Since the start of the noughties, the world has seen big tech make moves in building out its own internet infrastructure. The likes of Google, Facebook and Amazon have all begun to expand from the software provider role they were originally known for to a new role as connectivity leader by making significant investments in projects such as subsea cables, which transport 98% of the world’s internet traffic to provide instant communication for businesses and consumers. In 2021 and beyond, connectivity will remain imperative in order to power consumer services and employee solutions, with hyperscalers continuing their expansion into the role of connectivity leaders as they aim to provide better access to their services, which are increasingly powering much of the world's global online ecosystem. Subsea cables have been at the centre of this transformation, allowing software providers today – who own and part-own hundreds of these cables – to cement their role as an essential means of global connectivity.
So, why do these companies feel the need to add another string to their bow? In what way does this benefit them, and why are they making the transition from network disruptor to industry incumbent?
The need to connect
The ever-increasing importance of connectivity is potentially the most significant factor behind this transition. The pandemic has taught us a lot, but one prominent lesson is that the internet has never been more indispensable. In fact, the number of daily active users of Microsoft Teams increased from 32 million in March 2019 to 75 million in April 2020, showcasing just how many of us now use digital services on a daily basis. We rely on it for a multitude of reasons and, with the advent of new internet-dependent technologies like machine learning and AR, this is unlikely to change anytime soon. Software companies, who are investing in their own infrastructure, have come to realise the need for more visibility and control over their own network that impacts cloud and internet traffic. This in turn ensures that they are providing the most reliable connectivity possible to customers who depend on it more than ever.
Digital experience is everything
Today’s businesses know that uninterrupted user experience is essential to satisfy customers and keep employees motivated. The digital experience can make or break customer satisfaction and employee productivity, and that is not a risk that enterprises can afford to take. In order to combat this, end-to-end visibility is required for enterprises to fully understand and visualise the customer journey across their own networks, but also those outside their digital four walls. As the multitude of third-party dependencies impacting the digital supply chain continues to increase, the demand for continuous online experience is turning on the pressure tap for big tech companies to optimise their performance and keep customers happy.
By having full visibility and control of the entire infrastructure chain, software providers are able to take steps to remove any potential issues and monitor digital experiences even more closely. The constantly increasing demand from customers for enterprises to manage digital experiences has pushed some companies to already begin to take steps to do this – AWS, for example, has built out its own edge services in order to reduce ISP traffic flow and get closer to the end-user, a step which has proven even more essential in the face of the coronavirus pandemic. The investment of big players like Google and Facebook into subsea cables is another example of enterprises’ growing need for control and visibility over the networks that hold up their products and services.
New services for new markets
The infrastructure market has also seen a surge of new players as many software providers have been diversifying their services and entering new regions. Expanding their range of services enables them to reach an even larger number of customers, which of course is appealing in itself to any business. Amazon’s AWS Direct Connect, for example, is a paid service which seeks to guarantee improved performance and provide enterprises the ability to reach the AWS backbone faster. It is important to remember that the internet is an incredibly complex web of independent and interconnected service providers, meaning user experience can be negatively impacted by a number of disruptions and outages in any of these providers. In an effort to mitigate that risk, cloud providers and content delivery network (CDN) providers have been offering the alternative option of access to their private backbones, promising improved robustness and performance – for a fee. Inevitably, the appeal of diversifying service providers will have a huge effect on the infrastructure market, and we can expect to see software players continue to make significant developments in this area as a result.
Software will continue to eat telco
We are already seeing some providers make strides in this pursuit and capitalise on their current investments, largely fuelled by the pressures of user demand for new and uninterrupted services. What sets these providers apart from the telcos that came before them is their unique cash flow from applications they own and their ability to monetise their services, enabling them to invest in infrastructure quite aggressively. AWS is one example with its Direct Connect, but it’s not alone.
As a result of this, software providers making the move to build out their infrastructure and ultimately become network providers is now something of an inevitability in the constantly-evolving world we know today - and before long, it might prove difficult to recall a time when these companies were not part and parcel of today’s network infrastructure dynamic.
