Enterprises Embrace the Future: Subscription-Based Digital Infrastructure

For many businesses, participating in the digital economy evolved from an outcome-driven digital transformation. They developed a digital-first strategy characterized by an automated cloud-to-edge digital infrastructure that set them up for reimagining products, growing with ecosystems of partners and rethinking distribution and engagement at the edge. Operating at this level required enterprises to expand their use of distributed digital infrastructure and virtual private network connections—what we call interconnection.

Fast-forward to today, and we’re already seeing IT leaders expand their digital infrastructure via a subscription model. They’re discovering it can be more flexible and cost-efficient than relying on the traditional approach of owning on-premises physical infrastructure. Last year I wrote on the future of digital infrastructure. I predicted that, in the future, deploying infrastructure will be as quick and easy as consuming software is today. Businesses already subscribing to digital infrastructure are at the forefront of this trend, allowing them to refresh and improve hardware continuously.

This year’s Global Interconnection Index (GXI) 2024, provides insights into the growth and transformation of the global digital economy by measuring interconnection growth. The GXI 2024, published by Equinix, predicts that as the digital economy continues to grow, interconnection bandwidth[1] is forecast to climb at a five-year compound annual growth rate (CAGR)[2] of 34%, and the growth of ecosystems will allow businesses to capture new opportunities from the core to the edge.

The GXI serves as a benchmark for Enterprises and Service Providers, providing reference points for what companies in specific industries are doing and where they’re doing it. It’s a valuable resource for digital businesses—wherever they are on their journey.

Scaling data exchange with subscription-based digital infrastructure

The power of the digital economy is rooted in the ability to exchange high volumes of data. Enterprises must be able to move data from multiple sources to various processing locations while maintaining control and security around that data. Exchanging data via interconnection makes it easier to do this; the fact that global interconnection bandwidth is growing at a rate twice that of the internet shows that more and more businesses understand this.

Further, the increased data-dense demands from emerging technologies such as AI, 5G and edge computing creates a scenario where enterprises require dynamic access to the most powerful compute resources with the highest efficiency. With the rapidly expanding use of public and private AI, they can no longer accurately predict hardware requirements, driving an increased focus on deploying subscription-based digital infrastructure. Soon, we expect businesses will subscribe to pre-trained inference engines from application intelligence marketplaces, allowing them to compose even more powerful services. This will increase the volume of intelligence exchange, significantly expanding the reach of data marketplaces and the growth of interconnection bandwidth.

Subscription-based digital infrastructure can also help enterprises meet sustainability goals; they can use more efficient compute resources and reduce the volume of technical debt that accumulates when owned hardware assets rapidly become obsolete—often within two years or less.

Ecosystems unlock opportunity

The GXI 2023 made the case for companies to recognize that their ecosystem is their infrastructure. This year, the GXI forecasts that organizations will continue to increase ecosystem participation significantly as they seek to reduce reliance on owned physical equipment and gain the flexibility of subscription-based models for their digital infrastructure.

There’s a constant influx of providers and consumers of services as digital ecosystems continually form across all industries, taking the economy to higher forms of composable value and collaboration. Enterprises are benefiting in the following ways:

• Participation has its advantages. Businesses are gaining faster time to value by adding services and leveraging skills, capabilities and innovation to help redesign their business processes and equip them to sell their services to a larger audience.
• Subscription-based services accelerate expansion. Companies that may have gotten a late start are closing the gap as they tap into digital ecosystems to subscribe to necessary skills and capabilities rather than do it all themselves.
• Data is leveraged at the edge. Organizations are leveraging analytics and AI insights from data generated in the field for real-time decision-making, helping companies enable innovation that transforms practices from the edge in while IT transforms from the cloud out.
• Sustainability is essential. With the volume of emerging regulations prioritizing sustainability, companies are turning to ecosystems and choosing partners that share their future-first vision, allowing them to scale digital operations sustainably.

Global and regional GXI highlights for Enterprises and Service Providers

Click to highlights: AMER, EMEA, APAC, Recommendations

The GXI forecasts how organizations will continue to use interconnection bandwidth and distributed digital infrastructure to shape and scale the global digital economy.  It also shows how quickly different industries are transforming and where the most significant opportunities are by location, with its analysis of deployment models in the top 38 metros across 14 industries and 3 regions.

The global deployment and market research data in GXI 2024 provides a geographic breakdown of interconnection bandwidth growth and interconnection benchmark insights. Let’s take a look at a few highlights from the findings—worldwide and by region. Be sure to download GXI 2024 to access the complete market study.

Enterprises and Service Providers show significant growth globally for different reasons

• Service Providers are forecast to consume 62% of interconnection bandwidth. The volume of companies joining the mix continues to rise, which will fuel significant growth by 2026.
• Enterprises are growing at a 39% CAGR globally, which is 25% faster than Service Providers.

Click to highlights: AMER, EMEA, APAC, Recommendations

AMER

Network Providers show largest year-over-year increase in Americas

The Americas region leads interconnection bandwidth capacity globally and is forecast to grow at a 34% five-year CAGR.

• Network Providers have been the catalyst for ecosystem growth and continue to show the largest year-over-year increase in interconnection bandwidth.
• As more industries mature digitally, we see accelerated growth rates, with Wholesale & Retail Trade, Healthcare & Life Sciences and the Public Sector growing the fastest.

Americas has fastest-growing core metro globally and robust edge growth

Forecast data shows that 84% of the Americas interconnection bandwidth will be deployed as core in regional cloud adjacent hubs. Edge metro growth is climbing at a robust rate of 39% CAGR, vs. 33% CAGR for core metros.

• São Paulo is the fastest-growing core metro globally.
• Seattle, Houston and Montreal are the fastest-growing edge metros, each with a projected 43% CAGR.

Click to highlights: AMER, EMEA, APAC, Recommendations

EMEA

Service Providers and specific industry categories projected to lead growth in EMEA

While Service Providers continue to make up the majority of interconnection bandwidth consumption in Europe, the Middle East and Africa (EMEA), growth rates of Enterprise industries are accelerating faster.

• The fastest growth among Service Providers is predicted to be led by Cloud & IT Services and Hyperscale Providers.
• Mature Enterprise industries such as Banking & Insurance, Wholesale & Retail and Healthcare & Life Sciences are predicted to grow the fastest, while the Public Sector, which is smaller in contrast to other industries represented in the GXI, is growing the most rapidly.

Fast-growing edge metro locations expand capabilities and cloud on-ramps in EMEA

While many of the top edge metro locations—like Milan, Stockholm and Dublin—are modest in size, they are growing with more core metro capabilities and cloud on-ramps.

• London continues to be the largest hub for Financial Services, while Frankfurt stands out as having the largest percentage of Enterprise interconnection bandwidth, led by Manufacturing.
• Dublin has emerged as the fastest-growing edge metro, and Madrid continues to lead interconnection bandwidth due to its adjacency to subsea cable mooring locations.

Click to highlights: AMER, EMEA, APAC, Recommendations

APAC

Network sector and Hyperscale Providers stand out in APAC for different reasons

The Network sector leads Service Providers’ consumption of regional interconnection bandwidth in Asia-Pacific (APAC), and Hyperscale Providers are the fastest-growing Service Provider sector in the region.

• APAC has the fastest-growing Enterprise sector out of all regions at 42% CAGR, outpacing Service Provider growth rates by over 31%.
• Banking & Insurance and Energy & Utility are experiencing a surge in demand and are the fastest-growing enterprise sectors of any region globally.

APAC has fastest-growing core and edge metros globally

The core metros still show strong growth, and Hyperscale Provider growth dominates markets like Seoul, Jakarta and emerging metros in Southeast Asia.

• APAC has the fastest-growing core metro bandwidth globally. Tokyo continues to be the largest in the region, growing at a 31% CAGR.
• APAC is unique in having the largest and fastest-growing edge metros: Beijing is the largest edge metro globally, and Melbourne is the fastest-growing edge metro in the world.

Click to highlights: AMER, EMEA, APAC, Recommendations

6 recommendations for Service Providers and Enterprises

Now that you have an introduction to the forecasted growth of interconnection bandwidth and how it’s powering participation in ecosystems and driving the growth of subscription-based digital infrastructure, we recommend focusing on these digital-first strategies.

1. Design for digital: When it comes to business revenue, don’t just digitize business as usual.
2. Invest in the organization’s strengths: Build business-differentiating capabilities; commoditize and leverage ecosystems for everything else.
3. Prioritize sustainable partners: Choose partners that complement your sustainability goals and ensure their claims are officially quantifiable.
4. Rethink the core: Evolve from rigid and centralized to adaptable and distributed.
5. Extend digital infrastructure to the edge: Don’t invest in piecemeal infrastructure at the edge.
6. Reduce reliance on hardware: Adapt to subscription-based models for continuous improvement and easier adoption of new technologies.

There’s so much more to discover in GXI 2024 about how enterprises are advancing their digital-first strategies through ecosystem participation—and how you can apply the same practices to your business. I invite you to read the GXI 2024 market study today.

About GXI 2024

The global interconnection forecast combines Equinix data on interconnection along with market intelligence research to produce an industry-wide forecast. The digital infrastructure benchmark in the GXI provides current deployment trends and the typical growth journey for both Enterprise and Service Provider industries based on >11,000 implementations deployed between Q1 2016 and Q1 2023. GXI projections are based on the combination of the growth forecast, deployment benchmarks and market intelligence.

Forward-Looking Statements

This blog post contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, risks to our business and operating results related to the current inflationary environment; foreign currency exchange rate fluctuations; increased costs to procure power and the general volatility in the global energy market; the challenges of acquiring, operating and constructing IBX® and xScale® data centers and developing, deploying and delivering Equinix products and solutions; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenues from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; risks related to our taxation as a REIT and other risks described from time to time in Equinix filings with the Securities and Exchange Commission. In particular, see recent and upcoming Equinix quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this blog post.

[1] Interconnection bandwidth is a measure, calculated in bits/sec, of the capacity provisioned to privately and directly exchange traffic between two parties, inside carrier-neutral colocation data centers.

[2] Compound annual growth rate (CAGR) is a form of exponential growth, measuring a quantity over multiple years. The GXI calculates the compound annual growth rate over a five-year period. CAGR is not a linear growth rate, and takes into account the annual increased speed of growth in addition to the amount of growth.