Virtual vs. Physical Connections in a Digital Supply Chain

Part 2: When to use virtual or physical private interconnection…or both

Bill Long

In my last blog article on “When to Use a Direct Connect or a Virtual Connect…or Both,” I discussed how enterprises are using virtual connections and physical direct connects when migrating workloads to the cloud. As these digital businesses have evolved, the focus is now shifting from what they are connecting with, to who is connecting to them. As enterprises increasingly participate in ecosystems comprised of partners and customers in a digital business supply chain, they are shifting from being the source of private interconnection, to being the destination.

Volume 2 of the Global Interconnection Index, a market study published by Equinix, shows the growth of installed Interconnection Bandwidth[i] between enterprises and ecosystem counterparties. The graph below illustrates that between 2017 and 2021, enterprises are increasingly interconnecting to cloud and IT providers at a compound average growth rate (CAGR) of 98% as part of their digital transformation. At the same time, enterprises are also increasing their private interconnection to supply chain partners at a 41% CAGR.

Enterprise Interconnection Bandwidth by Ecosystem Counterparty

Participating in digital business ecosystems enables greater collaboration and innovation than any single business can achieve on its own. And just as there are compelling reasons to use virtual versus physical private interconnection (or some combination of the two) when connecting enterprises with clouds, there are similar use cases that are specific to using virtual and/or physical private interconnection when connecting an enterprise to its business partners and customers.

When to use virtual connections

You should consider virtual connectivity solutions as the number of counterparties wanting to connect with your business increases. As more partners and customers consider you as part of their digital business supply chain, then you’ll need a scalable and dynamic software-defined interconnection solution that will support the increasing amounts of traffic that will be moving between you and these ecosystems. The benefits of virtual connectivity include:

  • Efficient and cost-effective traffic consolidation over multiple virtual connections going through a single physical interface.
  • On-demand connectivity and dynamic control of data and application traffic flows.
  • A pre-defined solution for connecting with others that enables the following standard interconnection practices and processes:
    • Quickly finding businesses to connect with and seeing the type of connectivity they support using intelligent search tools.
    • Systematically locating provisioning information and negotiating connectivity permissions.
    • Leveraging simple, API-based mechanisms for quickly provisioning virtual connections.
    • Automated monitoring for keeping track of a connection’s “well-being.”

The Equinix Cloud Exchange Fabric™ (ECX Fabric™) directly, securely and dynamically connects distributed infrastructure and digital ecosystems on Platform Equinix®. It leverages software-defined interconnection to provision multiple virtual connections between counterparties over a single physical port. The ECX Fabric enables customized provisioning through an interface and provides all the benefits companies have come to expect from “as-a-service” models, including finding counterparties and deploying real-time connections to them via a portal or API using pay-as-you-go billing increments. And if you want to access a supply chain partner or customer that is not currently available at your location, you can do so via self-service virtual connections.

Equinix recently received the “451 Firestarter” award from leading technology research and advisory firm 451 Research, recognizing the company’s innovative contribution within the technology industry for ECX Fabric. The award recognizes how ECX Fabric helps meet digital businesses’ requirements for exchanging data on demand across global metros through private interconnection. Today there are more than 1,400 companies and 20,000+ virtual connections around the world on ECX Fabric.

The following are some use cases where our enterprise and service provider customers have used ECX Fabric to develop digital business supply chains:

A state government agency has standardized on privately interconnecting to different public and private sector partners via ECX Fabric to enable the same interconnection business processes for locating, provisioning and controlling multiple virtual interconnections between different government agencies and counterparties.

A U.S. mortgage origination clearing house is consolidating activities among companies that need to process mortgage origination information over an ECX Fabric-enabled private network to increase security. This is also a more cost-effective solution for the company than creating “one-off” extranets to each partner.

Unified communications provider, StarBlue (previously BlueFace), leverages virtual connectivity to deliver flawless quality of service (QoS) to their users. The company needed to enhance the quality and reliability of its services, while boosting its annual revenue growth and achieving rapid expansion into EMEA and the U.S. By leveraging ECX Fabric, BlueFace optimized multicloud connectivity and boosted performance, providing high-quality voice and video to its users with decreased latency and jitter. Nearly 98% of the company’s global traffic is now running through Equinix, using direct connections with other carriers within the Equinix locations.

Network service providers (NSPs) can harness virtual connections via the ECX Fabric for connecting between high-speed network backbones and lower bandwidth, last mile network segments to reliably reach their customers out at the edge. NSPs can also leverage ECX Fabric to address the challenges associated with connecting customer networks to colocation data centers and improve user QoS. For example, Verizon recently launched Software-Defined Interconnect (SDI), a solution that works with the ECX Fabric, offering organizations with a Private IP network direct connectivity to Equinix International Business Exchange™ (IBX®) data centers around the globe within minutes.

When to use physical connections 

Equinix Cross Connects provide physical private interconnection inside Equinix IBX data centers, as well as between data centers within a campus. Physical cross connects ensure ultra-high performance, network reliability and redundancy through a one-to-one physical connection, with no “opening” for competitors or bad actors to gain access to the connection. They also provide a more performant and scalable option since you can push more bandwidth through a choice of different media (CAT5/6, COAX, Fiber) and connection speeds (1G/10G/100G).

Equinix Cross Connects provide reliable access to vibrant ecosystems of business partners, service providers and customers using cost-effective physical connections that can be provisioned within 24 hours. Cross connection enables proximity to counterparties, reducing latency, jitter and failures. As physical connections are static and typically support high bandwidth connections – there are a number of use cases where you can “set it and forget it.” They include the following examples: 

  • In high frequency trading environments, with extremely latency-sensitive applications that require high-bandwidth, low-latency connections, distance between business partners and customers can translate into high-value losses. Direct connects are vital to removing the distance and reducing latency between traders and their customers. Platform Equinix supports 875+ financial services companies, including 475+ buy- and sell-side firms and 175+ exchanges, providing them with the direct and secure, private interconnection required by this dynamic ecosystem.
  • Physical cross connects also deliver a lower cost solution for high capacity, IP peering networks. Equinix Internet Exchange™ enables internet service providers, NSPs, content providers and large enterprises to exchange internet traffic by aggregating it to multiple peers on a single physical port. Network hops and congestion are reduced for greater end-user QoS when accessing applications and content. Companies interconnecting to this ecosystem can discover and connect to 1,800+ networks, 2,900+ cloud and IT service providers, and various large enterprises.
  • Enterprise high capacity backbone networks that require extremely high bandwidth will be mostly made up of physically connected network switches and routers, many of which are hosted by NSPs.

Combining physical and virtual connections

As more enterprise IT infrastructures are evolving to be a hybrid of on-premises and cloud environments, a combination of virtual and physical connections will be very important. For example, an NSP may deliver a physical high-bandwidth, long-haul network backbone to its enterprise customers, and then over the last mile, enable private virtual connections between end users and clouds.

As an increasing number of digital businesses are moving from centralized core data centers to distributed IT infrastructures at the edge, a combination of virtual and physical connections will also be necessary. Moving from a centralized to a distributed, hybrid IT model, creates more points where digital business supply chain participants will want to connect to your company in a more flexible, scalable and systematic way. As your IT becomes more distributed at the edge, you’ll need a more controlled and cost-effective virtual mechanism for partners and customers to connect to you.

There are a number of physical and virtual interconnection solutions and services that can be deployed on Platform Equinix. They include the recently announced Network Edge that provides virtual network services optimized for instant interconnection to clouds. You can also learn more about how the 451 Firestarter award-winning ECX Fabric enables virtual connections to enterprise, network and cloud ecosystems across the globe on Platform Equinix.

[i] Interconnection Bandwidth is defined as the total capacity provisioned to privately and directly exchange traffic, with a diverse set of partners and providers, at distributed IT exchange points inside carrier-neutral colocation data centers.