Global Report Predicts, by 2026, 80% of Enterprises Will Design and Run New Digital Infrastructure Using Subscription-Based Services
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The shift from CAPEX to OPEX models, as highlighted by the GXI 2024 report, indicates a significant trend in enterprise spending that can influence market dynamics. The move towards subscription-based models reflects a broader industry trend towards 'as-a-service' offerings, which can lead to a more predictable revenue stream for providers of digital infrastructure services. This predictability could be attractive to investors, as it provides clearer visibility into future earnings and could potentially lead to higher valuation multiples for companies operating in this space.
From a market research perspective, the 34% CAGR in global interconnection bandwidth suggests a robust demand for data transfer capabilities, which is likely to benefit companies in the telecommunications and data center sectors. The rapid expansion of edge infrastructure could also signal opportunities for companies specializing in edge computing solutions and services. This growth trajectory can have implications for stock valuations in the tech sector, particularly for firms positioned to capitalize on these trends.
For financial stakeholders, the anticipated dominance of the OPEX model by 2026 could lead to a reevaluation of capital allocation strategies. As enterprises increasingly opt for operational expenses over capital expenditures, the need for large upfront investments diminishes, which could improve cash flow management and potentially increase the appeal of tech stocks to investors who favor companies with lower capital intensity.
Additionally, the evolving landscape could impact the balance sheets of enterprises that traditionally invested heavily in IT hardware. A reduction in capital expenditures could lead to a lighter asset base and possibly alter financial ratios such as return on assets (ROA), which in turn could affect stock performance and investor perception.
The report's emphasis on the pace of hardware innovation, particularly GPU technologies, underscores the importance of technological agility in maintaining a competitive edge. For technology companies, the rapid rate of innovation necessitates a continuous investment in research and development (R&D) to keep up with or stay ahead of industry trends. This could lead to increased R&D expenses, which investors will need to monitor closely as they can impact profit margins and earnings.
Furthermore, the move towards digital infrastructure that is operated through subscription-based models may lead to a consolidation of market players, as scale becomes increasingly important. Smaller players may struggle to compete with larger, established firms that can offer comprehensive 'as-a-service' solutions. This potential market consolidation could have long-term implications for competition and innovation within the tech industry.
AI is driving evolution from CAPEX to OPEX; services increasingly replacing physical equipment
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GXI 2024 predicts that in order to meet the ever-growing demands of data-dense technologies such as AI, 5G and edge computing, IT decision-makers are increasingly shifting away from long-term purchases of physical equipment, such as servers, routers and storage arrays, in favor of flexible subscription-based models. This shift from CAPEX to OPEX started with multicloud adoption but is now becoming the norm across all infrastructure out to the edge, providing enterprises with greater agility in architecting their infrastructure everywhere while ensuring they have access to the most efficient technologies.
"Industry patterns have shown that the traditional procurement process of buying your own IT hardware, if that is not your business, is becoming a competitive disadvantage," said Steve Madden, Vice President of Digital Transformation & Segmentation, Equinix. "The pace of hardware innovation is increasing (especially with GPU technologies), putting pressure on price-performance ratio and infrastructure efficiency. Globally, digital transformation requires businesses to become more agile while adapting to dynamic changes. Subscription models can offer continuous improvement and easier adoption of new technologies already in place."
Additional Forecast and Trends from GXI 2024
- Digital economy continues to expand: Global interconnection bandwidth is forecast to grow at a
34% five-year compound annual growth rate (CAGR), reaching 33,578 terabits per second (Tbps) by 2026. - Accelerating growth of ecosystems: Organizations are connecting with
30% more business partners in twice as many locations. - Digital proximity drives business at the edge: Edge infrastructure has shown the highest growth rate and is expected to expand at over two times the rate of core through 2026.
Industry Perspective:
- Elias Khnaser, Chief of Research, EK Media Group
"In the current dynamic environment, subscription-based access to thriving ecosystem is the only way organizations will be able to build and scale a digital infrastructure capable of sustaining the business transformation resulting from AI, edge and other technologies."
About the GXI
The Global Interconnection Index (GXI) 2024 report, published by Equinix, is a source of insights on interconnection and its increasing impact on digital leaders. The report offers a comprehensive analysis of the digital economy's evolving landscape. The GXI forecast combines Equinix data on interconnection along with market intelligence research to produce an industry-wide forecast. This edition of the GXI provides an estimate for interconnection adoption across all carrier-neutral facilities (including third-party facilities) in 2022 and forecasts growth out to 2026.
Additional Resources
- Global Interconnection Index 2024 [report]
- Enterprises Embrace the Future: Subscription-Based Digital Infrastructure [blog]
About Equinix
Equinix (Nasdaq: EQIX) is the world's digital infrastructure company®. Digital leaders harness Equinix's trusted platform to bring together and interconnect foundational infrastructure at software speed. Equinix enables organizations to access all the right places, partners and possibilities to scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value, while supporting their sustainability goals.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Factors that might cause such differences include, but are not limited to, risks to our business and operating results related to the current inflationary environment; foreign currency exchange rate fluctuations; increased costs to procure power and the general volatility in the global energy market; the challenges of acquiring, operating and constructing IBX® and xScale® data centers and developing, deploying and delivering Equinix products and solutions; unanticipated costs or difficulties relating to the integration of companies we have acquired or will acquire into Equinix; a failure to receive significant revenues from customers in recently built out or acquired data centers; failure to complete any financing arrangements contemplated from time to time; competition from existing and new competitors; the ability to generate sufficient cash flow or otherwise obtain funds to repay new or outstanding indebtedness; the loss or decline in business from our key customers; risks related to our taxation as a REIT and other risks described from time to time in Equinix filings with the Securities and Exchange Commission. In particular, see recent and upcoming Equinix quarterly and annual reports filed with the Securities and Exchange Commission, copies of which are available upon request from Equinix. Equinix does not assume any obligation to update the forward-looking information contained in this press release.
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SOURCE Equinix, Inc.
FAQ
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