With converging trends in cloud, digital collaboration, mobility and the Internet of Things (IoT) increasing the volume of data large companies need to process; the shift towards edge computing has come to the forefront in 2019.
The potential offered by moving to the edge has seen a variety of operators adapting their business models to tackle the market demand through the different layers of the industry, particularly within datacentres. And with more than a third of organisations seeing cloud investments as a top three investing priority and cloud system infrastructure is forecast to grow 27.5% in 2019 to reach $38.9 billion*, who’s in line to capture the value?
We interview Eugene Bergen Henegouwen, EMEA President of Equinix, Gisle M Eckhoff, CEO of DigiPlex, Olivier Micheli, CEO of DATA4 and Petrina Anne Steele, Global Director, Emerging Ecosystems and Edge Technology, Equinix to get their views in advance of TMT Finance World 2019, the global M&A and investment conference bringing together the world leaders of TMT and Finance to assess the next investment strategies in the digital infrastructure.
Datacentres are the heart of the digital revolution
‘The main M&A driver this year has been the proliferation of major technological developments particularly within growing technology trends such as AI and machine learning,’ states Eugene Bergen Henegouwen, President, EMEA at global interconnection and datacentre company, Equinix.
‘The launch of 5G will mean the increased use of technology on the move. For businesses to stay ahead they will have to increase their use, analysis and processing of data, meaning datacentres, and their use of them, will need to grow too. ‘
Gisle M Eckhoff, CEO of DigiPlex, the leading datacentre colocation business in the Nordics, sees growth opportunities:
‘Our market has evolved rapidly over the last few years. We are in a ‘cloud-first’ phase where everything that can go to the cloud does go to the cloud. However, even in a cloud-first environment, some key applications and data will always need to be hosted locally for technical, cost, security or regulatory consideration. We are seeing these drive increased requirement for datacentre capacity.’
Cost, latency and regulatory and governance requirements are other critical factors driving the demand. Eckhoff continues,
‘The cost of moving huge amounts of data between a user device and a remote data centre on the other side of the world are significant. Edge data centres reduce these costs. Latency is also critical. Applications such as virtual reality and autonomous vehicles require near-instant response times, and, there will be an on-going requirement to exchange data and resource with services based in datacentres. Regulatory and governance requirements are also leading many to ask where precisely their data is physically stored, particularly in Europe with the introduction of GDPR. Our focus at DigiPlex allows us to invest in innovations like the Nordic Connect Platform designed specifically to help businesses expand across borders whilst meeting demands of not just latency but regulations such as GDPR.’
The importance of collaboration
However, whilst datacentres are at the heart of the digital revolution, to be successful, it’s crucial that datacentre owners need to be more than just a supplier and work in partnership with infrastructure providers as collaborators. Eckhoff states,
‘Ultimately, we are part of an extended value chain. End customers are not looking for a datacentre – they want a solution to their evolving data and processing needs. We are focused on providing the best infrastructure for success today and to be part of our customers’ journey towards digitisation for success in the future. Partnering with our customers is important to understand their needs, but also partnering with a wide ecosystem of suppliers that can help deliver them.’
Petrina Anne Steele, Global Director, Emerging Ecosystems and Edge Technology, Equinix believes that the possibility for collaboration is endless.
‘We’re now in a world where everyone is working to be more open and make their data accessible. Third party datacentres can no longer survive as remote islands. How companies connect to each other is becoming increasingly important. To be successful tech and datacentre providers are working more closely together to enable services, particularly as-a-Service & Infrastructure-as-a-Service at the distributed edge. The more services enabled, that customers can access at the lowest latency, the more value that is created for the customer.’
To cater for this growing demand, Equinix announced in July an agreement to form a US$1B+ joint venture with GIC, Singapore’s sovereign wealth fund, to develop and operate hyperscale datacentres in Europe. The initial facilities in the joint venture will serve the unique core workload deployment needs of a targeted group of hyperscale companies, including the world’s largest cloud service providers. When fully built out, the initial facilities will total approximately 155 megawatts (MW) of power capacity. The new sites will allow these key enablers of digital transformation to continue to grow, while strengthening Equinix’s leadership in the cloud ecosystem, as enterprises increasingly embrace hybrid multicloud as the IT architecture of choice.
Bergen Henegouwen, outlined ‘enterprises are looking to move from a CAPEX to OPEX model – we are currently in the early phases of the growth curve related to cloud adoption. Global Software-as-a-Service, Platform-as-a-Service & Infrastructure-as-a-Service adoption is still growing in double digits, which means there is the need for more compute capacity and high-speed network access – all of which are fodder for hyperscale datacentres.
The move to a hybrid model
Olivier Micheli, CEO of European based data centre business, DATA4, believes hat that companies will soon be adopting a hybrid environment with a private cloud running confidential data and heavy applications, and public cloud for the rest.
‘Companies tend to use more and more cloud resources to be more agile, reduce investments and increase the time to market. The balance in a hybrid environment will vary from one company to another, but will grow as demand for personalisation increases.’
Eckhoff agrees. ‘We are also seeing a multi-cloud focus, with enterprises using two, three or even more cloud suppliers to run aspects of their IT. Managing this hybrid model, staying agile and ensuring good governance means that at very least, organisation must audit where their data actually resides. These trends are driving customers to look for more than just a data centre provider, but a partner who can help unlock opportunities and enable new strategies, including multi-cloud and hybrid cloud.
The importance of cybersecurity
As companies rely more and more on cloud-operated infrastructure, cybersecurity is playing an ever-increasing role in securing a deal, due to the need for multiple suppliers providing security at both datacentre, software and service levels. Steele believes that investment in security as well as privacy are big issues particularly for companies looking to be increasingly open and automated with 3rd party integration.
‘I expect companies to invest heavily in ensuring that security and privacy of their data is paramount as we move to being more open and data rich. That companies become more deliberate and strategic about which companies they build data exchange and governance models with. I would also expect companies that don’t have in-house capabilities to start appointing in-house partners or acquiring knowledge in this space, whether that be from acquisitions or other.’
Bergen Henegouwen adds, ‘Security is one of the top concerns of companies managing the transfer of data and applications to the cloud; they come to Equinix because we transmit data over dedicated, private networks instead of across the public Internet, reducing the risk of workloads being intercepted, monitored and modified. Our high levels of security also add to us being an attractive investment opportunity, because investors are confident in our ability to maintain and run our data centres in a secure and efficient manner. This is something that is set to become increasingly important when 5G is rolled out, as the amount of data being transferred globally is set to increase exponentially.’
Ecklhoff expects more businesses to agree that moving data to a dedicated secure facility should be part of their defence strategy.
‘It is clear that offices and data centres have different needs for security, design and access. For a colocation provider the physical security of facilities is paramount. As dedicated, secure and physically separate facility, our data centres are inherently more secure than on-premise operations.’
Bergen Henegouwen, Eckhoff, Micheli and Steele are speakers at the upcoming TMT Finance World (November 27, London). The event, sponsored by Digital Bridge, Digital Colony, Q Advisors, Macquarie and the IFC, offers 350 M&A professionals the opportunity to engage with leading figureheads and discuss edge computing and infrastructure, 5G investment, M&A strategy and changing trends within the telecommunications M&A landscape.
Bergen Henegouwen, a regular attendee stated, ‘ I am really looking forward to healthy debate and panel discussions at TMT World Finance this year. It’s great to see such a broad spectrum of people from across the industry coming together to tackle some of the most pressing issues our industry faces in the M&A and financing sector.
I would like to leave the audience with the knowledge that investment in infrastructure such as a data centre, is only going to be a positive venture.
When you invest in a data centre you are effectively investing in multiple sectors as we house them all – automotive, healthcare, manufacturing etc. Thus, proving a less risky strategy for investors.
Olivier highlighted, Edge computing should be seen as near-shore IT computing to address regional and local needs. The potential development is massive with the expansion of smart cities/territories, IoT and connected cars. But such development will take time and more than what can be described in media. My recommendation to the audience would be to allocate capital but gradually.
Steele echoed that sentiment. ‘I think with the rate of technology advances and disruption today, we will start to see a new era of cooperation, openness and collaboration and companies that embrace that ethos at the center of their strategy and leverage technology to empower that will be the most successful. Those are the companies I’ll be putting my money against!’