Why Data Interconnection Services Are Booming with Increased Demand

NEWS ANALYSIS: Global Interconnection Index, the first of its kind in the industry, indicates that the capacity for private data exchange among businesses is rapidly outpacing that of the public internet.

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Publications such as eWEEK receive scores of industry surveys and other market research each month in our email boxes. Most of them have value and help us and our readers to understand trends in various sectors of the IT world.

On the other hand, some of them are self-serving, performed by a reputable research firm and underwritten by a product or service vendor in order to highlight how that vendor is leading its little part of the IT universe.

So when data center interconnection services provider Equinix told eWEEK about something called the Global Interconnection Index, a new market study published Aug. 16 by—you guessed it—Equinix, it’s fair to say there was skepticism on our part. But after querying the company and seeing how its method of research entailed the entire global data center interconnection market from a third-party perspective, we were convinced that this is indeed an industry study—not one merely designed to make its researcher look good in the eyes of investors, customers and the general IT public.

Why DIY Market Research Can Be Valuable

“A number of us inside Equinix come with a background as analysts,” Tony Bishop, Vice-President of Global Enterprise Vertical Strategy and Marketing at Equinix, told eWEEK. “We do a lot of our own market analysis and intelligence, and our inspiration was Cisco VNI (Visual Networking Index, which forecasts networking industry trends) and what they show about how network traffic is growing and changing. Huawei also publishes their own (research), and there are a few others.

“We spent about nine months really breaking down the industry, determining where the densest interconnection centers are, and pulling together from various sources what’s happening in the industry. So it is ours, but it is ours about the industry, not about us.”

We at eWEEK also have found over time that the best and most successful companies always do their own market research; it’s just that they don’t always care to share it with the public.

For the record, interconnection networks differ from standard data centers in that they serve as crossroads and optimizers for large public and private networks, rather than as physical stations for server, storage and networking equipment.

Major Player in This Market

Redwood City, Calif.-based Equinix owns and runs International Business Exchange (IBX) interconnection data centers. Spread across 15 cities in North and Latin America, Equinix's total global footprint amounts to more than 175 IBX centers across 44 markets and about 17 million square feet of data center space.

Thus Equinix plays a prominent role at the center of this market. Its Global Interconnection Index, a first in its market, analyzes the adoption profile of thousands of carrier-neutral colocation data center providers and ecosystem participants globally and looks at possible trends in that fast-growing sector.

One of the chief data points that came out of this on Aug. 16 is that the capacity for private data exchange among businesses is rapidly outpacing that of the public internet, growing at nearly twice the rate now and expected to comprise nearly six times the volume of global IP traffic by 2020.

As more and more companies embrace those vastly over-used buzz terms “digital transformation” and “customer experience,” they become dependent on the real-time engagement of many more users, partners and service providers. This is where the index can become a powerful research tool.

The index highlights how companies are translating digital transformation into action and creating entirely new ways of connecting with their customers, partners and supply chain, Bishop said. The document will provide an annual baseline to track, measure and forecast the growth of interconnection bandwidth, which is defined as the total capacity provisioned to privately and directly exchange traffic with a diverse set of counterparties and providers at distributed IT exchange points.

Takeaways from the Research

According to the Index, interconnection bandwidth is expected to grow at a 45 percent CAGR to reach 5,000 terabytes per second by 2020, dwarfing global IP traffic in both growth (24 percent) and volume (855 Tbps). It is also growing faster than Multiprotocol Label Switching (MPLS), the legacy model of business connectivity, by a factor of 10 (45 percent to 4 percent).

Key macroeconomic, technology and regulatory trends that are impacting Interconnection growth include:

Digital technology use, which forces the need to support real-time interactions requiring more Interconnection Bandwidth. According to Accenture, digital technology use is projected to add $1.36 trillion in additional economic output in the world’s top 10 economies by 2020.

Urbanization, which is transforming global demographics and creating a proximity need for digital services concentrated across metro centers globally. More than two billion people are expected to migrate to major cites by 2035, creating as many as 50 major urban metro hubs requiring dense Interconnection fabrics.

Cybersecurity risk, which expands Interconnection consumption as firms increasingly shift to private data traffic exchange to bypass the public Internet and mitigate against digital threats. By 2020, an estimated 60 percent of digital businesses will suffer major service failures as breaches permeate across physical and digital platforms.

Global trade of digitally deliverable services, which ushers in a new era of dynamic business processes and demand for Interconnection. Global digital workflows require a global mesh of interconnected metros to fulfill demand. According to McKinsey & Co., trade in digitally deliverable services now comprises 50 percent of total services exports globally, with an expected 9X increase by 2020.

More Highlights

• The index provides significant insight into regional differences in how interconnection is accelerating in different regions of the world. While the U.S. is forecast to have the largest amount of interconnection bandwidth, it is the most mature region, and other regions are more rapidly provisioning Interconnection Bandwidth to rival the projected deployment levels in the U.S.

• As crucial as interconnection is to how digital business is conducted, it has never been quantified. The Global Interconnection Index changes this with industry-first projections of how interconnection growth and access will unfold through 2020.

For the first time, organizations can see multi-dimensional projections of interconnection bandwidth requirements by region, industry, use case, firmographics and maturity model, Bishop said.

Go here to download a copy of the report.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor of Features & Analysis at eWEEK, responsible in large part for the publication's coverage areas. In his 12 years and more than 3,900 stories at eWEEK, he...