Jarrett Appleby joined Digital Realty two years ago, in April 2015, as the company’s first chief operating officer, and he was tasked with corporate strategy and global operations.
The $1.9 billion Telx acquisition was completed in October 2015 and immediately doubled Digital Realty’s retail colocation footprint. Its line of business transferred straight under Appleby’s responsibilities for the first 10 months “to ensure it stayed incubated and was integrated correctly,” he tells Capacity.
“Telx really got us significantly going as a colocation and interconnection leader and we’ve continued to expand into 12 markets with colocation assets in North America,” says the man who owns product strategy and delivery at Digital Realty and has a team for “design, build, operations, productisation and innovation”.
Telx was managing the company’s Meet Me rooms, “which is the heartbeat of connecting to internet service providers (ISPs) and the networks,” says Appleby.
“Our cloud customers in social and mobile content companies were looking for colocation and interconnection services on the same campuses and in the same market and we really pivoted our business.”
Telx’s interconnection ecosystem enables the exchange of information between communications service providers, enterprises, content providers and other entities with low latency and diverse connectivity across a global network and provided Digital Realty with a big opportunity for future growth.
Surpassing expectations
And boy have they grown. I’m speaking to Appleby two weeks before the company is set to release its Q1 2017 earnings, but 2016 figures show that Digital Realty increased its revenues every quarter in the year from $501.9 million in Q1 to $576.79 million in Q4 2016, results which surpassed Wall Street expectations.
“Bringing in a transactional-orientated sales and marketing engine meant a higher volume of small deals activity,” divulges Appleby. “We went from 600 customers at Digital Realty to 2,400. Building the foundations organisationally and culturally was a big challenge for us, with a clear focus on our customers, operations, product and service delivery capabilities.”
The Telx acquisition was symbolic at a time when companies in the data centre services space were diversifying their product portfolios in a data-driven world.
“The convergence of the subsea market and data centres has evolved over a number of years,” says Appleby, who adds that, over the past two years, “service providers in the market are not just very active in data centre builds but are playing a key role in the evolution of cloud services”.
Telx gave Digital Realty around 20 markets on the colocation and three more markets have been added. “What’s really interesting for us is that we’ve started launching colocation next to the cloud service providers. Think of it as ‘proximity colocation’ on the campus.”
He continues: “We launched that this year in Ashburn and in Richardson, Texas. Now you can buy colocation and have scalability in a single campus, all with very little latency solutions where you can connect to your partners, your community of interests, and your ecosystem through a cross-connect.”
Cloud explosion
There have been a number of architecture shifts in the last 15 years, says Appleby, who stresses that the data centre has moved to the heart of the interconnected world today.
“For us it’s so key because it doesn’t stop with just small deployments. It went from single cabinets to cages and we’re now seeing multi-megawatt and huge purpose-built data centres for the cloud service providers.”
With increased migration to cloud architectures, and the ability to scale more quickly than traditional data centres, Cisco predicts that cloud data centre traffic will surge from the 3.9ZB which was seen in 2015 to 14.1ZB by 2020. According to its latest Global Cloud Index, cloud data centre traffic associated with cloud consumer and business applications is growing at 30% CAGR. Global cloud IP traffic is expected to account for more than 92% of total data centre traffic by 2020.
“As an increasing number of enterprises utilise cloud services to perform business-critical operations, data centres must enable fast and cost-effective access to key service providers,” says Appleby. “Digital Realty is unique, as we come from a real estate foundation so that we can really expand and bring power and scale to a campus build. In Chicago, for example, we own the building at 350 E Cermak Rd, which is right down from where International Telecoms Week will be.”
Traditionally, companies like Equinix, which is one of Digital Realty’s customers, would enter and provide colocation services in that facility, but Digital Realty can offer colocation services directly through Telx as it controls the Meet Me Room. “So we have been developing downtown gateways to support colocation and interconnection.”
There’s a lot of value for cloud service providers and network providers by connecting data centre facilities, typically built in more suburban areas, and downtown markets.
The missing ingredient
The last piece of the puzzle for Digital Realty emerged a few months ago. A typical cross-connect takes one or two days, but in the cloud world “you need to do virtual cross-connects with near real-time delivery”. The Service Exchange platform, which enables seamless, on-demand, direct access to multiple clouds and networks, was launched in November 2016. Powered by Megaport, the single interface avoids the public internet and provides customers with a secure, private cloud connection.
Digital Realty plans to have over 30 points of presence with Megaport, which is a non-exclusive partner that brings connectivity to Amazon Web Services (AWS), Microsoft Azure and Google Compute Engine.
“We started developing our layer 2 capability with private networking solutions, but we’ll soon be announcing a new layer 3 capability as well as continuing to add more cloud service providers to the platform,” reveals Appleby.
Layer 3 capabilities are a requirement to enable enterprise customers to reliably consume software-as-a-service (SaaS) offerings from a private cloud environment.
European metro expansion
Digital Realty is “now focused on Europe in 2017,” says Appleby. And the stage is set for Digital Realty’s Connected Campus network in three strategic interconnection European metro areas. In July 2016, it completed the acquisition of eight carrier-neutral data centres in Europe from Equinix in a transaction valued at $874 million. The eight-property portfolio – five in London, two in Amsterdam and one in Frankfurt – comprises 213,000 net sellable square feet and 24.4MW of IT load.
The acquisition has seen Digital Realty pick up 700 customers, “half of which are new customers, while the other half are already Digital Realty customers with our colocation business”.
Appleby says: “It gives us critical capacity, product and inventory in downtown markets in the London Docklands, the Science Park in Amsterdam and in Frankfurt.” In London, Digital Realty connects to large scale campuses in Chessington, Woking and Crawley, where they have large scale footprint and large cloud compute engines live. They then connect to the edge in the internet gateways in those markets.
“We’ll be launching the Service Exchange platform across these strategic markets, he says. “Large cloud service providers have really redefined how we use the internet and conduct peering in this more software-defined networking world.”
Their deployments at the new edge are getting larger and larger and they’ve moved away from a traditional colocation world into larger scale deployments on the network side.
“You need that local proximity at scale, access to a lot of networks in these downtown markets.”
Appleby’s message is that cloud service providers are leading this charge, particularly by moving into campuses at a time when enterprise networks are becoming hybrid-multi cloud-ready.
