Despite Political Uncertainty, London’s Digital Growth Shows No Signs of Slowing as Capital Accounts For Over 35% of Interconnection Bandwidth Growth in Europe 

Digital transformation is accelerating for every company in every industry, everywhere around the world.

As a part of this necessary transition, people, software and machines are creating and consuming data faster and in more distributed locations than ever before, creating dissonance and driving businesses to private and direct Interconnection to solve their complex integration challenges.

According to the second annual Global Interconnection Index (the “GXI”), a market study published by Equinix that analyses traffic exchange globally, Interconnection, or direct and private traffic exchange between key business partners, is becoming the defacto method for companies to operate in today’s digital world. Interconnection Bandwidth provisioned for this purpose is forecasted to grow by 2021 to 8,200+ Terabits per second (Tbps) of capacity, or the equivalent of 33 Zettabytes (ZB) of data exchange per year, a dramatic increase over the previous year’s projection and ten times the projected capacity of internet traffic¹. This represents a significant five-year compound annual growth rate (CAGR) of 48%, almost double the expected 26% CAGR of global IP Traffic.

The second annual GXI reveals that Europe is projected to lose its second space spot behind America to Asia. Although Europe’s Interconnection Bandwidth is still growing fast (48% CAGR) and expected to contribute to 23% of Interconnection Bandwidth globally by 2021, Asia is not only projected to overtake Europe, contributing to 27% of global Interconnection Bandwidth, but will grow faster at 51% CAGR. America still holds the top spot, and is projected to have the largest capacity for Interconnection Bandwidth globally, contributing to more than 40% of global Interconnection Bandwidth by 2021. Latin America is on track to be the fastest growing market, with a CAGR of 59%.

Across Europe, Interconnection Bandwidth in London, Frankfurt, Amsterdam and Paris are expected to outgrow other European markets by at least 10% CAGR. Frankfurt and Amsterdam are both projected to outpace London in terms of growth. London’s Interconnection Bandwidth will grow by 52% CAGR, Frankfurt by 58% and Amsterdam by 57%. The wholesale and retail trade sectors are expected to have the fastest growing Interconnection Bandwidth in Europe (75% CAGR). The securities and trading sectors, along with healthcare and life sciences, will have the joint second fastest growing (69% CAGR). Both the business and professional services industries, and banking and insurance industries, are projected to grow rapidly, with 65% and 66% CAGR of Interconnection Bandwidth respectively.

“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, Inc. “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.”

“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,” states Russell Poole, Managing Director UK at Equinix, Inc. “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.”

Some of the key macroeconomic, technology and regulatory trends that have driven Interconnection growth in the past year and will impact its future growth include:

• Digital Business Transformation, which drives the need to support real-time interactions between people, things, locations, clouds and data to enable value capture. At least 50% of global GDP will be digitised by 2021, with growth in every industry driven by digitally enhanced offerings, operations and relationships².

• 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 as data is distributed across a growing number of vulnerability points. Large-scale cybersecurity breaches are one of the most serious risks facing the world today, and the scale of the threat is expanding drastically. By 2021, the global cost of cybersecurity breaches is projected to reach US$6 trillion³.

• Business Ecosystems, which are experiencing an increase in mix of customers, partners and employees and require digital ecosystems and Interconnection to scale. By 2021, organisations using a mix of intermediaries are projected to more than double, and active engagement with industries outside the organisation’s native industry are projected to nearly triple⁴.

In a separate independent study commissioned by Equinix of 133 senior IT professionals across the UK, over three quarters (77%) of senior IT professionals believe that as the public internet becomes more saturated, Interconnection is key to digital business success. Despite Brexit, 64% of the senior IT decision-makers surveyed think that due to the flourishing data centre industry in the UK, the UK is still the best place in Europe to Interconnect with partners, customers, supply chain and cloud service providers.

 To capture digital value, companies will need to support real-time interactions by more strategically interconnecting the workflows across people, things, locations, cloud and data. The second volume of the GXI identifies four classes of Interconnection use cases⁵ along with an IT maturity model. Adopted in combination, these use cases create a digital-ready infrastructure for today’s businesses:

• 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.

“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.” 

Highlights/ Key Facts

• The GXI provides significant insight into regional differences in how growth in Interconnection Bandwidth is accelerating in different regions of the world.
• United States: As an early adoption market for digital business and the headquarters for the largest number of multinational enterprises, the United States is expected to see compound growth of 45% per annum, contributing more than 40% of Interconnection Bandwidth globally.
• Europe: A growing number of regulations requiring data compliance is serving as a catalyst of growth for Europe, which is predicted to grow 48% per annum, contributing to 23% of Interconnection Bandwidth globally.
• Asia-Pacific: Benefiting from rapid urbanisation and home to many of the largest digital content providers, Asia-Pacific is anticipated to grow 51% per annum, contributing more than 27% of Interconnection Bandwidth globally.
• Latin America: Emerging market dynamics and growing digital business adoption positions Latin America for expected 59% per annum growth, contributing more than 9% of Interconnection Bandwidth globally.
• The GXI also forecasts Interconnection Bandwidth growth by counterparty categories, estimating the Interconnection behavior of each. Surpassing all other categories, Interconnection between Enterprises and Cloud and IT Providers is projected to grow 98% per annum through 2021, supporting businesses building out new digital services and migrating existing workloads to third-party cloud platforms.

Industry Perspectives on the Global Interconnection Index 

• Eric Hanselman, Chief Analyst at 451 Research

“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. 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.” 

• Christopher Purves, Head of Strategic Development Lab at UBS

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

• David Hicks, Vice President of WW, ISV, OEM and Java Business Development at Oracle:

“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.”