plants and service stations of the energy and utility sector conjure up the heavy metal industry of the 20th century more than the digital future of the 21st. But, in fact, this sector is ripe for digital transformation and the power of Interconnection, according to the second annual Global Interconnection Index (the GXI).
The recently released GXI report, published by Equinix, projects the significant growth of Interconnection, the direct private traffic exchange between key business partners, thanks to continuing trends in global digital business transformation, urbanization, data security, compliance and interactions across critical business ecosystems. By 2021, the GXI estimates that installed Interconnection Bandwidth worldwide could reach 8,200+ terabits per second (Tbps), a fivefold increase from last year’s forecast, with double-digit growth across all industries. Interconnection Bandwidth is the total capacity provisioned to privately and directly exchanged traffic, with a diverse set of counterparties and providers, at distributed IT exchange points inside carrier-neutral colocation data centers.
The energy and utilities sector is no slouch when it comes to global Interconnection Bandwidth growth. In fact, energy comes in first among all the vertical industry sectors’ five-year global Interconnection Bandwidth growth rates, with an expected 73% CAGR from 2017 to 2021, reaching 328 Tbps, or 4% of total Interconnection Bandwidth, by 2021.
The numbers are even more dramatic when you break them down by global region. Asia-Pacific’s (AP’s) energy and utility sector is projected to be leading in Interconnection Bandwidth capacity by 2021, with 154 Tbps, at an 83% CAGR. Next comes Europe (the EU) at 117 Tbps, thanks to a projected 64% CAGR. The U.S. comes in third at 33 Tbps, with an estimated 63% CAGR, followed by Latin America at 24 Tbps, with a whopping 93% CAGR projected by 2021.
The trends driving Interconnection growth in energy
Where do digital transformation and Interconnection fit in the energy industry? First, as exploration- related functions and users become more globally dispersed and remote, enterprise oil and gas firms have been moving their back-office IT applications to the network edge, closer to the source. These could include exploration and production (E&P) applications from the major energy players such as Schlumberger and Halliburton Landmark. PwC has predicted a 20% efficiency increase by 2025, equivalent to $100 billion, as a result of continued digitization in the oil and gas market.
Rather than building data centers around the world, many have turned to the hybrid cloud and software as a service (SaaS) platforms to achieve global reach. In addition, E&P applications employ massive datasets for 3D seismic modeling and other functions that must be stored close to the source, as well as SaaS applications, to avoid the performance hit and high expense of MPLS networks, or the complexities and costs associated with dedicated infrastructure at every site, which often do not have appropriate power and cooling.
By leveraging the best practices of an Interconnection Oriented Architecture® (IOA®), energy companies can gain the performance, low latency and, equally important, the tight security of a dedicated connection these firms require to protect their data from state-sponsored hacking attempts and potential safety risks.
Real-time performance and responsiveness between data and analytics are essential in an environment in which a wrong or late response can potentially result in a costly destruction of property or the tragic deaths of workers in the field. A hybrid IT architecture employing an Equinix Performance Hub for local Interconnection to private data storage and compute, interconnected with cloud- or SaaS-based applications via the Equinix Cloud Exchange (ECX) Fabric, is perfect for delivering this vital operational excellence. Aside from legacy applications, energy firms have been moving rapidly into real-time, big data predictive analytics leveraging IoT sensor data repositories and clouds, which share the same performance, scalability and security requirements as massive data storage and real-time data access. McKinsey has estimated that insights from advanced analytics can generate a return in the oil and gas industry of between 30 and 50 times the investment.
Interconnection can also fuel greater collaboration with supply chain partners to help energy companies bring products to market faster. In addition, collaboration with customers and real-time insights gathered from customer data can help accelerate response to customer demands, enhancing revenue and profits.
Energy firms stand to benefit greatly from strategically placed control points at the network edge, close to exploration, IoT and other data sources to achieve the low latency and security that enable near-real-time data collection and predictive analytics. Direct data exchange becomes possible when these control points or colocation centers house essential IT infrastructure, such as an Equinix Performance Hub and ECX Fabric, together with an energy firm’s supply chain, network and cloud provider partners.
For example, a leading North American oil and gas exploration and production company, leveraged private Interconnection on Platform Equinix® with the help of Equinix Professional Services for the Cloud (EPS Cloud) to accelerate the migration of applications and real-time big data analytics to Microsoft Azure and AWS cloud platforms. The company migrated hundreds of its on-premises servers with applications to Microsoft Azure via Azure ExpressRoute and ECX Fabric for Microsoft and SAP workloads in several U.S. locations. The Equinix Performance Hub delivered edge-based Interconnection close to data sources, clouds and customers, dramatically accelerating applications over optimized Interconnections.
“I wish we had known about Equinix sooner,” says the company’s director of information security and infrastructure. “Migrating to Azure gave us a quick way to pivot our focus to build a highly scalable WAN in an area where we needed to change in a hurry.”
Our Houston Equinix International Business Exchange™ (IBX®) data center is home to a robust energy ecosystem, hosting more than 3,600 energy-related organizations and 10 of the U.S.’s top 25 oil and gas exploration and production firms.
Download the Global Interconnection Index for more information on internet trends by region, vertical markets and vital ecosystem partners.
You may also want to check out the Energy Oil and Gas Solution Brief and IOA Knowledge Base for real-world Interconnection best practices for energy companies.</