Just as forces in nature can create a perfect storm, macro, technology and regulatory trends are converging to form an unprecedented era of complexity and risk, forcing the digital transformation of companies in every industry around the world. The second annual Global Interconnection Index (the GXI), a report published by Equinix, highlights five trends that are accelerating digital business transformation: digital business, urbanization, cybersecurity, data compliance and business ecosystems. Individually and collectively, these trends are forcing the integration of physical and virtual worlds at the digital edge, an undertaking which presents significant challenges and opportunities. To successfully navigate digital transformation requires a high-performance, secure and compliant global Interconnection platform for digital business.
As we explore the impact of these five trends in this blog article, we’ll also discuss why businesses are finding private Interconnection is crucial to address the challenges and opportunities created by digital transformation.[i] After a review of the five trends, we’ll use customer firmographic profiling to illustrate Interconnection Bandwidth adoption by businesses based on the following categories: company revenue, employees, geographic distribution, technology spend and geographic distribution of IT services.
GXI Trend #1: Digital Business
Digital business drives real-time interactions to capture greater value. By 2021, at least 50% of global GDP will be digitalized, with growth in every industry driven by digitally enhanced offerings, operations and relationships.[ii] Manufacturing firms are improving agility and time to market by connecting complex supply chains worldwide. Retailers are realizing new levels of customer engagement and service delivery by integrating online and in-store customer experiences. Financial services firms are developing engaging and rewarding omnichannel-based customer experiences. And energy companies are achieving greater visibility and deeper data analysis across disparate, regionally distributed systems. These are just a few use cases of real-time interactions that require private Interconnection of people, things, locations, clouds and data.
GXI Trend #2: Urbanization
Sources: (2&3) United Nations Population Division; (4) McKinsey.
Every year, 65 million people are added to the world’s urban population, the equivalent of adding seven cities the size of Chicago, creating as many as 50 urban metro hubs by 2030.[iii] The number of megacities with more than 10 million people is ramping up, as is the consumption growth of goods and services. Urbanization is transforming global demographics, creating a need for digital services to be physically proximate to consumers for timely delivery. Supporting increasing urban density requires direct and secure Interconnection of applications, data, content and networking for a high concentration of users.
GXI Trend #3: Cybersecurity
Sources: (1) EY; (2) Identity Theft Resource Center, CyberScout, Ponemon Institute.
By 2021, the global cost of cybersecurity breaches will reach $6 trillion.[iv] Digital business increases vulnerability points, especially when data is distributed across many different sources and consumers. As the prevalence and cost of data breaches continue to rise, managing cybersecurity risk becomes more complex. This requires distributing and interconnecting security controls at all points of business presence to improve your business’s security posture locally and globally.
GXI Trend #4: Data Compliance
Source: Information Technology & Innovation Foundation.
More than 18 major countries globally block the transfer of data related to accounting, tax and financial information, as well as other types of personal, public sector and business data.[v] Compliance with data regulations demands that businesses maintain data locally while using it globally. This requires the private Interconnection of data, analytics and networking to be implemented in the business region that demand data-residency compliance.
GXI Trend #5: Business Ecosystems
Sources: (2&4) Gartner; (3) Harvard Business Review.
By 2021, organizations using a mix of intermediaries will more than double, and active engagement with industries outside a business’s native industry will nearly triple.[vi] Digital trade flows are businesses and trade processes involving an increasing mix of customers, partners and employees. The importance of participating in business ecosystems is on the rise, as is the number of global and regional digital partners. Scaling business ecosystems requires an IT infrastructure that directly and securely interconnects participants with supporting digital flows.
The customer view of business Interconnection Bandwidth adoption
The GXI Volume 2 report delivers insights that drive digital business advantage by tracking, measuring and forecasting growth in Interconnection Bandwidth. It sheds light on the massive growth of Interconnection Bandwidth that supports digital business interactions between companies and organizations. The GXI predicts that by 2021, Interconnection Bandwidth will reach 8,200+ Tbps, representing a significant five-year compound annual growth rate (CAGR) of 48%. This is almost double the expected 26% CAGR of global IP traffic.[vii]
The report also presents the following customer firmographics to illustrate the critical business drivers behind dramatic Interconnection Bandwidth growth:
Revenue and employee firmographics
Using employee count as a proxy for number of users, the GXI predicts that for every 500 employees, businesses need to increase Interconnection Bandwidth by 4x to support the Interconnection of users across their digital business workflows. Likewise, as a company’s revenue increases, it correlates to needing greater Interconnection Bandwidth to support new business growth. These indicators of growth require increasing Interconnection Bandwidth capacity.
Geographic presence firmographics
For businesses operating in more than five countries, the GXI forecasts that an 8x increase in Interconnection Bandwidth is required to locally interconnect data sources with security controls to address both data compliance and reduce cybersecurity vulnerability points. As companies become more globally distributed, they require increased Interconnection Bandwidth to expand.
Technology spend firmographics
The GXI identifies when businesses spend greater than $50K per month on distributed IT services, the need for Interconnection Bandwidth capacity is expected to increase 9x to support real-time interactions enabled by the Interconnection of people, things, clouds and data. The more businesses spend on IT services—and increase the distribution of those IT services—the more Interconnection Bandwidth is required to support those services at the digital edge.
These customer firmographics can be directly correlated to the growth of digital business platforms and the requirement for direct and secure Interconnection. If you are trying to solve for these macro trends and follow a digital strategy, the GXI helps you to plan and test your own digital transformation journey by outlining key steps enterprises are following to become digital ready.
To learn more about how Interconnection can accelerate your business’s digital transformation, read the Global Interconnection Index Volume 2.
[i] Interconnection Bandwidth is the total capacity provisioned to privately and directly exchange traffic with a diverse set of counterparties and providers at distributed IT exchange points inside carrier-neutral colocation centers.
[iv] EY, Cybersecurity Regained: Preparing to Face Cyber Attacks (1); Identity Theft Resource Center, CyberScout and Ponemon Institute, The 2018 Cost of a Data Breach Study, 2018 (2).
[vi] Gartner, Capitalizing on Your Business Ecosystems Economy: A Gartner Trend Insight Report, July 11. 2017 (2 & 4);
Harvard Business Review (3)