As reported in our second quarter 2019 earnings, our interconnection revenues continue to outpace colocation revenues, with a year-over-year growth in Q2 of 13%. Needless to say, we take tracking global interconnection industry trends very seriously, particularly those of our nearly 10,000 customers around the world.
In our 2017 blog on “What is Interconnection,” we defined interconnection as the “private data exchange between businesses,” and explained how it happens through the “deployment of IT traffic exchange points that integrate direct, private connections between counterparties.” While this still holds true today, companies are continuing to evolve how they are connecting to the digital world.
Here are the six things you need to know now about interconnection to succeed as a digital business.
1. Who needs to interconnect?
Over the past few decades, the expansion of digital business has dramatically increased interconnection requirements for every enterprise in every industry, spurring companies to fundamentally change how they operate to compete in a connected world. This change began when the internet made it necessary for network carriers to interconnect to facilitate data traffic exchange between each other and their customers. As the business influence of the internet grew, it created a huge demand for interconnected ecosystems that could seamlessly bring e-commerce and content providers together with their consumers and supply chain partners.
The financial services industry was a perfect example of this ecosystem dynamic in action, equipping electronic trading exchanges to achieve high-speed, single-digit latency through the power of interconnection. And with the emergence of cloud computing, more and more enterprises of all kinds began interconnecting to the cloud to gain cost-effective access to compute and storage resources and consume and deliver new digital services at scale. Today our global economy becomes more digitized every day, forming dense digital ecosystems where on-premises enterprise IT infrastructures and clouds converge.
The Evolution of Interconnected Ecosystems
Since our founding, we have contributed to this evolution by enabling all business counterparties that need to interconnect to do so in the most efficient and effective ways. Today we continue to advance our interconnection leadership, providing our customers with reliable, private physical and virtual connections (software-defined networking (SDN) and network functions virtualization (NFV), which are proximate to the users and the IT services they need to interact with for the greatest performance. By removing the distance and hardware barriers at distributed IT exchange points in carrier-neutral data centers, we reduce the “friction” that can limit a company’s interconnection capabilities. It is in these dispersed, yet connected, IT exchange points where company data comes together and the physical and virtual worlds meet that the “digital edge” resides.
Today we continue to advance our interconnection leadership, providing our customers with reliable, private physical and virtual connections (software-defined networking (SDN) and network functions virtualization (NFV), which are proximate to the users and the IT services they need to interact with for the greatest performance.Bill Long, Vice President of Interconnection Product Management, Equinix
2. What model of interconnection matters?
Historically, enterprise networking focused on high scale, dedicated application-specific devices such as routers, switches and firewalls using direct cross connects. This matched the legacy centralized, corporate data center model, where all data, application and cloud traffic moved through a core IT infrastructure. However, digitalization has made users and IT services more regionally distributed and localized, fueling the need for more agile and accessible software-programmed networking devices at the digital edge. As hybrid IT infrastructures have become increasingly multi-tenanted and virtualized, interconnection capabilities have followed suit – offering greater choice and flexibility. The vendor neutrality of a global colocation platform with rich ecosystem accessible via a flexible software controllable network experience – such as Equinix – gives enterprises seeking a variety of networking and cloud services greater choice, lower total cost of ownership and improved performance.
Moving from a core, centralized data center infrastructure to a more regionally distributed and localized digital edge
Leveraging Equinix Cloud Exchange Fabric™ (ECX Fabric™) at the digital edge creates distributed, interconnected hybrid IT infrastructures that enable one-to-many and many-to-many interactions and data exchanges. This includes providing software-defined interconnectivity between distributed enterprises’ IT infrastructures and ecosystem counterparties, such as cloud and network providers. As digital businesses shift their operations from physical systems and connections to virtualized ones, Network Edge services on Platform Equinix allow them to provision direct and secure connections using multiple vendors’ virtual network services in minutes instead of months.
3. How is interconnection managed?
In the past, dedicated network appliances were typically managed manually with a command line interface (CLI) for provisioning and rudimentary scripting. Today’s applications and enterprise use cases are much more dynamic and widely distributed, so managing this complexity using traditional tools like CLI is much too complicated, slow and risky. Today’s network operations managers need greater end-to-end visibility and reach for real-time control of dispersed networks. By providing 100% application interface programming (API) controlled networking, ECX Fabric and Network Edge allow the real-time spin up and management of network infrastructures. This enables network managers to create virtual network devices in minutes, automate more mission-critical network services, and be proactive rather than reactive to performance issues or outages.
ECX Fabric Customer Portal
4. When and where should you interconnect?
Traditional networking applications were packaged in specialized CAPEX-intensive devices that you would “set and forget,” unless you needed to turn up your network bandwidth requirements to meet increased demand. Today’s more dynamic and dispersed networking applications and the virtual networking solutions that support them make setting and forgetting too slow and expensive to be effective. It also makes it tougher to spin up more network resources on-demand.
To solve these challenges, you need to be able to dynamically control when and where interconnectivity happens. By harnessing virtual connections via ECX Fabric and Network Edge services as “pay-as-you-go” models, you can more efficiently manage a dynamic network infrastructure from both OPEX and CAPEX perspectives. This includes automatically spinning up virtual connections and bandwidth when and where you need it based on user requirements and network performance behavior.
ECX Fabric Customer Portal – Selecting Origin and Destination Locations
5. What is the business value of interconnection?
Enterprises traditionally connected to a backbone network that then connected to their own assets or other locations. But today’s enterprises need to access multiple networks and clouds while participating in increasingly interconnected digital supply chains. While connecting to your company’s own infrastructure across different locations remains very important, it has become increasingly critical to connect to other participants in your digital supply chain. Digital businesses that are more tightly engaged and integrated realize exponentially greater opportunity and value than those who go it alone.
By curating ecosystems to interconnect with networks, clouds and digital supply chains using ECX Fabric on Platform Equinix, you can seamlessly expand and scale your interactions with critical digital and business partners worldwide. Also, by interconnecting IT infrastructures via the ECX Fabric, you can remotely access cloud and SaaS providers and other digital services that may not be local to your data center. You can access multiple network and cloud services in minutes over lower cost virtual connections using ECX Fabric. According to “The Total Economic Impact™ of Equinix,” a commissioned study conducted by Forrester Consulting on behalf of Equinix (April, 2019), the savings could be up to 60% and 70% in network traffic and cloud connectivity costs, respectively.[i]
6. How should you interconnect?
In the past, most enterprises used an MPLS network to connect their locations, and then turned to the internet to connect to the outside world. But the security risks and performance challenges inherent to the public internet hampered business outcomes and opportunity. By leveraging private interconnection solutions, like ECX Fabric and Cross Connects that bypass the internet, you can ubiquitously connect hybrid multicloud infrastructures to critical digital supply chains without the security and performance concerns. Virtual networking technologies such as SDN and NFV provide immediate access to digital and business ecosystems on Platform Equinix, and more importantly, allow you to harness dynamic business processes on-demand to discover, coordinate, provision and manage digital supply chain interconnections.
Learn from our customers’ experience
Tracking the role, relevance and impact of interconnection in this expanding digital world is central to our business. And with more than 333,000 interconnections across our global platform, and 1,400+ companies and 20,000+ virtual connections around the world on ECX Fabric, we continuously gain invaluable lessons and best practices from our customers’ interconnection deployment scenarios.
You can benefit from this same level of insider insights by reading the upcoming, third annual Global Interconnection Index (the GXI), a market study published by Equinix. Volume 3 of the GXI measures and forecasts the growth of the private interconnection bandwidth required to support the companies driving digital business, and helps you position your organization to compete, grow and thrive as a digital business.