The edge is where much of the action was last year, and where even more action will surely be in 2021. One of the earliest proponents of building out data center space at the edge was EdgeConneX. EdgeConneX was recently purchased by EQT and is entering into a new phase of growth, and just last week extended its presence to Asia for the first time via a new joint venture. With us today to talk about the company’s outlook, the nature of the edge, and the effects of the pandemic on the industry is the company’s chief marketing officer, Phillip Marangella.
TR: In November EQT Infrastructure closed the purchase of EdgeConneX. What was the rationale behind this transaction, and in what ways should we expect it to manifest itself going forward?
PM: In the data center space you’re seeing a lot of M&A activity with infrastructure funds like EQT investing in the space. EdgeConneX had been backed by private equity, and this is just a continuation. It isn't an acquisition by a competitor; it's another form of investment that lowers our cost of capital and allows us to accelerate our growth and meet the demand that we're seeing in the market. We’ve built a successful global platform that is now one of the largest private data center operators. We are now approaching 50 data centers across 35-plus markets throughout Europe, North America, and South America. And this deal allows us to further scale our business.
TR: In what form will that scaling take? Expansion within your footprint or to new geographies?
PM: The Asia-Pacific region will be an area of focus going forward. But we will be scaling out where we are today as well, all driven by unprecedented customer demand. I think COVID has increased the emphasis, but underlying trends were already driving digital transformation and migration to the cloud and a need for more at the edge. All COVID did was accelerate those trends, which in turn has put the burden on the entire data center industry to scale out to meet both immediate and long term demand.
TR: Are you seeing that demand manifest in existing markets or in new ones? Is it showing up in the edge or at the core?
PM: All of the above. It is both ends of the spectrum. It's certainly at the edge because our homes have become almost the new edge. We're all working, streaming, gaming, studying, pelotoning, TikToking, and more, and this is creating creating vast amounts of data and requires more network and data center capacity closer to where the people are. But on the large scale front we are seeing a lot of demand for very big build-to-suit hyperscale capacity driven by things, like Zoom, Teams, and overall enterprise migration to the cloud. There is additional demand due to things like GDPR, data privacy and sovereignty in Europe. Even though the major FLAP markets, places like Belgium or Denmark or Sweden, are relatively close from a latency/distance perspective, it can be more about having in-country data center capacity. And when we went to South America last year for the first time, we went beyond Brazil to Buenos Aires and to Santiago, and we're looking at other markets in South America. In Santiago we filled up our first data center before it opened in spite of some economic crises and global challenges. We are also getting requests for markets in Asia, the Middle East, and along the coasts of Africa. It’s not unique to us. There is very robust demand in emerging markets, and I think you'll see that trend not only continue but accelerate in the next few years.
TR: Into what expansion projects are you currently actively investing manpower and resources?
PM: In Europe we are investing in continued expansion in Amsterdam, Dublin and Warsaw as well as some new as-yet unannounced markets. In the U.S., we are working on expansions in a number of edge markets in which we’ve filled up the first ‘edge’ and are on our second and third: Portland, Santa Clara, Atlanta, and Miami.
TR: In what ways is the ‘edge’ different today than it was back in the early days of EdgeConneX?
PM: Well, the edge is now cool. When we started, it wasn't, but now everybody is talking about the edge. But yes, the edge has definitely changed. Everybody has a different definition, but we have always collaborated with our customers to define what their edge is. Most often it is predicated on the user experience; it’s about our customer's customer. Cloud gaming customers want to bring their games closer to gamers so that winning and losing isn’t about whose latency is lower. When enterprises across various verticals put more applications in the cloud, latency and cost becomes important. When you bring it closer, you substantially reduce the network component of the cloud. That’s what’s important for both cloud providers and enterprisea if you want to drive more cloud adoption. Things like autonomous vehicles, machine learning, AI, and telemedicine all either involve large volumes of data or require high data velocities. So much data is now being created at the edge that it risks creating bottlenecks at the edge. Data centers in collaboration with networks can alleviate that to smartly route the traffic, whether you keep it local to the edge, connect it to another edge, or send it back to the core. You can be smarter and much more efficient about how you handle all that data that's now being generated and consumed at the edge.
TR: What do you think about the opportunities out at the micro edge?
PM: The form factor doesn't matter to us, it’s driven by the customer. Whether it's 100 megawatts or 100 kilowatts in a data center, we can support it. There are many active discussions and proofs of concept at the far edge, or micro edge, or whatever you want to call it. It’s about bringing those different ecosystems together at the far edge, because it’s not just one but a collection of things that are interdependent that are needed to efficiently and effectively deliver such a platform. It is not mainstream yet, but there are lots of possibilities. You don’t need to put little data centers everywhere for sub-millisecond latency, but I do think you can start putting more data centers in tier 3 and tier 4 markets to support local requirements. And you probably put micro data centers in more of the major markets too. In the Bay Area, the big data centers are concentrated in the South Bay, but if you're going up the 101 to San Francisco, you might every 10 miles need a small data center, and maybe you pair it with a car charging station where cars can offload data. Smart cities is another area we are seeing discussions, and there are trials in Europe. I think in 2-3 years' time you will see much more of these being prevalent and established. But right now people are trying things out, seeing what the latency thresholds are, and building out those ecosystems.
TR: What does the M&A environment look like now, and how might it feature in EdgeConneX’s growth plans going forward?
PM: There's a lot of consolidation and it continues to grow. Typically, we have tried to grow organically. But in certain markets when you go inorganic it accelerates your time to market. We did that in Warsaw and in Munich. It can help us plant our flag that much faster and be able to scale from there. We are very selective in that, but we're actively looking at opportunities in a number of markets around the world and trying to prioritize these things. The EQT structure and support will enable us to perhaps take on much bigger opportunities than an individual existing data center. We might be able to acquire a more regional or multi-market provider to scale-out in some of the new markets or regions I mentioned earlier.
TR: How has the COVID-19 pandemic affected EdgeConneX internally?
PM: We built our EdgeOS to be able to operate our data centers unstaffed. That was for efficiency and economics, but with COVID it's been a godsend. When customers can't get to the data center, our platform allows them to maintain their business continuity. So that's been fantastic not only for us managing our facilities but for our customers to manage their deployments. I think as a business everybody adjusted and adapted to working virtually. One effect has been in sales, because, purely from a relationship perspective, it's very much a personable thing. If you think about PTC in Hawaii every January, it’s great because you get to meet all your customers in a much more chill environment and talk about your plans for that year or the next. It’s just not the same doing a virtual event. I think it's still fine with existing customers, but it's finding those new ones that’s harder: meeting new people and building that trust that you would have over a dinner, or a coffee, or whatever it may be. That's true for everybody of course, and we are all trying to adapt.
Our operations team adapted by using RFID to track people and using different color-coded shifts to make sure that maybe if one person tests positive then it doesn't take down the entire crew. And we try to share amongst the community lessons learned. We're all learning from each other how to adapt in this unprecedented environment.
TR: Thank you for talking with Telecom Ramblings!
If you haven't already, please take our Reader Survey! Just 3 questions to help us better understand who is reading Telecom Ramblings so we can serve you better!Categories: Datacenter · Industry Spotlight