Digital adoption patterns change dramatically

The latest Global Interconnection Index (GXI), study published by Equinix, shows that COVID-19 has already had a dramatic effect on how businesses are planning their digital infrastructure initiatives over the next three years.

According to the report, digital service providers, within industries like telecommunications, Cloud and IT services, content and digital media and technology providers, are forecast to increase private connectivity bandwidth five times by 2023, driven by greater demands from enterprises to close digital gaps at the edge.

“As interconnected services, cloud providers, distributed cloud, edge services and SaaS offerings continue to proliferate, the rationale to stay only in a traditional data centre topology will have limited advantages,” wrote David Cappuccio, distinguished VP analyst, Gartner and Henrique Cecci, senior director Analyst at Gartner.

They wrote, “this is not an overnight shift, but an evolutionary change in thinking how we deliver services to our customers and to the business. This trend, coupled with the new reality that outside factors might limit physical access to the data center (such as emergency quarantine), is driving new thinking in infrastructure planning”.

The report also forecasts that overall interconnection bandwidth, the measure of private connectivity for the transfer of data between organisations, will achieve a 45 per cent compound annual growth rate (CAGR) from 2019 to 2023. The expected growth is driven by digital transformation, and specifically by greater demands from enterprises extending their digital infrastructure from centralised locations to distributed edge locations.

This comes as businesses scale and support real-time interactions by strategically interconnecting workflows closer to and across people, things, locations, cloud and data. The capacity of this connectivity is equivalent to 64 zettabytes of data exchange, which is enough bandwidth for every human on the planet (7.8 billion) to transmit their full DNA sequence in an hour.

Global macro trends and COVID-19 have impacted certain industry segments includes:

• Digital adoption patterns are changing in response to massive disruptions
• According to the GXI Vol.4, the digital adoption pattern has altered, with service providers now forecast to provision more interconnection bandwidth (10,284 Terabits per second (Tbps) by 2023) than enterprises, by a factor of nearly 2x.
• However, much of this service provider demand is anticipated to be in support of enterprises that are prioritizing their digital transformation in preparation for post-pandemic recovery.
• The report also predicts that enterprises with a digital infrastructure will extend their competitive advantage and continue to lead in business growth, while those without have struggled and are dependent on service providers to transform their business models.
• Traditional businesses are moving workloads to an edge-first architecture
• The GXI Vol.4 predicts that traditional business, within industries like banking and insurance, manufacturing, and business and professional services, will represent a combined 30 per cent of global interconnection bandwidth by 2023. This is led by the growing need to move workloads to the digital edge while scaling core IT infrastructure. By 2023, these traditional businesses are expected to reach a peak interconnection bandwidth growth rate of 50 per cent annually.
• Healthcare & life sciences and government and education are expected to lead the traditional enterprises in their interconnection growth rate as public and private initiatives on artificial intelligence (AI) and machine learning (ML) are forecasted to drive a combined 47 per cent CAGR in interconnection bandwidth from 2019 to 2023.

Organisations are benefiting from the “network effect”

Organisations are maximizing their digital advantage by building a presence in locations with the most users, largest number of providers and the densest activities, known as the “network effect.” According to IDC, 80% of digital leaders will see the impact of connecting to multiple ecosystems, including improving their value to end customers by 2025.2

The need for application exchange in digital ecosystems to support real-time engagement is essential and creates a network effect for businesses. The GXI Vol.4 predicts that connectivity from service providers to networks and cloud & IT service providers will be the two main sources of ecosystem interconnection, with an estimated 49 per cent combined CAGR from 2019 to 2023.

Regional Insights:

• Global interconnection bandwidth is forecast to grow by 45 per cent CAGR. By 2023, global installed interconnection bandwidth is expected to reach 16,300+ Tbps.
• Asia-Pacific is expected to grow at a 47 per cent CAGR.
• Cloud and IT services are to lead the growth in this region, reaching an anticipated 1,374 Tbps by 2023, which is 29 per cent more than the next largest region, North America, in this sector.
• The GXI Vol.4 anticipates healthcare and life sciences and government & education to see an acceleration in interconnection bandwidth adoption as both industries prioritize digital initiatives such as telehealth and AI.
• The leading metros for private connectivity within the region are expected to be Singapore, Sydney, Tokyo, Shanghai and Hong Kong.