It overstates the matter to argue that “interconnection” is the core business of a data center, compared to rack space, power, air conditioning and security at better financial terms than operating one’s own internal data center.
But it would not be overstating the matter to argue that interconnection is an absolutely vital function of a data center.
According to Cisco data, most global data traffic actually moves within data centers. In past years, “inside the building data traffic has represented as much as 75 percent of all data traffic. Another seven to nine percent of global data traffic moved between data centers, according to Cisco.
Nor would it be incorrect to argue that a data center’s core revenues come only partly from real estate value. As it turns out, a growing part of the business is interconnection value.
By some measures, interconnection represents roughly 18.5 percent of Equinix recurring revenues.
source: Nortia Research, Paolo Gorgo
source: Nortia Research, Paolo Gorgo
Other leading data centers also report significant recurring revenues from interconnection services.
We normally think of connectivity providers as the lead suppliers of “interconnection” or “networking” or “bandwidth,” but data centers also directly earn revenue from supplying interconnection services, access to networks and bandwidth.
On its fourth quarter 2022 earnings call, Equinix noted that interconnection business saw revenues for the quarter growing 13 percent, year-over-year, “outpacing the broader business.”
“Equinix Fabric saw continued growth and is now operating at a $200 million revenue run rate, one of our fastest-growing products,” said Charles Meyers, Equinix CEO.
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