Quite often, data centers and connectivity service providers are urged to “become platforms,” “become ecosystems” or “business hubs.” It is good advice, for the simple reason that value is increased. And since value tends to correlate with customer growth, hence revenue, higher value always is desirable.
That is an example of network effects: the observation that the value of some products or services increases as more nodes are added. A voice network that connects people and organizations in one local area has some value. A voice network that connects all or most people and organizations in a region is more useful. Better still is a network connecting everyone in a nation. A network that connects all users globally has the highest value.
That also is true of many internet applications and services as well. “Ecosystems” can be built around products that increase value, as Apple demonstrates with its iPhone. The big issue with ecosystems is the additional value partners bring.
The concept is easier to visualize for a data center provider than a connectivity provider. A colocation provider gains revenue and customers as more partners conclude it makes sense to colocate at a physical location. To the extent a colocation provider makes money from tenants and interconnection, “ecosystem” makes perfect sense.
The concept is harder to commercialize for a connectivity provider as TCP/IP allows any and all partners to connect with each other without formalized business relationships, and therefore without necessarily increasing connectivity provider revenue in a direct sense. Such “permissionless” access means business partners do not need a connectivity provider’s agreement to conduct business with each other, even when using networks.
Ecosystems can create additional value, for the same reason that geographic proximity creates value, by increasing the number and range of business partners with whom transactions can happen, and therefore value and features sold to customers and available to end users.
But that does not make such ecosystems “platforms.”
“Companies must think of the edge as more than just a collection point for data from intelligent devices,” Iron Mountain argues. “They should broaden their vision to see the edge as a new business hub.”
Regardless of the preferred language, the key business idea is that interconnection or colocation have value. That makes it easier for a data center or colocation provider to envision becoming a business hub, creating an ecosystem.
It is far harder for a connectivity provider to do so. Becoming a true business platform is not easy for either type of provider.
What is less clear is the best description of the business model.
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