Equinix passed our 20th birthday last year, so for our 20th installment of the “How to Speak Like a Data Center Geek” series, we are taking on the topic of ecosystems. The timing is not a coincidence because, in many respects, digital business ecosystems have evolved in parallel with our own history. Our founders believed that a carrier-neutral platform of interconnected data centers would be needed to support the rapid growth of the internet. And, within the last few years, analyst firms like Gartner and IDC have started paying attention as well.
The continued growth of business and digital ecosystems is also driving a greater need for interconnection among their participants. The second volume of the Global Interconnection Index (the GXI), published annually by Equinix, shows that the majority of private interconnection is happening between enterprises and network and cloud and IT provider ecosystems, with sustained growth through 2021.
But first, let’s step back and take a look at the origin of the “ecosystem”.
Ecosystem vs business ecosystem
An “ecosystem” refers to a biological community of interacting organisms and their physical environment that are linked together through nutrient cycles and energy flows. The word was coined by British ecologist Arthur Tansley in a 1935 publication to draw attention to the importance of viewing these ecological communities as whole systems.i
Natural ecosystems also provide the basis for human economic activity. Almost every product derives some part of its raw materials from natural ecosystems, and intangible services such as tourism and insurance also depend in part on these ecosystems. The earliest business ecosystems evolved in a similar manner to natural ecosystems. For example, a business ecosystem that evolved around apples would eventually include many players such as growers, hybridizers, fertilizer and pest control manufacturers, harvesters, shippers, wholesale integrators, retailers, etc. Over time, many of these players would begin to partner for greater scale and competitive advantage.
Despite the obvious parallels, the earliest appearance of the word “business ecosystem” wasn’t until a 1993 Harvard Business Review article by author James Moore, “Predators and Prey: A New Ecology of Competition”. In it, he describes the business ecosystem as being an economic community of interacting organizations and individuals – the organisms of the business world. In a business ecosystem, companies coevolve capabilities around a new innovation: they work cooperatively and competitively to support new products, satisfy customer needs, and eventually incorporate the next round of innovations.ii
Digital ecosystems version 1.0
Digital ecosystems reflect this reality – they are partnering ecosystems of companies, providers, data, processes, clouds and things interconnected digitally to enable collaboration and provide mutually beneficial results to all parties involved. In many respects, digital ecosystems evolved as businesses began to digitize and automate their operations. Manufacturers connected to multiple supply chain operators and supply chain operators connected to multiple suppliers and manufacturers and so forth.
In the early days, these connections were often made over the public internet, even though critical workloads were still kept in-house or outsourced to managed hosting and network providers. Over time, this led to significant challenges for businesses looking to scale and compete in the growing digital economy. Namely, it was slow, unreliable, not secure, and impractical for scaling across the globe, especially as businesses needed access to more than one provider, location and data sources.
The evolution of digital ecosystems
No single provider could support multiple clouds, applications, locations and data sources across the globe. Carrier-neutral internet traffic exchange points became important for network providers to interconnect with each other to expand their coverage. Equinix was founded during these early days with a vision of providing exactly that – neutral, equal-access locations for traffic exchange. E-commerce and content providers soon followed as they wanted to place their services closer to population centers for better performance and digital content workflows became increasingly complex. Today, Equinix hosts more than 1,800 network providers and more than 700 content and digital media providers.
Next came financial ecosystems as the stock markets began to move from manual to electronic trading. Financial services and the exchanges needed to exchange high volumes with the lowest latency as possible. Speed is of the essence for new ecosystems that are emerging as well, such as alt data and algorithmic trading providers. Today, Equinix hosts more than 1,250 financial services companies, including more than 500 capital markets firms.
Similar to network providers, cloud and IT service providers began to join the ecosystem as they sought ways to expand their global coverage, and today Equinix hosts more than 2,900 cloud and IT service providers.
Finally, like the apple example above, thriving digital ecosystems attract an ever-growing number of players. More than 9,800 companies are part of the Equinix ecosystem, including nearly half of the Fortune 500 and over a third of the Forbes Global 2000.
Growing healthy ecosystems
Why is this important?
Biodiversity is necessary for ecological ecosystems to thrive. If one or a few species begins to dominate, the whole system may collapse. Digital ecosystems are no different. To flourish and generate the most innovation, they require a healthy balance of cooperation and competition between diverse participants. A healthy digital ecosystem is one where a business can collaborate with their optimal partners and customers, and engage with the world’s leading clouds, networks and services. In the sharing economy of today, with companies like Uber and AirBNB redefining the edges of ecosystem participation, that can also mean private individuals as suppliers and consumers. Regardless of how they are organized, digital ecosystems grow best in carrier-neutral colocation centers where real-time interactions between people, things, locations, clouds and data can happen on a global interconnection platform.
Download the Global Interconnection Index Volume 2 to learn more.
And don’t be shy about checking out every post in the “Speak Like a Data Center Geek” series – you never know what you might learn!
Part 20: Ecosystems (see above)