Digital transformation growth in Europe continues to accelerate, driving enterprises to partner with multiple cloud and technology service providers to meet their digital business needs. But concerns around data privacy, residency and compliance regulations have also risen, with much greater scrutiny of how companies are managing the lifeblood of the digital economy—the data.
When the European Union’s (EU) General Data Protection Regulation (GDPR) came into effect in May 2018, it imposed robust transparency requirements and stiff penalties around how the personal data of EU citizens can be collected and used. With data breaches on the rise, data privacy and compliance regulations such as the GDPR will continue to serve as catalysts for interconnection growth throughout Europe. To solve compliance challenges, businesses will need to deploy and connect security services at local endpoints where data is being created. Private interconnection, which is the direct and secure exchange of traffic between key business partners, ensures that data is kept safe in transit by avoiding the public internet. In an independent study commissioned by Equinix, APCO Insight surveyed 2,485 IT global decision-makers, and 36% in Europe said they believe interconnection is a key facilitator of digital transformation.[i]
The third annual Global Interconnection Index (GXI) measures and forecasts the growth of the private interconnection bandwidth required to support the companies driving digital business.[ii] As the digitization of the global economy advances, so does interconnection. By 2022, the GXI Volume 3 estimates that installed interconnection bandwidth worldwide could reach 13,300+ terabits per second (Tbps), the equivalent of 53 zettabytes (ZB) annually. In one minute, that amount of interconnection bandwidth could concurrently process 45 million self-driving cars. Europe alone accounts for 22% (2,988 Tbps) of the projected global interconnection bandwidth growth and is expected to grow at 51% CAGR between 2018 and 2022.
Europe alone accounts for 22% of the projected global interconnection growth.
INTERCONNECTION BANDWIDTH GROWTH BY REGION
Industries focused on compliance and innovation are driving interconnection
The GXI highlights five major macro, technology and regulatory trends shaping the competitive landscape across all industries. These include rapid growth in digital business, urbanization, cybersecurity risk, data volumes and compliance requirements, and business ecosystems.
Service providers, such as Telecommunications carriers and Cloud & IT Services, are key enablers of digital business and are expected to remain the largest industry segments of private interconnection, together comprising 35% of the total installed interconnection bandwidth capacity in Europe by 2022.
As an example, Telent, an internet of things (IoT) service provider in Germany, needed a flexible, scalable infrastructure that would comply with the German government’s telecommunications regulations, while also being capable of processing high volumes of IoT data at speed. The company collaborated with Equinix and Axians, an information and communication technology (ICT) company, to build a reliable, high-performing hybrid cloud solution on Platform Equinix®. The resulting solution complied with regulations and brought the distribution of services and controls closer to Telent’s customers, employees, partners and ecosystems with 99.999% reliability.
A security concept, detailed emergency planning and professional data encryption are mandatory [for us]. With millions of IoT terminals sending data packages, we [also] need an overall concept that’s easily expandable. We rely on Axians to set up a software architecture and on Equinix to provide us the highly available infrastructure for our network.Wolfgang Krüger, Head of Networks, Telent
Perhaps surprisingly, Wholesale & Retail Trade will be the fastest-growing industry in interconnection through 2022 at a 72% CAGR, and not for compliance reasons. European retailers will increasingly leverage technology to renovate their business models, deliver innovative services and enhance the customer experience. The leading strategic priority is enabling an omnichannel experience[iii], which translates to nearly $5 billion in spending according to IDC.[iv]
As expected, continued enhancement of data compliance regulations aimed at strengthening trust will fuel further growth in Healthcare & Life Sciences (71% CAGR) and Government & Education (70% CAGR). Having strong data protections in place can potentially unlock private records exchanges, such as the European electronic health record exchange, which is an initiative focused on enabling the exchange of patient information and e-prescriptions across borders.[v]
All of these interactions must be fortified with stringent and reliable data security and privacy compliance policies and controls, especially at the edge, where most data is created and consumed. To achieve this, businesses are increasingly opting for private, direct connections. In an independent study commissioned by Equinix, APCO Insight surveyed 2,485 IT global decision-makers, 68% of whom said that complying with data protection regulations was the top priority in their organization’s technology strategy.
Consult the GXI Vol. 3 to see the full range of industries that are driving interconnection growth in Europe.
Enterprise ecosystems are leading in interconnection growth
As a mature market with well-developed infrastructures, service providers in Europe are moving away from expanding their footprint toward expanding the breadth and speed of their services. At the same time, businesses are seeking additional revenue growth by developing new digital offerings and ecosystems of services. Consequently, enterprises are expected to account for 60% of total interconnections in 2022, with a 67% CAGR, while service providers will make up the remaining 40% of interconnections with a 36% CAGR.
European enterprises are also expected to use 67% of their total installed interconnection bandwidth capacity to reach Network Providers, while another 17% will be connecting to Cloud & IT Providers. Network (71%) and Cloud & IT Providers (9%) also lead in the types of counterparties that service providers are accessing via direct and secure interconnection. As an example, DAZN is a sports video streaming enterprise based in Europe that offers live and on-demand streaming of events. Through Platform Equinix, the company can access more than 1,800 network providers and 2,900 cloud and IT service providers to establish connections between all relevant parties in their ecosystem, enabling production capability almost anywhere.[vi]
To support DAZN’s initial launch and future expansion we needed a local presence in global markets. Equinix’s interconnection platform provides the capability to deploy infrastructure that gives us both high performance and resiliency. In addition, we can directly connect to our network and cloud providers in these geographies, providing us with the flexibility to support on-demand production requirements in multiple locations.Dom Wedgewood, SVP Broadcast & Technology, DAZN
Wholesale & Retail Trade will be the fastest-growing industry in interconnection through 2022, and not for compliance reasons. European retailers will leverage technology to renovate their business models, deliver innovative services and enhance the customer experience.
INTERCONNECTION BANDWIDTH BY ECOSYSTEM USE CASE—EUROPE
Four European metros are driving the majority of interconnection growth
Europe is one of the most urbanized regions in the world, with 74% of the population residing in urban areas.[vii] Urbanization is changing demand origins, creating a need for localized digital capabilities, close to population centers where businesses come together to exchange information and services. As a result, interconnection is growing fastest in major urban hubs.
The top four European metros will reach nearly 78% of the interconnections in Europe in 2022 (2,318 Tbps), with a 53% CAGR. As a major digital hub and financial center, London will account for 34% of all European traffic, followed by Frankfurt (19%), Amsterdam (15%) and Paris (10%). To support the growing demand of these markets, Equinix continues to extend Platform Equinix, enabling companies to deploy their IT infrastructure and services at the digital edge.
INTERCONNECTION BANDWIDTH BY TOP METROS—EUROPE
1. Rounding may affect totals.
2. These are the top metros and not inclusive of all metros.
Read the GXI Volume 3 for more information on interconnection growth trends and deployment scenarios by region, industry and ecosystem partners.
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[i] APCO Insight survey, sponsored by Equinix, August 2019.
[ii] 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.
[iii] Omnichannel refers to the different methods of shopping available to consumers – online, in a physical store or by phone.
[iv] IDC, European Spending on Digital Transformation to Reach $256 Billion in 2019, Led by Innovation Accelerators, According to IDC Spending Guide, Dec 2018; Digital Transformation: Technology and Industry Outlook, May 2019.
Of European interconnection traffic in 2022 will come from four metros – London, Frankfurt, Amsterdam and Paris.