There are few businesses that are not affected by the global supply chain issues or rising inflation on businesses. Telecoms, and specifically the data centre industry, is no exception.
Judith Gardiner, vice president of growth and emerging markets at Equinix, gave Capacity her thoughts on the situation and how enterprises are managing this challenge.
“Despite hopes that global supply chain issues would improve in 2022, the IT industry is still experiencing up to 12-month delays in hardware supply,” she says. “The breakdown of global supply chains and other business disruptors – such as the lasting effects of the pandemic and the war in Ukraine – are driving an increased need for companies to be flexible and adapt quickly across many areas of their business.”
At the same time, she says that enterprises are accelerating their investment in digital infrastructure, viewing digital transformation as a way to build long-term resilience in uncertain times.
“Businesses that understand the value of deploying more of their operations both virtually and physically are increasing spending on deployments via the cloud and carrier-neutral colocation solutions, and interconnection services, to remain relevant across their markets,” she says.
Rising inflation is being driven by increased government spending during the Covid-19 pandemic, the global instability caused by the war in Ukraine, supply chain issues, and the rising costs of commodities, such as oil and gas.
“We initially expected businesses to respond with a more cautious approach, but we continue to see global investment in digital infrastructure,” adds Gardiner. “As the year continues, we’re likely to see an even stronger push by businesses to increase their digital capabilities and an escalating demand for cloud-based storage and services as companies look to build a more resilient infrastructure network.
“One lesson digital leaders worldwide have learned from their experiences during the pandemic is there is an increasing need to adapt quickly to disruption and to have an agile, flexible business model.”
The Covid-19 played a part in these global issues, with the rates of digital transformation increasing exponentially as companies tried to cope with the pandemic’s impact.
“The pandemic emphasised the need to put data closer to the user as businesses and workers across the globe adapted to a hybrid working environment,” added Gardiner. “This saw many companies implementing their digital transformation strategies at warp speed, abandoning traditional hardware-centric models, which proved slower and more expensive to operate, in favour of digital infrastructure capable of delivering a virtual connection with employees and customers across the globe.”
Given that the business landscape has changed dramatically, Gardiner says that flexibility remains essential to organisations as they navigate uncertainty, sudden shifts in market dynamics and emerging trends.
Digging deeper into the causes of the supply chain issues, other than those caused by the pandemic, Gardiner reminds us that Russia’s invasion of Ukraine also exposed several geopolitical “fault lines” that caused breakdowns in supply chains, critical raw materials to be inaccessible, and an impending commodity crisis.
“Even in the early onset of the pandemic, one of the supply chain disruptions felt was the hardware and chip shortage, which continues to have a major impact,” she says. According to market research company Forrester, this is expected to continue into 2023.
“To combat this shortage, businesses need agility and visibility across their entire footprint, with digital infrastructure that enables cross-border communication to help them interact and transact in real-time,” adds Gardiner. “As supply chains work to catch up on existing demand, robust physical and virtual digital infrastructures can serve to future-proof critical operations anywhere in the world.”
Historically, IT architecture was based on a centralised model that relied on company-owned hardware and lacked the ability to keep up with market trends and changing customer demand.
But by connecting to a global digital infrastructure network, Gardiner says companies can create efficiencies by bringing edge resources and services closer to partners and customers and benefitting from improved supply chain resilience.
“As a result, organisations are replacing traditional private data centres with vendor-neutral colocation facilities distributed in multiple locations worldwide, reducing latency and increasing operational agility and competitive edge,” she says.
Gardiner, like the rest of us, is finding it difficult to predict when some of the recent global challenges will be resolved. “However, at Equinix, our role is to support international businesses navigate these choppy waters and ensure they are able to respond to shifting economic and market influences,” she says.
Due to rising vendor costs, one would assume rising inflation will impact data centre and infrastructure investment. In the case of Equinix, this is certainly the case.
“We’re seeing inflation affecting various areas of our business and continue to look at ways to mitigate the impact across our portfolio, including sharing some of the increased costs with our customers,” explains Gardiner.
On the construction side of things, she says that costs are increasing due to a rise in labour and raw materials costs, supply chain and logistic challenges, and high demand.
“The range of cost inflation on our expansion projects varies across the 30 metros we are currently active in,” Gardiner says. “To counteract these pressures, we’re working hard to drive down building costs through design and procurement efficiencies.”
One of the more positive effects of this situation is that enterprises are accelerating their sustainability strategies to reduce waste and achieve more efficient operating costs.
“Equinix’s own data centres are designed to the highest operational standards with energy efficiency a leading priority,” says Gardiner. “So far, we’ve invested more than US$129 million in energy efficiency upgrades and improvements, and are constantly seeking new ways to innovate within our data centres in order to achieve our global climate-neutral goal by 2030.”
In her role as vice-president for growth and emerging markets, Gardiner has identified that there is still a lot of growth globally, driven by strong digital transformation mandates.
“In the short and long term, Equinix needs to ensure that we’re meeting increasing digital demand, so our own data centre build and deployment programme is continuing at pace,” she says.
One project that Gardiner has been closely involved with is Equinix’s US$320m acquisition of MainOne, marking the company’s entry into the African market.
“We are very excited about our first move into the African continent via the acquisition of MainOne. Africa has the youngest population of any continent - the median age on the continent is 20 years. This represents considerable latent demand for mobile and online content and other services in the digital subscription economy,” she says.
The deal will see MainOne, which is headquartered in Lagos, Nigeria, continue to operate as a separate business under the Equinix umbrella – its new name will become “MainOne, an Equinix company” – while Funke Opeke will remain as chief executive to the lead the business, and its existing 500 employees and management team.
“Equinix recognises that there’s value in that local market knowledge and our track record of excellent service delivery for our customers,” says Opeke. “They’re not looking to displace or disrupt that but complement it with capabilities that they have on a global basis.”
According to Gardiner, the acquisition augments Equinix’s long-term strategy to become a leading African carrier-neutral digital infrastructure company across MainOne’s footprint in Nigeria, Ghana and Cote d’Ivoire.
“Equinix and MainOne are both committed to bridging the digital divide in West Africa,” she says. “This acquisition will enable MainOne customers to connect to Equinix’s global platform, while at the same time allowing global customers to connect into West Africa, accelerating digital transformation and enabling West African businesses to access new regional and global markets.”
Shortly after the transaction closed, Gardiner and the MainOne team welcomed the launch of a new data centre, Lekki II, in Lagos.
The Lekki II facility provides immediate room for growth in MainOne’s Lekki data centre campus, which is targeted for further expansion of up to 10MW of data centre capacity. Combined with MainOne’s existing assets, Lekki II provides open access connectivity to all of Nigeria’s telecom networks that have established presences on the campus.
New markets
Now we are past 2022’s halfway mark, Gardiner says her team’s focus for the next 12 months is on the company’s short-term and long-term strategic roadmaps for sustained growth.
“Although the world continues to face challenging times, within the growth and emerging markets we’re continuing to assess new markets and expand in existing ones to enable our customers to pursue their digital transformation strategies,” Gardiner says.
At the same time, she says that demand from hyperscale customers for its xScale facilities is strong, which in turn increases demand from their enterprise customers.
“The company will strengthen its core business by scaling up go-to-market offerings, adding additional capacity in existing and new markets, and evolving systems to deliver operating leverage and an enhanced customer experience,” she says.
