Digitalization of the modern world continues to accelerate, impacting every industry. Enterprises are facing a paradigm shift as the digital economy expands, permeating interactions everywhere. By 2022, IDC predicts that over 60% of global GDP will be driven by digitally-enhanced offerings, operations and relationships. Competing in this new norm means that business leaders must focus on aggressive digital transformation to survive. Those who don’t may risk losing nearly two-thirds of their total addressable market over the next four years.[i]
Cloud has taken center stage in this race toward reinvention and not just for improved cost, productivity and scalability. Product and service innovations in the cloud are fast-tracking digital transformation for many enterprises. Cloud is no longer a differentiator but a core business enabler. As more critical workloads are shifted to the cloud, demand for private Interconnection between enterprises and cloud and IT providers is also on the rise. The Interconnection Bandwidth growth between ecosystem counterparties is projected to grow at a 98% CAGR, according to the second annual Global Interconnection Index (the GXI).
The GXI, a market study published annually by Equinix, delivers insights that drive digital business advantage by tracking, measuring and forecasting growth in Interconnection Bandwidth – the total capacity provisioned to privately and directly exchanged traffic with a diverse set of counterparties and providers at distributed IT exchange points. 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 growth in Cloud and IT Services
The Industry View
Cloud and IT (CIT) Services are the linchpin in the digital transformation for many enterprises as they look to extend their global reach, build new digital services and migrate existing workloads to the cloud. So, it’s not surprising that the CIT sector is expected to remain a leading consumer of Interconnection Bandwidth. Coming second only to the Telecommunications vertical, business connections to Cloud and IT Services will increase to 1,382 terabits per second (Tbps) of installed Interconnection Bandwidth capacity by 2021.
INTERCONNECTION BANDWIDTH BY INDUSTRY
Looking at the industry growth by region yields some interesting variation. The CIT sector in Asia-Pacific (APAC) overtakes Telecommunications with a projected installed Interconnection Bandwidth capacity of 507 Tbps by 2021, at a 40% CAGR. In the U.S., the CIT sector comes in fourth with 426 Tbps, at a 32% CAGR. It holds second place in Europe (the EU) and Latin America, with a projected 314 Tbps, at a 36% CAGR and 135 Tbps, at a 49% CAGR respectively.
The Ecosystem View
An even clearer picture emerges when looking at the larger ecosystem. Enterprise workloads continue to shift to the cloud, but often in a hybrid or multicloud architecture across different providers. More than 80% of companies are running hybrid/multicloud environments with up to five different cloud platforms, according to RightScale.[ii]
This proliferation of hybrid/multicloud infrastructures is driving demand for private traffic exchange with Cloud and IT Providers as enterprises seek to overcome security challenges, as well as those related to latency, scale and availability. In fact, Interconnection between businesses and Cloud and IT Providers, is the leader in year-over-year growth at a 98% CAGR between 2017 – 2021.
INTERCONNECTION BANDWIDTH BY ECOSYSTEM COUNTERPARTIES
Breaking the numbers down by global region uncovers some intriguing patterns. U.S. CIT providers are projected to be leading in installed Interconnection Bandwidth capacity by 2021, with 626 Tbps, at a 96% CAGR. Next comes Asia-Pacific (APAC) with 443 Tbps, at a 99% CAGR. Coming in third is Europe (the EU) at 254 Tbps, with a projected 98% CAGR, followed by Latin America at 116 Tbps, with an astounding 109% CAGR projected by 2021.
Trends driving Interconnection growth in cloud and IT services
How did we get here? A few major trends are converging to fuel this growth.
- Digital business ecosystems require real-time interactions between people, things, locations, clouds and data to increase value capture. To achieve this, many enterprises are turning to “as-a-service” solutions across multiple cloud providers to seamlessly and quickly move workloads between clouds, platforms, partners and providers across the globe. Take, for example, Coca-Cola European Partners, a leader in fast-moving consumer goods. By adopting a cloud-focused, Interconnection strategy based on Interconnection Oriented Architecture® (IOA®) best practices, they were able to improve connectivity with cloud partners, simplify their global network management and create a more secure, resilient and connected business operation.
- Urbanization is transforming global demographics and demand origins, creating a need for proximity between digital services and users. Two-thirds of the global population will live in cities by 2050, according to the United Nations.[iii] Supporting this urban density requires the Interconnection of applications, data, content and networking in locations where there is a concentration of users.
INTERCONNECTION IN DISTRIBUTED URBAN HUBS
Retail is a great example of this mega hub phenomena. In retail, digital transformation is driving the distribution of services and controls closer to customers, employees, partners and ecosystems. This shift requires a digital edge strategy and placing strategic control points next to users, clouds and networks. One of Hong Kong’s oldest retailers, Wing On, embarked on a three-year digital transformation and modernization journey with Equinix. Utilizing a hybrid cloud infrastructure that leverages Platform Equinix® and Equinix Cloud Exchange Fabric™ (ECX Fabric™) to integrate its ERP, loyalty program and POS systems, Wing On was able to achieve reliable and high-performance connectivity between its systems and offer improved customer experience via its online and offline applications.
- Security and regulatory compliance is expanding Interconnection consumption as firms increasingly shift to private data traffic exchange, bypassing the public internet, to address digital threats and changing data protection laws. Increased vulnerability points with data distributed across multiple sources and consumers heightens the risk of a breach. Expanding data regulations such as the General Data Protection Regulation (GDPR) require the need to maintain data locally with strict data controls, even if the data is used globally. Over 100 countries have enacted data protection laws, many of which are following Europe’s lead in putting stricter controls such as GDPR in place.[iv] Managing this risk involves distributing security controls across locations and privately interconnecting them at business points of presence. More enterprises and service providers are deploying mini-clouds in multiple regions to manage these risks and comply with local data residence regulations.
Dutch managed security solution provider (MSSP), Motiv ICT Security, provides hosted security operations center (SOC) solutions that help companies prevent cybercrime, data theft and data leakage. Motiv is now an ECX Fabric™ partner and reseller offering its SOC solution and services to customers in the Netherlands. The combined Motiv and Equinix solution provides businesses with access to multiple cloud, network and security services to support a variety of business use cases.
The cloud is critical to digital business success and Interconnection is critical to cloud success. An interconnected cloud brings enterprises and providers together to directly and securely interconnect across many locations in a variety of ways, opening the door to greater business agility, intelligence and innovation.
Download the Global Interconnection Index for more information on Interconnection growth trends by region, vertical markets and vital ecosystem partners.
You may also want to check out these resources for best practices on the interconnected cloud: