The Crucial Role of Data Center Services with Equinix’s Karl Strohmeyer

Today’s guest is Karl Strohmeyer, Chief Revenue Officer of Equinix. Karl joins Mike to discuss the crucial role of data center services (and colocation) in enabling the global remote workforce for the long term and how Equinix is leveraging new acquisitions to grow their market share.

Covid-19 has had a major impact on the world, and overnight, a large amount of the world’s workforce shifted to a work from home environment. It’s going to be a long time before things go back to normal and a large percentage of the world’s workforce will remain working from home, if not permanently, a few days a week at least.

With 200 data centers around the world, and interconnection of every major carrier, cloud and SaaS provider, how do you see Equinix as a key enabler of the new work from home ecosystem?

The work from home dynamic is interesting, and I think there were companies that were more prepared for it than others. But if you think about the core value proposition of our platform at Equinix, it’s to help companies localize their IT infrastructure as close to where the data is created and consumed and proximate to the cloud as possible. We’ve been doing that for years, and we’ve been working with companies like Bridgepointe for years. But before, the CIO would maybe have 10 offices in a region or across multiple regions where they could predict the performance of the consumption of those workloads and applications by their users.

Now that’s turned into potentially thousands because people are all at home. And we all know the constraint, because we deal with it every single day as we stare at our cameras. It’s the consumer bandwidth. That consumer edge is where we’re having the problem, and so there’s all the more need to proximate those applications as close to those users as possible.

It’s just been a wild ride of engaging segments across the spectrum of the enterprise and service provider community to help them think about the distribution of infrastructure. We continue to add new locations, with inorganic acquisitions and it just helps tremendously overall.

About a year ago, you guys unveiled Network Edge and gave customers the ability to spin up a virtual router, firewall, LAN appliance in one of your flagship data centers, so you don’t necessarily have to have a physical presence there anymore, you can now have a virtual presence. Then just a couple months ago, you guys completed an acquisition of Packet, and for those people who don’t know who that is, they provide bare metal servers in a lot of the same key cities where your flagship global data centers are in the US and Asia.

Prior to those product additions to the portfolio, customers had to physically buy space and put in server racks, storage routers, firewalls in your data center. Is this a shift in what Equinix is doing? Is this complementary to the data center and interconnection business? How do you see this fitting into the short-term and long-term strategy for Equinix?

It’s absolutely complementary, but the key is this notion of abstract and complexity. The real value that we offer is interconnection, the counterparty that you’re requiring, for whoever that is on the platform.

And yes, we would love to sell space and power, love to continue to deploy performance hubs for everybody that needs them. What we typically see, or what we believe, is people will build out their core physically, but they’ll have other markets where they’ve got employees, where they’ve got a manufacturing site, and they’re not quite sure how much infrastructure they need to deploy there.

They can spin up infrastructure virtually, and as you know, our first venue, our venture into virtual production of anything was Cloud Exchange Fabric, which allows a person who deploys in one location to access the interconnection density of another location through Cloud Exchange. Through a portal, through real-time usage, they can turn it up, they can turn it down, they subscribe at a bandwidth level, and so that was our first venture into offering services outside of one physical location.

The Network Edge capability was next, where there’s a lot of switching and routing, and firewalls and load balancing that people can do. You literally go to our website, and you can spin up that instance and determine whether or not routing traffic at that location improves performance across your overall wide area network or not. And if it’s not, you turn it down.

Edge Metal is where I think it all comes together, because instead of physically deploying a cabinet or servers in a cabinet, you can literally virtually deploy and gain access to our ecosystem of interconnected camera parties virtually. We will give you dedicated servers, and you can add your OS and spin up your applications on those servers. They’ll be proximate to Cloud Exchange Fabric, proximate to Network Edge, and so effectively, if you have particular workloads that you want to see how they perform in a geography next to AWS, you can do that virtually.

That’s the promise. That’s not a replacement for physical colocation, that’s in addition to it. Because people aren’t always going to justify the cap required to physically deploy, nor will they have the time to go through that for particular applications or use cases. So we’re just trying to abstract complexity for customers.

We’ve not always been the easiest company to do business with in the past, and we’re trying really hard to change that. We’re in 211 data centers, not including the Canada assets, and 55 markets, 29 countries around the world. We’ve grown fast, but we’re trying to make sure that platform is consumable both physically and virtually over time.

Equinix previously had a couple data centers up in Toronto as a point of presence, but you just recently got 13 Bell data centers.  Can you tell me about that? Why Canada, why now? What’s the significance for you guys?

We’ve been trying to solve the Canada dilemma for a while, which is if you’re selling to companies that are headquartered in Canada, they want at least two locations from you. We struggled not having a Montreal solution, which was specifically where they were trying to drive us to. We looked at acquisitions, we looked at organic green fields, and just none of them would pan out in a way that made sense relative to other opportunities we had globally in other markets like another data center in Singapore or Ashburn. And so this deal just was perfectly sized for us.

We bought 29 data centers from Verizon several years ago. That was a complicated acquisition because we weren’t buying the systems, and it had over a thousand customers, and it was very complicated to integrate, but we did it, and we know how to do it. So in this scenario, there are 600 customers across 13 data centers. It gives us a presence in western Canada, in Calgary, as well as presence in Ottawa, and of course Montreal.

What is probably not obvious is that Bell Canada owns the enterprise marketplace from a telecommunications standpoint in Canada. Having them as a go-to-market partner, to jointly sell a proposition is fantastic. Canada is a fairly small market as it pertains to the number of players. Assuming we can close this transaction, which obviously we have the confidence that we will, overnight we will be the number one retail data center operator in Canada.

That’s exciting for us, and on top of that we announced the acquisition of Axtel down in Mexico, so we have assets down in Monterrey and Mexico City. You’ve got Miami, you have Dallas, and now you have Mexico City on the North side of the continent of South America, and then we have Columbia and Brazil. Most of your traffic is going through those locations from a North and South standpoint.

It’s really powerful, and the traction we’ve seen with enterprise buyers is, as soon as we go into a new site –– one of our 10,000 customers –– many of them want to expand into those sites. Because as you said, they understand the brand, they understand what to expect from us, they understand the quality of the infrastructure. They already have a contract, they have a partnership obviously with people like Bridgepointe, and so it becomes easier for them.

Canada has the tenth largest economy in the world and the barrier to entry is high, so the whole deal is exciting.

You mentioned the Cloud Exchange. It’s connecting people to the cloud over, because you need one physical connection, a bunch of virtual connections, multiple clouds, and it was easy to do. Now, you guys have expanded that fabric to mean not just interconnection to cloud, but interconnection between your own data center services, and interconnection to partners, interconnection to suppliers. How are customers leveraging that now?

We learn from our customers every single day if we’re actually listening. There are a lot of use cases for customers to use themselves as a potential bypass for location A to location Z so there’s a lot of that type of application. There’s a lot of taking advantage of it if there’s a particular cloud or SaaS provider that’s not in their resident market, and they want to interconnect with them, and they’ve got workloads that the performance will be improved by going over Cloud Exchange to do so.

We’re going to probably end up starting to call it the fabric, because to your point, it interconnects everything, and it’s also a service layer inter-connector so that it’s a marketplace for a lot of the companies that are on the platform. There are several thousand companies that use Cloud Exchange as a marketplace to sell access to their services.

As you well know, we’re very close to all of the hyper scalers. And so when we go to market with the Microsoft sales team or the Google sales team, they like us because it’s a direct connection to their service, which consumes more of their cloud service because of the direct nature.

There’s lots of just cloud interconnectivity for workload exchange as you can imagine. We’re surprised constantly — there are business continuity, disaster recovery use cases from site A to site B. And again, it will be the enabler, we think, for these more remote edge metal types of applications calling back to their core infrastructure. The only thing I would add is that we’re seeing a lot of usage base, meaning one-time events. I’ve got to get this workload from here to AWS, and I’m going to use Cloud Exchange Fabric to do so, but I don’t need to tie it up forever. I’m just going to use it for a one-time interim event. The great thing is that it’s portable. It’s on a portal, it’s clickable and you can order it easily. There’s API calls that you can design to it, so you can configure your own applications to call it directly. And so there’s been a lot of enthusiasm around the infrastructure.

You said it briefly, but I don’t think most people even know what the marketplace is. I use it all the time, but I have customers that’ll come to me, and they’re trying to decide where to put their data center. There are still these companies out there in certain verticals who run their own data centers and they’re slow to put into a third party — they’re very careful and methodical about their approach to things.

I know your sales team knows how to leverage it, but I’ll say for anyone out there listening, if you’re not familiar with the marketplace, reach out to someone to show you what it means, because I think it’s been a very powerful tool for us in helping customers make better decisions.

One of the things we’re really trying to do in the spirit of continuing to advance our portfolio is make it discoverable. So once you’re on Cloud Exchange Fabric, you can discover who else is there, and you can turn up a VLAN to them. And there are some technology issues, but more there’s NDA and contract issues that we’re navigating to make that really powerful.

I think that network effect is the one thing to impart to everybody that’s listening, which is the value. When you add a customer to the platform, every other customer benefits from that additional customer. It’s that interconnected value that creates this ongoing proposition that you can guarantee to your customer that there will be more value tomorrow that they can reap from the platform than they are today because it scales. And what we’re trying to do is to abstract complexity and make that easier — easier for you to position that value and for your customers to consume it.

My plea is just for all of you to keep telling Equinix what else we’ve got to do. We like to think we’re humble, we try to be really good listeners, and we’re here in service to your pursuit to capture more customers. So as you have ideas, or as you run into areas where there’s probably more friction than you think there should be, please tell us.

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