Equinix

History

Equinix was founded in 1998 by Al Avery and Jay Adelson, two facilities managers at Digital Equipment Corporation. The founders believed that existing data centers would not be sufficient to support the rapid growth of the internet and saw the opportunity to deploy data centers on a much larger scale to support this growth. In an interview, Adelson recalled that the early internet was "run by cowboys. … It just wasn't hardened, it wasn't commercialized. And for those of us that cared, we knew that a company like Equinix would need to exist. Somebody would have to be the steward of all this infrastructure."

Equinix promoted its data center platform as a neutral place where competing networks could connect and share data traffic. This peering model extended each carrier’s individual reach, regionally and globally, and its wider adoption enabled the massive peering that led to the explosive growth of the internet, the “network of networks.”

Equinix focused on expanding interconnection from its inception, as it aimed to capitalize on the so-called “network effect,” through which each new customer would broaden the appeal of its platform. Each new carrier, for example, would expand network route options for content providers, who were then increasingly drawn to Equinix and, in turn, increased Equinix’s appeal to advertisers who wanted to do business with those content providers. In an early interview, an Equinix marketing executive said the company’s strategy was to find “people who bring people who have relationships with people.” The company’s first data centers opened in New York City, Silicon Valley, and the Washington D.C. area. Soon after, the company began a continuous and steady expansion that aligned with its internal philosophy to always attempt to increase interconnection opportunities ahead of market demand.

Expansion

Equinix’s overseas expansion began in 2002 in Asia-Pacific, after it acquired data centers in Hong Kong, Singapore, Sydney and Tokyo in mergers with i-STT and Pihana Pacific.

Steve Smith took over as CEO in 2007, the same year Equinix announced a $2 billion international expansion plan and entered the European market by acquiring data center operator IXEurope and its facilities in France, Germany, the Netherlands, Switzerland and the UK. That plan was completed with the 2010 opening of Equinix’s 50th global data center, in London, but a more intense period of growth followed. Over the next seven years, the company nearly tripled its data center portfolio, growth the company attributes to increased demand for interconnection services caused by the emergence of cloud computing, along with the expansion of related trends such as the Internet of Things and big data.

Equinix’s next major acquisition came in 2010, when the company purchased Switch and Data Facilities Company, Inc., a U.S. internet exchange and colocation services provider with locations in 23 North American markets. The transaction was valued at approximately $683.4 million.

The company extended its operations to the Middle East and in Southeast Asia in 2012, announcing partnerships to enter the Dubai, UAE, and Jakarta, Indonesia, markets. Also in 2012, Equinix increased its commitment to Asia-Pacific, its fastest-growing region, by completing a $230.5 million all-cash transaction for Hong Kong-based data center provider Asia-Tone. In the transaction, Equinix gained a total of six data centers and one disaster recovery center spread across the Hong Kong, Shanghai and Singapore markets. At the time of the deal, Smith said the acquisition put Equinix “in a strong position to establish market leadership in Asia-Pacific."

In 2014, Equinix strengthened its Latin American presence when it paid $225 million to complete the acquisition of ALOG Datacenters of Brazil S.A., the country’s leading provider of carrier-neutral data centers. Equinix had acquired a 53% stake in ALOG in 2011.

In 2015, Equinix converted to a real estate investment trust (REIT) in a move to gain tax advantages and enhance shareholder value by offering a regular dividend. In addition, Equinix acquired the professional services company Nimbo as part of a broader effort to develop its professional services business to assist customers executing data center migrations or advancing their network and hybrid cloud strategies.

The year 2015 was an intense period of acquisition activity and global growth for Equinix. Early in the year, Equinix opened five new data centers on four continents, increasing the company's data center footprint to more than 10 million square feet.

The largest acquisition in company history was announced at the end of May 2015, when Equinix said it would purchase the British company TelecityGroup. The offer was cleared by the European Commission in November, but only after Equinix agreed to sell eight of its data centers around Europe to Digital Realty Trust for $874 million. In January 2016, Equinix announced that it had completed the Telecity acquisition in a transaction valued at approximately $3.8 billion.

The addition of TelecityGroup’s 34+ data centers more than doubled Equinix’s capacity in Europe, making the company the region’s largest retail colocation provider. The deal also added network and cloud density to better serve enterprise customers who viewed interconnection as a core IT design principle, and who were increasingly moving to highly interconnected, global data centers to accelerate business performance and innovation.

The size of the deal raised questions about Equinix’s continued appetite for further expansion in the near term. Smith responded to the questions by noting Equinix ‘s strong balance sheet.

"This deal doesn't preclude us from taking action if there were other opportunities," he said.

Four months after Smith’s comment, in September 2015, Equinix said it would buy Japanese provider Bit-Isle for $280 million. The deal, finalized in December 2015, doubled the number of Equinix data centers in Japan to 12 by adding five in Tokyo and one in Osaka. It also established Equinix as Japan’s fourth-largest data center provider.

In 2016, Equinix opened new data centers in Dallas, Sydney and Tokyo and announced a deal to acquire 29 data centers in 15 markets from Verizon for $3.6 billion. The acquisition would extend Equinix’s North American footprint into two new markets, Houston and Culpeper, Va., and expand its Latin American presence by adding a facility in Sao Paulo and bringing the company into Bogota, Colombia, for the first time. The company said the deal was expected to close in mid-2017, subject to the satisfaction of customary closing conditions.

Smith frequently speaks of his goal to build Equinix into an “historically significant” company. He points to Equinix’s leading market position and commitment to continued expansion, saying it aligns with cloud-driven surges in global data traffic and the subsequent need for the colocation and interconnection services Equinix provides. “Equinix will be remembered in the history books for … how we interconnected the world,” he said.

Data centers

Equinix has invested more than $13 billion since its founding to build its data center platform.

Equinix calls its data centers International Business Exchanges (IBXs) to emphasize the collaboration and data exchange it says they enable. Chairman Peter Van Camp has compared them to "international airports where passengers from many different airlines make connections to get to their final destinations." Smith said the interconnection available within his company's broad data center footprint allows organizations to distribute IT closer to employees, customers and markets without having to build and manage the needed connectivity themselves. "We spend a lot of capital to build these facilities and companies take advantage of it." Equinix IBXs peer IP traffic to over 90% of the world's internet routes. Their Internet Exchanges route internet traffic between more than 1,400 telecommunications networks worldwide.

The company cites its global average uptime record to demonstrate the reliability of its facilities and services. Equinix received positive press coverage in the aftermath of Superstorm Sandy in 2012 after its customers in the Northeast U.S. experienced relatively limited outages, compared to widespread problems at other vendors.

Equinix has received various International Standards Compliance (ISO) certifications related to physical and data security at its data centers. They include ISO / IEC 27001:2005 and 27001:2013 Information Security Management System Standard, related to information and physical security and business continuity, and the PCI-DSS Payment Card Industry Data Security Standard, related to physical security access to customer equipment.

Cloud

Equinix says the cloud computing space is a primary focus. In a 2010 interview, Smith said the company’s top priority was to be “the home to as much cloud infrastructure as we possibly can.” The Equinix Cloud Exchange is the focal point of company efforts to draw a heavy concentration of cloud providers inside its IBX data centers. It believes these providers can act as magnets to the businesses and other entities seeking services in the burgeoning cloud computing market. As of the end of 2016, Equinix hosted more than 500 cloud providers.

Some analysts have warned that long-term consolidation in the telecommunications industry caused by cloud will decrease demand for data center space and hurt the growth prospects of companies such as Equinix. Equinix argues that accelerated cloud proliferation and adoption, along with the emergence of cloud-dependent trends and technologies such as big data, mobile and the Internet of Things, dramatically increase the value of its core interconnection offering.

Equinix was described by an industry analyst as a “crucial middle man,” connecting companies that build private clouds on the Equinix platform to the underlying networks and public cloud providers they depend on.

Enterprise

Equinix has emphasized expanding its enterprise business as more companies move aggressively to compete as digital businesses. In a 2016 conference, Smith announced a company goal to exponentially increase its enterprise customer base in the next decade. Smith estimated the total addressable enterprise market at 350,000 globally and projected Equinix could land as many as 60,000 enterprise customers by 2026. Equinix’s total customer base at the end of 2016 was about 8,500, including about 2,250 enterprise customers.

Industry observers said a challenge for Equinix would be appealing to customers who didn’t know they needed what Equinix offers: “Courting enterprises … is more difficult than serving Equinix’s traditional customer base, consisting of financial, network, media, and cloud companies. These customers basically knew what they wanted from Equinix, and all Equinix had to do was deliver.”

Equinix says its appeal to the enterprise market is based on its network density, cloud expertise and what it says is a growing enterprise need to obtain services from multiple cloud providers just to execute routine business. It argues the only way the enterprise can meet customer expectations is with what it called an “interconnection first” mindset that prioritizes moving closer to end users and enabling faster data processing and analysis at the “edge of the network.” The company has devised what it calls an “edge strategy” for the enterprise, named the Interconnection Oriented Architecture. This strategy is designed to allow the enterprise to move closer to end users by capitalizing on Equinix’s global footprint and the access it provides to multiple networks and cloud providers.

Equinix also said its interest in cultivating enterprise growth was to ward off the threat presented by the largest public cloud providers, all of whom it hosts in its data centers.

Some analysts have argued that the continued growth of the public cloud giants –such as Amazon Web Services and Microsoft Azure – would eventually lead them to abandon third-party colocation providers like Equinix to build their own data centers and take advantage of economies of scale.

In response, Equinix has positioned its facilities as meeting places where enterprises could directly access as many public cloud services as possible and build customized and business-critical applications. The company believes that attracting more enterprises as they begin relying on multi-cloud strategies will further establish Equinix as an essential interconnection point between the enterprise and the public cloud, including its largest providers.

Ecosystems

Equinix has cultivated several digital ecosystems on its data center platform, and says they are an important differentiator because business models in the digital age depend on collaboration across industries and regions to innovate and speed up production cycles.

Company managers said they began noticing in the early 2010s that customers in different ecosystems were collaborating inside their data centers. Equinix today positions itself in the broader market as a place to find and interconnect with partners, citing the number of mature ecosystems it hosts on its global data center platform. It has also pushed its channel partners to sell based on access to a variety of ecosystems on the Equinix platform.

The ecosystems inside Equinix include:

Sustainability

Equinix has implemented various renewable energy technologies and sustainability practices on its data center platform. In 2015, the company made a long-term pledge to power its entire data center platform with clean and renewable energy.

The pledge followed criticism in 2014 from the environmental group Greenpeace, which said in an annual report on the environmental practices of Internet companies that Equinix had an insufficient commitment to renewable energy and carbon emissions mitigation.

The following year, Equinix pledged to use 100% clean and renewable energy globally and signed deals with wind farms in Texas and Oklahoma to buy enough renewable energy to offset the energy consumption of its entire North American data center portfolio.

Equinix said that, as a leader in an energy-intensive industry, it recognized that “delaying action on climate change will be costly in economic and human terms.”

In a 2015 update to its 2014 report, Greenpeace said Equinix had made a “significant shift” in its renewable energy policies and that its 100% renewable power pledge “sets an important new bar that other colocation providers will need to meet.”

Also in 2015, Equinix was also among the signatories of the White House’s American Business Act on Climate Pledge. As part of the pledge, signed in the run-up to the 2016 Paris Agreement on slowing climate change, dozens of U.S. corporations made commitments to a range of clean energy goals.