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Equinix’s Charles Meyers: Cloud Will Affect Allocation of Capital in Tier 2, Tier 3 Markets

 
Sep 28, 2017
by Josh Anderson

ATLANTA, GA – Charles Meyers joined Equinix in 2010, and today he leads the strategic business teams that drive company growth by focusing on the future needs of customers and partners. The Strategy, Services and Innovation (SSI) unit includes Product Management, Engineering, office of the Chief Technology Officer, Business Development, Corporate Strategy and Tech Ventures. Under Mr. Meyers’ leadership, the SSI unit works to optimize the company’s position as a cloud enabler, identify key growth areas, and evolve our services portfolio in response to market, competitive and technology trends. At CapRE’s Second Annual Great Atlanta and Southeast Data Center Summit on August 24, Charles participated in a Q&A with Tim Huffman, Senior Vice President and Director of Data Center Solutions at CBRE called  ‘The Connectivity Horizon of Hybrid IT.” Below is a snippet of that Q&A.

Huffman: How does the Cloud affect pricing for Tier 2 and Tier 3 colocation markets?

Meyers: I think it affects it at some level in all markets. As I’ve said before, undoubtedly, the Cloud is in many ways a substitute. To the extent that a value proposition of a provider is “I’m going to give you a connected, reliable space to house IT infrastructure,” I think you’re seeing the impact on providers with that value proposition. And I think that that probably does create some level of price pressure on some level of what I would consider commodity colocation.

And I think that’s going to affect how people allocate capital into markets. It’s probably less critical in the Tier 1 markets, where there is a broader, more diverse base of business. But even there, I think that people that don’t have a strong, differentiated value proposition are seeing some kind of price pressure, because of the Cloud and other possible substitutes. So it may be a little more acute in Tier 2 and Tier 3 markets, but again that might be offset in time by the evolving Edge, and it’s a matter of how those head winds and tail winds play out, and over what period of time.

 

Huffman: Are SDN enabled players, like Megaport and Packet Fabric, impacting the cross connect business in the United States or globally? How do you see that playing out?

Meyers: Obviously, our Cloud exchange platform is fully SDN-enabled. So that is a way for them to gain private cloud connectivity at Layer 2. But then there are other options available to them, and those include the likes of MegaPort and Packet Fabrics, though Packet Fabric is really about connectivity and network services, whereas MegaPort does have more of an angle around private cloud connectivity right now. I think that there is still an opportunity. What we see is that the aggregation of cloud destinations is what’s important to the customer. They say, Hey, where can I reach, most effectively, the population of cloud end points that are important to me?

And then generally they have a private infrastructure requirement that they feel has to be proximate to those Clouds. So we continue to see a lot of uplift. It is both cross connects as well as exchange ports on our cloud exchange, so down at Layer 2. And if you look at it, all of those providers are interconnecting. Because most of the providers that you’re talking about there are not facilities based. And let’s just say that history has not been kind to non-facilities-based players.

But they have to interconnect to facilities-based players somewhere. Because if they are going to traverse someone’s network, they’ve got to interconnect with that network. So we still see a very robust business in terms of growing cross connects to enable those types of solutions. But we also see uptake at the virtual layer in terms of people using SDN services. And I think that that is going to be increasingly from the carriers too. Because carriers were, unsurprisingly, slow to the uptake, because they have so much at risk in their traditional MPLS business.

But they’re going to get there. And they’re going to go to SDN—enabled services. And I think you’re still going to see that big points of aggregation, like what Equinix has, are going to continue to be tremendously relevant. But you know, we want to provide some place that provides the richest set of solutions for our customers, to get them what they need and to enable the multi-cloud and Hybrid cloud. We continue to see a lot of upside to that. But those services are an interesting catalyst in the market, and I think they will continue to stimulate a lot of stimulation on the part of carriers. Slowly, but surely.

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