Equinix, the world’s largest colocation data centre provider, has a unique purview over an evolving tech-enabled business landscape. The Silicon Valley-based company’s platform of more than 220 data centres puts it at the centre of growing demand for distributed digital infrastructure.
“The pandemic has been a catalyst for people continuing to realise that digital transformation is a critical business priority across industry sectors around the world,” Charles Meyers, the chief executive of Equinix, tells fDi over Zoom.
As one of Equinix’s 10,000 global customers, Zoom — along with other video conferencing platforms — has needed more data centre capacity in line with the proliferation of remote working.
With digital services, data and cloud computing becoming increasingly inseparable from modern business operations and our daily lives, infrastructure providers such as Equinix are set for expansion.
Digital infrastructure leader
Since 2010, Equinix has been the second-most active global investor in the data processing, hosting and related services sub-sector, behind Amazon, announcing more than 100 foreign greenfield investments across 25 countries, according to fDi Markets.
“For a lot of companies, saying they are digital infrastructure leaders is hype. But with Equinix, it’s real,” says Courtney Munroe, vice president for worldwide telecommunications research at market research firm IDC.
Rivals, such as US-based Digital Realty, CloudFlare and Japanese telecoms multinational NTT, follow closely behind in terms of global investments.
Data centre outsourcing
Equinix connects organisations directly to their customers and partners in their data centres, serving a broad base of activities ranging from education to manufacturing, mobility and healthcare.
Mr Meyers says that demand depends on how data-intensive businesses are, noting that across industries, such as retail, automotive and financial services, companies are increasingly leveraging data and the cloud for their operations.
“We have seen a very strong movement towards hybrid and ‘multi-cloud’ as the architecture of choice for both our service provider and enterprise customers,” he says, adding that businesses want to balance their own private infrastructure with interconnection to the cloud infrastructure housed in Equinix data centres.
Digital consultancy Gartner predicts that by 2025, 80% of enterprises will shut down their traditional data centres, opting for specialist companies to manage their digital infrastructure.
Mr Munroe says that burgeoning demand for access to cloud applications and a boom in enterprises moving their on-premises data centres to third-party specialists is benefiting colocation providers.
“It’s often more cost-effective to leverage a company like Equinix than having in-house data centres,” he explains. “If you want to have a flexible, agile infrastructure, Equinix can provide you with cutting-edge technologies and access to a lot of companies.”
Mr Meyers adds that “enterprise demand and the needs of our customers is forcing us to think about how to make sure we can extend our global platform to interconnect with the platform of the hyperscalers”.
Amazon, Facebook, Microsoft and Google — broadly referred to as hyperscalers for the huge amount of data they produce and manage — are driving the majority of capital expenditure (capex) in the industry.
For Equinix, which serves both the hyperscaler and retail colocation segments, Mr Meyers says there is a symbiosis between large hyperscale and enterprise facilities.
“We have a highly complementary relationship with the hyperscalers, providing them with cloud on-ramps, and network nodes within our retail data centres, as well as dedicated space for their own data centres,” he says.
Synergy Research Group, a market intelligence firm, estimates that capex by hyperscale operators in the first quarter of 2021 rose by 31% from a year earlier, reaching $38bn. Between the end of 2015 and 2020, the number of large data centres operated by hyperscalers providers more than doubled to 597 globally.
Data centre decisions
When deciding where to invest in new data centres, Mr Meyers highlights that digital demand and connectivity take precedence. While a market’s gross domestic product is used as a proxy for economic opportunity, “end-user demand is at the forefront of decision making”.
Historically, data centres have been concentrated in developed metro areas, with the Frankfurt, London, Amsterdam, Paris and Dublin (FLAP) markets dominating in Europe. Real estate services firm JLL forecasts a 21% increase in new data centre capacity will be added to FLAP markets in 2021.
Mr Meyers says that a significant part of Equinix’s business still comes from the FLAP markets, and a similar concentration plays out in the US, across major metros areas such as Washington DC, New York, Silicon Valley, Chicago and Dallas.
But Mr Meyers says that there has been a move towards a hub-and-spoke model, with distributed digital infrastructure being built around the traditionally large data centre markets as demands have grown for broader connectivity.
In June, Equinix announced it would extend an existing joint venture with GIC, Singapore’s sovereign wealth fund, to bring its xScale data centre portfolio to more than $6.9bn across 32 facilities globally.
Mr Meyers explains that this partnership will enable Equinix to free up capital, with plans to invest more than $2bn into its colocation business every year until 2025. Equinix is currently exploring other expansion opportunities in Ghana, Nigeria, Kenya and South Africa, as well as several south-east Asian markets.
“We are very active and think there are opportunities out there. Mergers and acquisitions is still a very relevant part of the toolkit, but organic colocation investment drives most of our expansion,” he adds.
Equinix has been an active dealmaker over the past 20 years, most notably buying data centre services giant Telecity for $3.8bn in 2016, which catapulted it to becoming Europe’s leading data centre provider. It is currently finalising a deal to acquire the Indian operations of GPX Global, which has been stalled by the pandemic, says Mr Meyers.
But as data centres proliferate, energy consumption continues to be a heated issue. In 2018, data centres globally consumed 205TWh, equivalent to roughly 1% of global electricity usage, according to a paper published in Science.
Mr Meyers says that environmental, social and governance (ESG) concerns “are a lot more than a fad”, stressing that Equinix is investing heavily to improve its social and environmental impact. Equinix currently operates its data centres with 90% renewable sources and has committed to become carbon neutral by 2030.
Mr Munroe notes that Equinix has been very cognisant and proactive for years in improving its environmental footprint, both in terms of renewable energy sources and green data centre buildings.
As digitalisation presents the potential to create $100tn in economic value by 2025, according to the World Economic Forum, Mr Meyers hopes for Equinix to play its part in unlocking this potential.
“As infrastructure continues to distribute and interconnect to the broader digital ecosystem, our purpose is being a platform where the world comes together,” Mr Meyers adds.
This article first appeared in the August/September print edition of fDi Intelligence. View a digital edition of the magazine here.