Owning a datacentre is more difficult than ever, says Equinix boss
EMEA president Eric Schwartz reveals what's driving the datacentre sell-offs seen over recent months
While the trend of buying or building datacentres seems to be reversing for IT and telecoms providers, one firm is gobbling them up left, right and centre.
Five years ago these providers were champing at the bit to own their own facilities, but a number of high-profile sales over recent months seem to suggest a sudden change of direction, with datacentre provider Equinix first in line to snap up redundant sites.
Equinix recently completed one of the larger deals, taking over 29 datacentres from $100bn-plus comms provider Verizon in a $3.6bn deal. This came on the same day that CenturyLink sold its datacentre and co-location business to a consortium of private investors for $2.15bn.
Alongside the Verizon's deal, Equinix announced a $145m expansion project across London, Paris and Sydney in March - adding to some 20 expansion projects that are already underway.
More specifically in the UK, Equinix acquired Telecity for £2.6bn last year and announced plans to invest £26m in its LD6 flagship datacentre.
Speaking to CRN Equinix's EMEA president Eric Schwartz explained that the exodus of providers from the datacentre space is being driven by a number of factors including changes in consumer spending, the growing cost of maintaining datacentres and increased scrutiny on compliance.
"The world for enterprise IT, including telecoms and managed services, is changing rapidly," he said. "The velocity of cloud, computing uptake, deployment, integration etc are accelerating at levels that simply weren't the case six years ago, so there's an element of companies needing to decide how they manage that and how they focus their engines on serving a large enterprise customer base.
"I think the [datacentre] industry continues to grow and the capital requirements continue to grow. What might have looked manageable six years ago might not look so management now.
"The final piece is the datacentre industry has grown and matured and the valuations are substantial higher, so companies that don't view this as a core business are thinking it's maybe an attractive time to sell."
Global scale
Equinix currently has over 175 datacentres worldwide and is expected to record revenues of around $4bn in its current financial year.
The firm works directly with customers - the likes of major banks, investment houses, and internet search engines - and also cloud providers and service providers.
Schwartz explained that as companies become both more global and more distributed, it becomes increasingly difficult for them to run their systems effectively if they don't have datacentres in all the regions they operate.
The two options they have, he said, are to build more datacentres at massive capital expenditure, or utilise the services that providers like Equinix offer on a subscription basis.
Around two thirds of Equinix's revenue currently comes from customers that are distributed globally.
"Our customers are increasingly global and those applications and services need to be distributed around the world," he said.
"If the choice is between building their own facility in London or coming to Equinix in London, that's one trade off, but if you're operating something where you've got a global customer base you'll probably need a couple of sites in Europe, a couple of sites in Asia, a couple of sites in North America…
"The world is moving too fast to say 'I'm just going to go around the world and find 10 sites in 10 different counties and build them myself from scratch'. The alternative that we and others offer allows that to be done much faster and usually at lower cost. That's become the model."
Interconnection
Aside from the datacentres themselves, the other key offering from Equinix is its interconnection services, which allow customers and providers to connect directly with each other within Equinix datacentres, rather than over the internet.
Cloud providers like Amazon Web Services, Microsoft Azure and Google allow their own customers to connect directly with them in Equinix facilities, providing better connection speeds and performance.
"There is an interconnection element to what those cloud providers are doing in that as they grow their customer base and the customer base migrates more workloads to these players the value of being able to connect directly becomes more valuable, more necessary and more common," he said.
"As fast as they're growing it's also contributing to growth in our facilities where people are looking to connect directly to them - companies like AWS and Microsoft Azure have a presence in our facility so customers can connect to them directly.
"There are a number of reasons why things work well in cloud, but there are also reasons why things won't work in the cloud. This is where it is ideal to have it partly in the cloud and partly out of the cloud, so hybrid.
"We're optimised to do exactly that and because large cloud providers will put connection points in a number of our facilities, when customers come to us and say they want to keep a portion of it private, we can do that, and then if they need to connect as efficiently as possible to the clouds to optimise their applications they can do that."