Datacenter Colocation: It’s More than Just Space & Power

Marko Spremo:

Good morning. Good afternoon, everyone. Wait a few minutes here. About a minute to get everybody logged in and we’ll be starting in a minute to ninety seconds.

Marko Spremo:

(Silence)

Marko Spremo:

Okay. We’ll go ahead and get started. Thank you everybody for joining us today on the title of webinar data center, colocation, it’s more than just space and power. My name is Marko Spremo, the VP of sales and marketing here at Telapprise, also joining us today from Telapprise is Matt McKee, our director of technology. As you can probably hear I’m a little bit under the weather, so he’ll be assisting us. For those of you that don’t know Telapprise, we help clients translate technology chaos, and to streamline efficiency by helping clients identify, source, procure and manage technology service as a value added representative of the various technology carriers and providers. Joining us today is D.R. Carlson from Equinix, he’s senior manager of global channel messaging.

Marko Spremo:

And the goals of today’s webinar really are to address three topics. The benefits of colocation over local on premise data center builds, the advantages of building near cloud presence to deliver a hybrid cloud advantage and last but not least software define networking ecosystems for SaaS and public cloud connectivity. For housekeeping items, before I hand this over to D.R. and introduce D.R., if you have any questions, we want to have this as interactive as possible. So for any questions you have, please do add those questions in the Q and A, and we’ll answer those as we go through the webinar here. D.R. and Matt, the microphone is yours. D.R., thank you again for joining us. And we look forward to having a very interactive and educational session.

D.R. Carlson:

Marko, thank you very much for the time and the introduction. Hope you feel better.

Marko Spremo:

Thank you.

D.R. Carlson:

With that, start starting off our conversation here. I put on here the Telapprise tagline, I love this. “Breaking the technology life cycle of pain.” And I think while that’s a big issue that we’ve seen a lot of companies dealing with, it’s also dramatically changed. There has been so much that has changed around this idea of technology and while everybody has all of these individual projects that have been going on for years, we’ve now seen this whole idea of digital transformation bump up against the global pandemic. So not only was there a ton of change that was going on, but this change was dramatically accelerated. It’s interesting that leading up to this pandemic so often when we would talk about digital transformation, we would often hear companies say, “Hey, we think that term’s been overused” and then the pandemic hit.

D.R. Carlson:

And then everyone’s like, oh, that’s what you meant, because what we think and what we saw was it wasn’t overused, it was misused. And I think a lot of times people looked at increased performance and reduced cost as digital transformation. And what we’ve seen is that’s digital novelty, right? Digital transformation is literally changing the way you do business and the landscape of IT has changed. And when it comes to digital transformation, what we’re seeing is almost half of C-suite executives that were surveyed admit that they don’t know where to start when developing their transformation strategy. This isn’t a knock on anybody or saying that they don’t know how to digitally transform or that they need to digitally transform. What it’s saying is this is all brand new. And when we’re looking at an overarching strategy to digitally transform, how do we go about doing that? And so that’s really a lot of the conversations that we’re seeing and having with partners and customers and prospects is we realize now that we have to digitally transform, the way of IT has changed.

D.R. Carlson:

How do we do that? So what’s interesting though, is what we’ve seen is when we start to focus on an overarching strategy, as opposed to individual components of IT, we really see it come down to these three primary components, right? We see it’s this ability to interconnected digital core, to integrate digital ecosystems and then interact at a digital edge. And when we talk with customers and prospects, we often say, if you think about every one of your IT projects that you’re engaged with right now, every one of them will fit into one of these three categories. Now, if there’s someone on the call right now, this webinar is like, I actually have a project that wouldn’t fit into one of those three. Please let us know what they are, because we’d love to address that because we haven’t really heard one as of yet.

D.R. Carlson:

And so while these three are the biggest ones that we’re seeing around, again, interconnecting a digital core, integrating digital ecosystems and then interacting at the digital edge, we really start to see what this looks like in different industries. So it sort of shows up differently in all of these different industries. These are just some of the ones that we address or talk to or work with. Healthcare, we’re seeing that core ecosystem and edge show up a little bit differently than it might in the one next to it, which is manufacturing. Manufacturing, we see this a lot, especially around this idea of integrate or interconnecting a digital core, right? So many of these manufacturing companies are now trying to integrate industrial IOT and machine to machine in these buildings that were built in the middle of no where, unless you’re Tesla of course, right?

D.R. Carlson:

I mean, but manufacturing companies that years ago were building their factories where land was really cheap. They’re now trying to introduce industrial IOT and the infrastructure that it’s set upon, isn’t able to support it. And so those are where we see it show up in manufacturing. For retail, we’re seeing again digital core, digital ecosystem and digital edge, digital edge being so important and really taking a big step forward in retail, especially with COVID. When COVID hit and a lot of these stores were closed or weren’t having the traffic that they used to, this online just became absolutely huge for them. And then the last one is financial or payments that we’re seeing and how core ecosystem and edge show up in those. So again, when we think about those three primary components, they might show up different not only for industries, but sometimes specifically for customers and prospects in what they’re trying to achieve. So sort of a long-winded intro. But before I move on, wanted to see if there are any thoughts and or comments?

Marko Spremo:

I was going to say, D.R., just where do you see clients struggle having that visibility understanding and where do you see them starting developing this slide in your previous slide?

D.R. Carlson:

Yeah, I think one of the biggest ones is still, again, looking at things through the lens of a legacy IT, when IT was so for so long viewed as a cost center and now how everything has changed and now IT is being looked at as a revenue center. And what does that mean? We had a CIO of one of the nation’s largest retail companies stand on our stage at our sales kickoff just a few years ago and said, “We dramatically increased revenue over the past year. Didn’t open a new store. How did we do that? We became digital.” And so there’s this idea of shifting from a cost center to a revenue center that is another aspect of this change for IT. And then again, going back to the stat that I started with a lot of companies saying with all of this, again, even though if I took a thousand projects that I’m working on and put them into the three primary components of digital core, digital ecosystem or digital edge, where do I even start with this?

D.R. Carlson:

Because there’s so much noise and talk about hybrid multi-cloud or digital edge, but where we tell companies to start is where you start with everything, right? Which is the foundation, because again, foundation’s are built first and it’s what everything else is going to sit on top of. And we believe that the network is the foundation of digital transformation. Again, not saying that this hybrid private or multi-cloud isn’t important and interacting at the digital edge, isn’t important. I’m just saying those things are going to be greatly impacted by the infrastructure or the network that it all sits upon. And so when we start to talk to companies, we’re like, this is one of the things that you want to get right first, which is why the vast majority of companies that we’re dealing with are somewhere in this network modernization, network optimization or data center consolidation project. Most companies that we’re working with are dealing with that because, they also have come to understand they might not use these words, but that the networks, the foundation of digital transformation, and yet even though most people would be like, yeah, we agree with that, 65% of executives, according to Forbes, report that their current infrastructure is struggling to support the rapid adoption of digital technologies.

D.R. Carlson:

And I jokingly say in meetings that this stat tells me one thing, that 35% of executives must be asleep in meetings because we have yet to be in a meeting where someone hasn’t said, “My network is struggling to keep pace with the demands being put on it.” And so when we start to talk about that, we realize there are two main issues or are two main culprits for this, right? The first is just this dramatic increase-

Matt McKee:

D.R., I just want to ask a quick question on that slide. So, how does this play into most of our clients have this belief that the easy way to adopt rapid technology is with the cloud first mentality. And so knowing that Gartners kind of shifted into this in order to be competitive, you have to be hybrid colo, premise, edge and cloud. How do you see that shift coming away from a cloud only strategy into maybe a cloud leading strategy, but not exclusive strategy?

D.R. Carlson:

Yeah, that’s great. And I think one of the things that we saw early on, there were two big mistakes that we saw a lot of people make and it was trying to cloudify a legacy infrastructure and it was like, well, we have access to all of this increased performance that we were looking for, but we’re not getting the full benefit of that because of our legacy infrastructure. And the second was this, I mean, it was that companies looking at cloud as a destination instead of a component of an overarching strategy, which is why we saw so many companies view it as a destination, went 100% in and then realized, okay, maybe it’s not 100%. And so, we’ve had conversations with the companies who said, “We made that mistake. We went a hundred percent in. And so our goal for the next year is we’re not going to be 100% in.”

D.R. Carlson:

And we’ll say, “Well, what’s your goal?” “We’re going to go 80% in.” Great. How do you know that’s the right answer? And their answer is we don’t. And so again, as long as you continue to view that as a destination, that’ll continue to be an issue. As soon as you start to change that and realize that it is a component of an overarching strategy is when it starts to get leveraged for all of the reasons that it should be leveraged, again, super powerful, super beneficial. But again, it’s a component of an overarching strategy and it’s part of this idea of this digital core, right? The ability to directly connect to all of these cloud service providers and the ability to turn up and turn down service in hours is how we view it as a component of an overarching strategy.

D.R. Carlson:

But all of that access only adds to these numbers, right? When we start to think about just this dramatic increase in traffic. So when you think about this, if someone rolled their network out in 2012, that would’ve been some foresight to imagine what that traffic would be in 2022. Most of the companies we work with rolled their network out long before 2012. I’m not saying that they haven’t upgraded it, but it’s hard to keep pace with just this amount of traffic. And when we talk to companies to say, I know we’re just starting 2022, but if you had to guess where this red bar for 2023 was going to be, do you think it’s going to be lower or higher than 2022? And we’re not there yet, but everyone seems to have the same answer, which is it’s going to be much higher. Right. Which means the problems that we’re having are only going to get worse.

Marko Spremo:

What do you see, D.R., as a challenge the biggest challenge that clients are facing in making that migration? I mean, obviously that’s a big lift and change. What would you say the number one thing that you’re seeing clients struggle with?

D.R. Carlson:

Yeah. It’s trying to do all of these things on this legacy infrastructure, which is one of the issues and here’s why this is the issue. And again this made all the sense in the world when we rolled these networks out. So it’s not like anyone was like, “Hey, you were wrong.” This made all the sense in the world. We had to bring everyone back to our headquarters because that’s where all of our critical applications sat. But you ask companies, is this where all of your critical applications sit today?

D.R. Carlson:

Most of them be like, no, yeah. Then this doesn’t make sense anymore. Which is why it’s causing all of these problems over here on the left, which are all of the problems or many of the problems that our prospects and customers are dealing with. The big one is this, to answer your question, the solution to this used to be add more bandwidth. But what’s interesting now is it only makes the problem worse, right? So it’s making our networks more rigid. And so the biggest thing that we need to overcome is this idea is transformation will not happen on legacy architecture. It just simply can’t. And that’s why the first thing that companies need to do is to establish this digital core. And this digital core has to be distributed, not centralized. And again, and this is why every single one of our prospects and customers are somewhere on this network modernization, network optimization, data center consolidation project for this reason, right?

D.R. Carlson:

They realize they have to get this foundation set, but this foundation has to be digital. And so, what were the problems before we’re now starting to see, this is what the solution looks like, gives us the ability to localize this traffic, optimize this network. Again, back to the point we were talking about earlier, it simplifies this cloud strategy of understanding now I can turn up and turn down service, but it also gives us the ability to lead into our second big pillar, which we’ll come to eventually, which is this digital ecosystem. Now I have the ability once this is in place to peer directly with partners, as well as leverage these business ecosystems. But it’s not about just being distributed, right? It’s not, “Hey, we’re just going to be distributed and everything’s okay.” What’s important is what’s inside of these centers, and that’s, at Equinix, I mean these companies-

Matt McKee:

D.R., real quick. So if you look at this slide, this seems to kind of mirror the shift at the branch to an SD wan distributive model. Right? And so are your clients pairing the shift to the digital core with SD wan from the core to the edge and what kind of adoption rates are you seeing there?

D.R. Carlson:

Yeah, it’s huge. It’s huge for the reasons that because of what’s inside of these buildings, right? So, Equinix started as a place where the networks just came together to peer traffic. And since they were peering traffic inside of Equinix, this is where they built their core infrastructure. So, for many of the world’s leading network service providers, there’s a 95% overlap between their core infrastructure and our data centers. So to your point, when companies start to look at leveraging SD wan, SD wan providers realize that connectivity is business critical. And so when they think about launching these SD wan services, do they want to be further away from this core infrastructure or closer to it, which is why many of these SD wan providers now are offering their services inside of Equinix because they realize this is where the core infrastructure sits. It’s also why we’re starting to see numbers like this. And while this is a case study, these numbers are typical, right? We’re seeing companies go from this centralized architecture to this distributed type of architecture and we’re seeing them cut their network spend in half, drastically improve latency and dramatically increase their bandwidth. Again, because they’re not pulling it all back to this central location, but instead they have the ability to access the core infrastructure of the world’s leading network service providers. Does that answer that question?

Matt McKee:

It does, thank you.

D.R. Carlson:

Perfect. Perfect. So now, when we’re working with these companies, again, this is one of the first steps that we walk with them through this, we call it our digital infrastructure roadmap that establish this digital core and the next is the ability to connect it to a digital ecosystem. And the reason that you have to connect to these digital ecosystems, we see this all the time, digital transformation won’t happen in isolation. McKinsey states that failing to embrace these digital platforms or these ecosystems is one of the biggest pitfalls in a digital strategy. One of the reasons is that these digital ecosystems are going to count for more than $60 trillion in revenue by 2025. So again, this was our story. We just started as a neutral location where all of the network service providers were coming together to peer traffic.

D.R. Carlson:

And since they were peering traffic inside of Equinix, this is where they built out the core infrastructure. And since then over the years, industries have realized that the closer they were to this core infrastructure, the more it was going to benefit their business. So the first to realize this was the financial industries, they realized that the closer they were to the core infrastructure, the lower their latency was going to be, I am not a subject matter expert in the financial industry, but I have heard that low latency is pretty important. So not long after that, it was the content digital media companies that realize the closer they were to the core infrastructure, sooner they could offload their traffic. Their performance went through the roof and their cost went down. The real turning point for us though is when the cloud service providers realized that the closer they were to this core infrastructure, the more of their services they were going to be able to sell.

D.R. Carlson:

Or as we like to say, connections enable consumption, which is why there are more cloud on-ramps inside of Equinix than anywhere else in the world. Again, they started realizing that the closer they were to this core infrastructure, the better it was going to be for them. And so we tell people, back to one of the earlier questions, any of these customers now that are on this hybrid, private or multi-cloud journey that the most efficient and secure place for them to continue this journey would be in the exact same location that the cloud service providers have built their on ramps and the network service providers have included their core infrastructure. One of the things, it’s why 80% of Google egress traffic runs through Equinix or why AWS is available in so many markets or has so many on-ramps inside of Equinix.

D.R. Carlson:

And it was because of this, then that the enterprise started realizing now that their critical applications weren’t sitting in their basement anymore, you probably hear a number of enterprises say this, “We don’t need to be in the data center business anymore.” And so this is where you start to see this almost a conflicting message of the data center is dead and yet why are so many people moving into Equinix? And there’s a little bit of difference between, “Hey, this is where we’re going to park a bunch of gear,” as opposed to “This is where we’re going to take part in the digital economy.” And so we started seeing the enterprise move inside of Equinix. And then they started realizing that the companies that they used to connect to outside of the walls of Equinix were also inside of Equinix. And so we started seeing these massive ecosystems grow inside of Equinix again, because now all of these companies were realizing that they could start to privately connect.

D.R. Carlson:

And some of these ecosystems just became huge because again, all of the components that these industries were dealing with, they had the ability now to privately connect and turn up and turn down service inside of Equinix in hours, as opposed to days, weeks, or months, or as we like to say sometimes minutes instead of months. And so when you start to look at this and I apologize, this is an old slide. As you can see, all this data was current as of first quarter, 2021. We’re well over 400,000 interconnections now. But when you talk about just density and the networks, content service providers, as well as the hyperscalers being deployed inside of Equinix, density increases gravity, increased gravity increases density and so on and so on, which is why we’re seeing more interconnection growth inside of Equinix quarter after quarter than our next 10 closest competitors combined. Because these company are now realizing they can not only connect to these ecosystems, but they have the ability to start to address the next 10 to 20 of their IT initiatives because the underlying technology is also deployed inside of Equinix.

Matt McKee:

So D.R., as you look at this, when you think about a mid-market customer, that maybe today doesn’t have any data center assets and is running just on premise servers, what’s the thing that surprises them the most that they get out of looking at moving into an Equinix facility?

D.R. Carlson:

Yeah. We see that a lot, there is that question of, “Well I don’t have a ton of things that I need to, and it really has less to do about moving,” which is why we’re seeing less and less about this data center consolidation and more about network optimization. But what they’re starting to realize, and we hear this all the time. I mean, I have presented this slide and I have had someone say to me, “You mean to tell me that instead of having to refresh this hardware in my data center, you’re telling me these services are available inside of Equinix?” That’s what we’re saying. And for many of them, it’s that aha moment to be like, why wouldn’t I do this? I think that’s a great question. Why wouldn’t you do this? If you have the ability to directly connect or access the network service provider that you’re already using to leverage the cloud service providers you are already using and the ones that you’re going to use as well as the ability to privately connect with all of the other companies that you’re connecting to right now, as well as address an extent to 20 of your IT initiatives inside of Equinix, this is giving them the ability to leverage the digital economy.

Matt McKee:

And outside of the big three cloud platforms, what do you think is the most adopted part of the ecosystem? Is there one provider that most of your clients have found they want to connect to, or is it really niche depending on their industry?

D.R. Carlson:

Well, a lot of them we see, especially over the last two years have been Zoom, WebEx, Teams. I mean, all of these services that allow them to connect and stay connected to not only their customers, but internal, their internal stakeholders as well. I mean the report, I heard that Zoom when COVID hit, went from a million instances a day to a hundred million. Now I have to imagine even the most proactive planner would probably plan for 10 times the amount of growth. I doubt there are too many people out there who are planning for a hundred times the growth and getting that plan approved. But we have seen many, one of the world’s largest banks because they were connected inside of Equinix had established this digital core, had connected to a digital ecosystem. When COVID 19 hit, had the ability to turn up 120,000 remote workers in three days.

D.R. Carlson:

And again, a lot of companies or people, when we say that, say how in the world did they do that? Establish a digital core, connect it to digital ecosystem, and then put all as close to the end user as possible, what everyone refers to as the digital edge. So I know there’s a lot of talk about the digital edge. I know there’s also not a lot of agreement on where that digital edge is. Right? As a matter of fact, we just keep coming up with more and more terms for it on whether it’s near edge, far edge, micro edge, macro edge. So there’s a lot of talk about that again, probably not a whole lot agreement on where it is. However, wherever it ends up being one thing is certain, you still have to connect to it. So I mentioned earlier that the financial industry is deployed inside of Equinix because how important low latency was to their industry.

D.R. Carlson:

But what we’ve seen lately is the fact that low latency is now important in every industry. Matter of fact, 88% of IT decision makers cite low latency is the most important quality of their network. And what’s the dominant factor that determines latency? The actual physical distance the packets have to travel, which means this ends up being the most efficient and secure path that anyone’s data can take. And because the networks, again, back to a previous point and built their core infrastructure outside of Equinix, our prospects and data are going to pass through these buildings one way or another, and it’ll either go directly through it or indirectly through it. And what we have found is directly through it is a whole lot more efficient and a whole lot more secure. So I started this whole thing off with, again, coming back to just these three primary components, of digital transformation, interconnecting a digital core, integrating digital ecosystems, and then the ability to interact at the digital edge.

Marko Spremo:

D.R., you mentioned earlier in your slide deck, that there was a 45% cost reduction, by migrating to this digital distributed hub architecture, what other items does a client need to think about when they’re making that migration? Right. There’s always one component, a cost reduction here, but are there other cost factors that they need to think about when they’re making that migration? Are there any, what I would call gotchas?

D.R. Carlson:

Yeah. I think one of the first big ones is that digital transformation, isn’t about cost takeout. That’s a legacy model of IT that we see. It’s a byproduct. We do see it happen, again, we see companies cut their network spend in half and then have the ability to take that spend and continue with their digital transformation. But yeah, I think that’s one of them, this ability that cost takeout in digital transformation is a byproduct, not one of the main reasons. The main reason to even start with this digital core is the ability to not only address the dramatic increase in traffic, but too, how are we going to establish a foundation that’s going to be able to respond at the speed we would need it to respond in this digital economy? And so that’s one of the very first ones.

D.R. Carlson:

And the second one is not only looking at which cloud provider I’m connecting to today, but which one will I need to connect to tomorrow or next year and who else do I need to connect to? And again, am I taking everything into consideration or am I still viewing it as the standalone independent IT decisions? Because that’s where we saw a lot of people sort of paint themselves into a corner, said “For years I’ve made hundreds of decisions based on the least expensive solution. And now I’m being asked to stitch all these things together and provide a strategy. That’s what I’m finding difficult.” And so what we often recommend is, well, let’s sit down, we call them strategy briefings. Let’s take a look at doing a strategy briefing. Where are you in this entire process? What are you looking to accomplish? Where do you want to go? And it’s through these strategy briefings and we can say, we’ve seen the leaders in every single industry take these steps to become, or to really transition to a digital first mindset. And it is that move to that digital first mindset that we’ve seen the most successful companies move to and stick to by again, establishing this overarching strategy.

Marko Spremo:

And what would you say, if I’m a client and I’m talking about this particular strategy? What are the two or three things that you would say, here are the things that you just absolutely must think about prior to making this type of change of migration?

D.R. Carlson:

Yeah. And I think again, pair it down to these three primary components, establish this digital core, where are you in this process and is what you’re doing for this digital core going to establish a foundation that’s going to enable you to do everything else? Are you in control of that before making a ton of other decisions? Not that you can’t do them in parallel, but again, I think making sure that the foundation is established in order to do everything else. Is the ecosystem big enough that you are going to be able to connect to everyone that you need to, your vendors, as well as other people that you connect to now in your ecosystem? And then do you have the ability to get all of this information as close to the end user as possible, whether that’s global or even if it’s just domestic? And I think more importantly, I mean, I can’t tell you the amount of times we’ve done these strategy briefings where we’ve had individuals from different groups in IT come together and they have admitted, this is the first time I’ve met some of these other people.

D.R. Carlson:

And so doing this, I think this strategy together for companies is super crucial.

Matt McKee:

So D.R., we’ve talked a lot about connectivity and that digital ecosystem that you guys bring to the market and that can enable your clients. But outside of that, what other advantages does the Equinix system have in comparison to the broader colocation market?

D.R. Carlson:

Yeah. Well, number one I think is that just overarching platform, right? The density of the network service providers, the cloud service providers, the fact that there are more cloud on-ramps inside of Equinix than anywhere else in the world. The access to all of the SaaS providers that everyone’s trying to leverage now, as well as the locations globally, where all of this is available. I mean, so when you start to think about, it’s more of this idea of a digital platform and that’s where we would ask customers to start to think about us, is this digital platform where they can access everything that they need and to sort of stop thinking about it as colocation?

Marko Spremo:

Excellent. Well, D.R., Matt, as we wrap up, are there any other items that you’d like to address or discuss before we wrap up our session here today? Is there anything you want as parting thoughts, comments, suggestions to our clients?

D.R. Carlson:

Yeah, I think the last one would just be this, as far as the partnership goes, we would welcome the ability to start to talk to customers and prospects together about this overarching strategy and to say, what is the strategy you have in place now? Are you taking into consideration all of the things you need to take into consideration? And, we have this digital infrastructure roadmap that we’d be more than happy to discuss with clients together to see where they are in this process and where they plan to go.

Marko Spremo:

Thank you, Matt. Any closing thoughts, comments?

Matt McKee:

No. Other than I suggest everyone take D.R. up on his challenge of bringing to the table a IT initiative that doesn’t fall into one of these platforms. We’d love the opportunity to prove you wrong or have you prove us wrong.

D.R. Carlson:

Yeah. And I want to know if I’m wrong, because I say that a lot and I’m going to have to stop saying this and I’m be like, “Except for one, there’s this one project that doesn’t fall into this.” So please let me know.

Marko Spremo:

Never say never, never say always. D.R., Matt, thank you for joining at the last moment and helping assisting on this, D.R., thank you for your time and putting the deck together, very informative, and really appreciate you joining us today. Thank you to all the attendees, really appreciate your time today. And with that, we will wrap up our session.

D.R. Carlson:

Thank you very much.

Marko Spremo:

Thank you everybody. Have a great day.