6.2.1 Cloud Adoption

Cloud adoption is at an all-time high as companies continue to shift towards both cloud storage and cloud computing to drive their business. Amazon Web Services and Microsoft Azure lead the way in enterprise adoption with no sign of slowing down. (Figure 61) These cloud services are global in nature and inevitably their traffic will end up traveling over submarine telecommunications cables. As a result, data center providers have become more involved with the submarine fiber industry, especially around cable landing stations where they can capitalize on interconnection and colocation opportunities – especially in those areas where multiple cables come ashore to a single location.

Figure 60 - Enterprise Public Cloud Provider Usage, 2019

Figure 60 – Enterprise Public Cloud Provider Usage, 2019
Source: Flexera RightScale 2019 State of the Cloud Report

In January 2019, Flexera surveyed 786 enterprise technical professionals about their cloud computing adoption. Of these respondents, 94 percent have adopted the use of cloud computing in some fashion with organizations leveraging five different cloud services on average. Spend on enterprise cloud is growing significantly with companies planning to spend 24 percent more on public cloud in 2019 vs 2018. In all, 13 percent of respondents spend more than $12 million on public cloud services on an annual basis while 50 percent spend more than $1.2 million annually. (Flexera, 2019)

Figure 61 - Enterprise Public Cloud Provider Adoption Rate, 2017-2019

Figure 61 – Enterprise Public Cloud Provider Adoption Rate, 2017-2019
Source: Flexera RightScale 2019 State of the Cloud Report

These numbers show that the cloud computing market continues to accelerate overall. As this market grows, so will data center providers and the need to provide robust telecommunications networks that allow enterprise customers to efficiently manage their traffic anywhere in the world. A key part of this will be the integration of data centers with cable landing stations to more efficiently provide backhaul and interconnection opportunities on international telecommunications routes.

6.2.2 Data Center Market Expansion and Integration

The cost for implementing a new data center can be steep. Depending on overall size and location building a new data center can cost anywhere from $6.5-$10 million per megawatt (MW). (Diaz, 2019) In 2019 alone, data center provider Equinix plans to spend nearly $2 billion to open 12 new International Business Exchange (IBX) and expand 23 existing IBX facilities. (Lima, 2019) Non-OTT data center providers, Equinix, Digital Realty Trust and Interxion, will continue to benefit from submarine cable construction activity as proximity to a cable landing station can provide numerous interconnection opportunities that can help make the high cost of a new data center build worth it.

While non-OTT data center providers do benefit from submarine cable infrastructure, they are not driving new builds and are strictly interested in the interconnection opportunities that being involved with cable landing stations provides. For Equinix and other carrier-neutral providers, locations with only a single cable system are not attractive growth options.

In the future, expect data center providers to continue integrating more closely with submarine cables. Bridging the gap between terrestrial and submarine traffic is one of the most critical components of international connectivity. Traditionally, submarine fiber systems would come ashore at a cable landing station, negotiate deals for backhaul connectivity to a data center – which was not always close by – and from there negotiate interconnection services to other carriers and providers. This added network latency and complexity – both of which are greatly reduced when data center and cable landing station facilities are integrated more closely. As new ideas and technologies are developed towards this effort, network efficiency and reliability will increase.