Connect and they will come. Not really for many CDOs.
CDOs, whose mandate is often about digitalization of the business, understand the virtues of internet connectivity very well. But they also know it limits control.
Control of how data is exchanged and shared is becoming especially important in today’s regulated world. With virtual walls blocking data exchange on privacy and data sovereignty grounds, businesses need to stay in control on where, how and what data is exchanged.
Latency is another issue. CDOs, especially from financial services companies, understand the value of proximity to interconnectivity hubs. That is why they are willing to pay top dollar for direct private connectivity with Stock Exchange data centers.
These are among the major trends that the Equinix’s latest Global Interconnection Index points to as spurring private connectivity.
“But these macrotrends are creating opposing forces and creating a lot of complexities for companies. No matter the size of the company or industry sector, they all need to plan for the scale complexity risk,” said Tejaswini Tilak, senior director, Vertical Marketing, Equinix.
“New architectures anchored by interconnection smooth this complexity and, increasingly, enterprises are finding that they also yield improvements in security, performance and capacity,” said Eric Hanselman, chief analyst, 451 Research in a recent press release.
One such architecture is the private interconnectivity hub that offers private interconnectivity between businesses and the entire ecosystem, with the internet becoming relegated to a “last mile” access option.
Private is Growing
Private interconnectivity hubs are growing fast.
According to Tilak, the U.S. is leading with having the most “mature” private connectivity hubs. Europe, spurred by GDPR and other data privacy developments, is also seeing fast creation of these hubs and interconnectivity.
However, Tilak believes that Asia Pacific will soon grow faster than the U.S. and Europe, overtaking them by 2021. “And we expect to have the second most installed interconnection bandwidth here, because of the vibrant market for large enterprises and startups,” she said.
Key industries that will drive this growth will be healthcare, life sciences, financial services, trading and energy.
The growth of private interconnectivity hubs and the increasing reliance on private direct connectivity is creating more hubs.
“Usually a hub is in some kind of data center. But what typically happens in these hubs is that they extend their own infrastructure to the next point with the companies owning a portion of the infrastructure,” said Tilak.
These hubs then start to privately and directly exchange data with “counterparties”, such as telcos, cloud providers, B2B value payment chains, etc., inside “carrier-neutral data centers”.
“So, you have real-time and dynamic mesh traffic that is happening at this hub,” said Tilak, adding that this is changing the way CDOs approach to network design.
She noted that such hubs are becoming vital as companies like content streaming companies become focused on user experience, or e-commerce companies looking to complete transactions within a certain period.
“For example, the only way to make algorithmic trading work is through low latency connections between the [Stock] Exchange servers and the brokers and market feed providers. So, it is really about proximity, making these [hub] locations default locations,” said Tilak.
The Balancing Act
CDOs rewiring their business through these hubs need to balance innovation and legacy business models.
“It is really about sustaining business innovation. You have to think about your plumbing; else you are not looking at a sustainable model,” said Tilak.
The Global Interconnection Index report offered four classes of use cases that will help CDOs architecture their networks. They include:
“CDOs can use the above use cases to compare and build a roadmap to [their digital transformation goals],” said Tilak.
“After all, if you want to build a great house, you need to build your foundations right,” she added.