All indicators point to North America leading the charge in the digital transformation revolution. IDC estimates that the worldwide spend on digital transformation will total US$1.9 trillion by 2022, with North America making up 34% of the global market share.[i] A vital component for today’s businesses to realize their digital transformation objectives is private interconnection, which provides the direct and secure exchange of data traffic between key business partners, whether they are in the same building/campus or in different national regions or countries. In an independent study commissioned by Equinix, APCO Insight surveyed 2,485 IT global decision-makers and 46% in North America said that interconnection is a key facilitator of the digital transformation.[ii]
The third annual Global Interconnection Index (GXI) demonstrates how, as the digitalization of the global economy increases, so does interconnection worldwide. The GXI Volume 3 estimates that by the end of 2022, global installed interconnection bandwidth capacity will reach 13,300+ Tbps, or the equivalent of 53 Zettabytes annually. That is enough interconnection bandwidth capacity to concurrently process 500 billion streams from internet of things (IoT) devices. The GXI also forecasts that at the same time, North American businesses will lead the world in interconnection bandwidth growth, with a 38% share (5,066 Tbps).[iii]
The GXI highlights five major macro, technology and regulatory trends—digital business, urbanization, cybersecurity, data volumes and compliance, and business ecosystems—that have converged to form an unprecedented era of complexity and risk. In response to these trends, North American companies have been working on their “digital maturity” pretty aggressively over the last decade. As a result, their compound annual growth rate (CAGR) in interconnection bandwidth between 2018 and 2022 is expected to slow down compared to other parts of the world. The North American interconnection CAGR is expected to be +46% over five years, whereas Latin America leads the world with an estimated +63% CAGR, according to the GXI Vol. 3.
Regional Growth Rate of Installed Interconnection Bandwidth Capacity
North American interconnection growth in 2022.
Industries and technologies driving interconnection
North American service providers, such as telecommunications carriers, have the biggest head start in the race toward private interconnection across all the industry sectors, with 21% of the market in 2022. Next in consuming the most interconnection bandwidth capacity are businesses in the Banking & Insurance (18%), Manufacturing (15%), and Securities & Trading (12%) sectors.
This lines up with the industry sectors leading in global investments in digital transformation, according to IDC, where financial services and discrete and process manufacturing dominate. Data security, digital payments, cryptocurrencies and blockchain are key digital technologies driving greater demand for interconnection in financial services firms. And manufacturing companies are incorporating more capabilities in artificial intelligence (AI), machine learning (ML), robotics/automation, and IoT. These digital technologies require greater interconnection bandwidth capacity to move large amounts of data from sensors and things to analytics engines, and support machine-to-machine (M2M) communications. Many of these technologies, according to IDC, are also short- and long-term drivers of digital transformation.
The GXI predicts that Healthcare & Life Sciences and Energy & Utility will be the fastest-growing industries in interconnection through 2022 (both 63% CAGR), coming up from a more modest base. Drivers here for greater interconnection bandwidth include:
- Stricter personal data security and compliance regulations.
- More user-based interactions with healthcare services and patient portals.
- Increasing amounts of data from IoT sensors in the field flowing into big data and analytics platforms, either on-premises or in the cloud.
Consult the GXI Vol. 3 to see the full range of industries that are driving interconnection growth in North America.
Interconnection market estimated to be held by telecommunications carriers in 2022.
Ecosystems expanding to fuel next-level digital business
With its mature digital service provider industries (i.e., networks, clouds), North America will see a shift in how enterprises prioritize their digitization efforts as they mobilize to form robust digital ecosystems. As a result, according to the GXI, enterprises are expected to account for 59% of the interconnections in 2022, with a 58% CAGR, whereas service providers will make up the remaining 41% of interconnections, with a 35% CAGR.
North American enterprises are also expected to use more than 58% of their total installed interconnection bandwidth capacity to reach Network Providers, while another 24% will be connecting to Cloud & IT Providers. Network (73%) and Cloud & IT Providers (13%) also lead in the types of key business partners that service providers are accessing via direct and secure interconnection.
Installed Interconnection Bandwidth Capacity by Sector (Tbps)
For example, U.S. food service distribution giant Sysco leveraged private interconnection to build a high-speed network backbone on Platform Equinix® to more cost-effectively interconnect its multiple U.S. data centers and leverage a dense network peering ecosystem. It also harnessed Equinix Cloud Exchange Fabric™ as a hybrid multicloud gateway for its server/application migration and data analytics in the cloud.
Urbanization to escalate interconnection needs in top North American metros
Urbanization is growing in North America as more people move to metropolitan centers. By 2022, 83% of the North American population will be living in urban areas, according to the United Nations.[iv] The GXI Vol. 3 reports that “Supporting urban density requires the localized interconnection and analytics of applications, data, content and networking where there is a concentration of users.” This validates the huge growth in installed interconnection bandwidth capacity in major North American urban areas.
The top four North American metros are expected to represent 79% of the interconnections in 2022 (4,025 Tbps). And with a 47% CAGR, they are outpacing the rest of the global market (42% CAGR) in private interconnection growth. As expected, New York, a thriving global financial center, leads with 40% of the total North American interconnection bandwidth capacity. Chicago, with its growing Security & Trading, Business & Professional Services, and Energy & Utility industries, holds the second largest share at 22%. Washington, D.C. claims 20%, as a hub for the Telecommunications, Cloud & IT Services, and Government sectors. And lastly, Silicon Valley, as the western center for Telecommunications, Cloud & IT Services, Manufacturing and Content & Digital Media industries, is expected to have 18% of the interconnection bandwidth mix.
Private interconnections from enterprises.
Installed Interconnection Bandwidth Capacity by Top Metro (Tbps)
The GXI Volume 3 also provides an in-depth analysis of the interconnection deployment scenarios in North America, as well as other regions worldwide:
Check out the regional private interconnection forecasts in the GXI to find out where your business is on the digital maturity curve and discover how to harness interconnection to fuel your organization’s digital transformation.
[i] IDC, “Digital Transformation (DX)Technology and Industry Outlook,” April 2019.
[ii] APCO Insight survey, commissioned by Equinix, August 2019.
[iii] Interconnection bandwidth is 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.
[iv] United Nations, World Urbanization Prospects, 2018.
% of North American interconnections are in 4 metros.