Private interconnection bandwidth to reach 8,200Tbps by 2021, says Equinix

19 September 2018 | Natalie Bannerman

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Interconnection, or direct and private traffic exchange between companies is growing to become the number one way for businesses to connect in the digital world.

According to Equinix’s second annual Global Interconnection Index (GXI) bandwidth provisioned for private connectivity is forecasted to grow by 2021 to more than 8,200Tbps of capacity which is equal to 33ZB of data exchange per year. The new figures are a huge increase over previous years’ projection, roughly ten times the projected capacity of internet traffic. Overall this represents a five-year compound annual growth rate (CAGR) of 48%, almost double the 26% CAGR of global IP traffic.

“Significant macro, technology and regulatory trends are converging to form an unprecedented era of complexity and risk and forcing the integration of physical and digital worlds,” said Sara Baack, chief marketing officer for Equinix. “The second volume of the Global Interconnection Index has found that companies are solving their increasing digital requirements by directly connecting to key business partners through Interconnection, as traditional forms of connectivity do not meet the demanding requirements of today’s businesses.”

Across Europe, the GXI shows that interconnection bandwidth in London, Frankfurt, Amsterdam and Paris are expected to outgrow other European markets by at least 10% CAGR. Specifically, London by 52%, Amsterdam by 57% and Frankfurt by 58%. For Europe as a whole the region will grow at a CAGR of 48% per annum, contributing 23% to global interconnection bandwidth.

“Despite Brexit and political uncertainty in the UK, the GXI reveals that London is projected to show strong growth, accounting for more than 35% of Europe’s interconnection bandwidth growth,” said Russell Poole, managing director UK at Equinix. “London’s digital acceleration shows that post-Brexit, Interconnection Bandwidth continues to be driven by the secular growth of global data traffic and the massive shift in IT to support this data explosion. Equinix’s 12 data centres across the UK and the recent expansion of Equinix’s LD4 data centre in Slough, is an example of the continued investment and growth in London’s digital sector.”

As for sectors, wholesale and retail are expected to have the fastest growing interconnection bandwidth with Europe (75% CAGR), securities and trading along with healthcare and life sciences will have the joint second fastest (69%), while the business and professional services industry along with the banking and insurance industries will also grow rapidly at a CAGR of 65% and 66% respectively. Interconnection between enterprises and cloud and IT providers is projected to grow 98% per annum through 2021.

“As enterprises chart their paths to greater digitisation, they seek pathways that avoid the turbulence generated by the growing complexity of integrating various digital services,” said Eric Hanselman, chief analyst at 451 Research. “New architectures anchored by Interconnection smooth this complexity and, increasingly, enterprises are finding that they also yield improvements in security, performance and capacity. Equinix’s Global Interconnection Index provides useful insight into these digital trends including why businesses are directly connecting with strategic partners to build their digital business ecosystems.”

Across other regions, the GXI found that the US is an early adoption market for digital business and home to the largest number of multinational enterprises. In terms of growth, the US is expected to see a CAGR of 45%, contributing more that 40% to global interconnection bandwidth.

Asia-Pacific will benefit from rapid urbanisation and is home to many large scale digital content providers. It is forecast to grow at a CAGR of 51% per annum, contributing more than 27% of interconnection bandwidth globally.

As for Latin America, thanks to emerging market dynamics and the growing adoption of digital business, the region is expected to grow at 59% per annum, adding more than 9% of interconnection bandwidth globally.

“The majority of FX Spot trading is already electronic, and we see the ratio of digital business increasing at pace across other asset classes,” said Christopher Purves, head of strategic development lab at UBS. “Maintaining low latency is critical to our digital business, with fast, reliable networks provided by Interconnection forming a core part of that mission.”

The report also goes on to highlight a number of key macroeconomic trends that have driven interconnection growth and will continue to do so in the future. These include:

  • Digital business transformation because of the need to support real-time interactions. According to the GXI at least 50% of GDO will be digitised by 2021.
  • The cybersecurity risk, which expands the consumption of interconnection as companies move to private data traffic exchange in order to bypass the public internet and mitigate the various digital threats. By 2021, the global cost of cybersecurity breaches is expected to reach $6 trillion.
  • Business ecosystems, because of the increase in mix of customers, partners and employees companies require digital ecosystems and interconnection to scale. The GXI forecasts that by 2021 organisations using a combination of intermediaries will more than double, while active engagement with industries outside the company’s industry will nearly triple.

 

This year’s GXI identified four types of interconnection use cases along with an IT maturity model. Which are:

  • Network optimisation to shorten the distance between users and services applications.
  • Hybrid multicloud to connect and segment traffic between multiple clouds and private infrastructure.
  • Distributed security to deploy and interconnect security controls at points of digital engagement.
  • Distributed data to deploy and interconnect data analytics in proximity to users.

“As enterprises increasingly adopt hybrid cloud architectures to accelerate their digital transformation initiatives, Interconnection is a proven design strategy for reaching cloud services such as Oracle Cloud Infrastructure in an efficient manner. Direct and private interconnection to Oracle Cloud Infrastructure FastConnect network connectivity platform helps provide predictable and consistent performance, isolation and availability,” said David Hicks, vice president of WW, ISV, OEM and java business development at Oracle.

Equinix all commissioned a separate independent study of 133 senior IT professional across the UK, which found that 77% of those professionals believe that as the public internet becomes more saturated, interconnection is the key to digital business success. Additionally, despite Brexit, 64% of said professionals think that because of the thriving UK data centre industry, the UK is still the best place in Europe to interconnect with various stakeholders.

“The explosive global demand for streaming video content has meant that content delivery management (CDM) companies have had to turn to cloud in order to survive” said Ben Foakes, managing director at BASE Media Cloud. “And as cloud becomes a vital component to the media and entertainment industry, so does Interconnection. BASE Media Cloud and its customers will only be able to meet this rapidly increasing demand for video data by leveraging Interconnection. This year’s GXI highlights the importance of our relationship with Equinix, as by 2021 Interconnection Bandwidth among CDM companies is set to increase at a 41% CAGR.”