Today, we are announcing an exciting new joint venture with GIC to develop and operate hyperscale data centers in Europe. For the past several years, an important trend has been the expansion of large-scale facilities to support the growth of hyperscale companies, including the world’s largest cloud service providers. Equinix has worked closely with these customers to support their interconnection and edge requirements in our International Business Exchange™ (IBX®) data centers. Beginning with PA8 in Paris, we launched a strategy to build dedicated facilities specifically to serve these customers’ large footprint requirements.
The U.S. $1+ billion joint venture will enable us to meet these larger requirements in locations that are easily accessible from our IBX campuses to enable hyperscalers to fulfill their growing core workload requirements. We are launching “xScale™” as the new name for these hyperscale data centers to define a new category of offerings for our customers. xScale data centers will provide the access to Equinix’s comprehensive suite of interconnection and edge services that will tie into the hyperscale companies’ existing access points at Equinix, and increase the speed of connectivity to their existing and future enterprise customers.
Hyperscale data centers are characterized by tens of thousands of square meters of floor space, filled with thousands of compute and storage systems and massive amounts of networking capacity. While we have met a limited amount of these requirements in our IBX data centers to date, the strong growth in demand for capacity, coupled with our recognition that the customers’ requirements differ from what we provide today, led us to define a new class of facility to address this demand. Currently, we have two xScale data centers-PA8 and LD10 and additional xScale facilities are planned in Amsterdam, Frankfurt, London and other markets.
Due to their size, xScale data centers require large investments. In 2019, Equinix plans to invest nearly $2 billion of capital in new IBX capacity along with the maintenance of our existing data centers and growth of our service platforms, including Equinix Cloud Exchange Fabric™ (ECX Fabric™) and Equinix Internet Exchange™ (IX), as well as development of new products like the recently announced Network Edge service. The joint venture that we announced today creates a dedicated investment vehicle to provide the capital needed to fund our initial six xScale data centers in Europe and provides a framework for funding future xScale data centers around the world.
Hyperscale data centers on the rise
Given how central these capabilities are to their businesses, many hyperscale companies are investing in their own data center infrastructures. In fact, the number of hyperscale data centers increased by 11% in 2018, with 430 hyperscale facilities currently operating worldwide, according to Synergy Research.[i] Synergy reports that hyperscale data center operators spent more than $26 billion in CAPEX during the third quarter of 2018, with Google, Microsoft, Amazon, Apple and Facebook together accounting for 70% of hyperscale CAPEX over the last 10 quarters.[ii]
The majority of hyperscale data centers are in the U.S. (see diagram below), which opens a greenfield opportunity in EMEA and Asia-Pacific, where local proximity to regional users is critical to ensure consistent performance and quality of experience.
How xScale data centers help hyperscale companies handle hypergrowth
Hyperscale businesses are planning ahead for a world that is going increasingly digital. To support their rapid growth, many of these hyperscale companies, including AWS, Microsoft Azure and Google Cloud, currently leverage Equinix’s global interconnection and data center platform to gain direct and secure access to vibrant ecosystems of customers and strategic business partners. With xScale data centers, hyperscale customers will now be able to add to their core hyperscale data center deployments and existing customer access points at Equinix, allowing streamlined expansion on a single platform that spans 200 data centers across more than 50 metros. The new xScale data centers will meet hyperscaler customers’ requirements to support their core workload deployments in a globally consistent and reliable manner. This includes delivering an industry-leading average uptime record of 99.9999%, full UPS power backup systems and N+1 (or greater) redundancy.
The Equinix and GIC joint venture
Initially, the joint venture will own and develop six xScale data centers for hyperscale providers in Europe to meet the strong demand for hyperscale data centers in that region. Equinix data centers in London and Paris will be transferred to the joint venture, and already have a significant portion of their space under lease. Four new xScale data centers are expected to be developed in Amsterdam, Frankfurt (two sites) and London. Equinix will own a 20% interest and GIC will own an 80% interest in the joint venture. The joint venture is expected to close in Q3 2019, pending regulatory approval. xScale data centers will be managed and staffed by Equinix, and jointly controlled by Equinix and GIC. Our development and construction teams are working on additional xScale opportunities in other markets around the world. As these projects take shape, we have the opportunity to add those facilities to this joint venture or to create additional joint ventures for those facilities depending on the specific circumstances of the new projects.
Equinix hybrid multicloud leadership grows
This exciting joint venture with GIC strengthens Equinix’s leadership position in global cloud ecosystem deployments from top hyperscale customers, which currently exceeds $500 million in annual Equinix revenue, with interconnection-rich retail deployments representing the most rapid growth. This further expands our ability to enable hybrid multicloud growth for our enterprise and other service provider customers leveraging ECX Fabric, which directly and securely connects distributed infrastructure and digital ecosystems worldwide on Platform Equinix®.
We announced our strategy to create this joint venture at Equinix Analyst Day in June 2018. A lot of hard work by teams across Equinix has gone into creating this program, and I want to thank everyone involved for helping us reach this milestone. In particular, Jim Smith joined Equinix a little more than a year ago, and he deserves both congratulations and recognition for having led our company’s efforts in creating this program. This joint venture is an important step in helping us establish and grow Equinix’s position as the premier platform for the future multicloud world. As we make progress with the joint venture and xScale, we will add more information to Interconnections – the Equinix blog.
With xScale data centers, hyperscale customers will now be able to add to their core hyperscale data center deployments and existing customer access points at Equinix, allowing streamlined expansion on a single platform that spans 200 data centers across more than 50 metros.Eric Schwartz, Chief Strategy and Development Officer at Equinix