Equinix is ready to make the jump to hyperscale. The colocation market leader has lined up one of the world’s wealthiest investment funds to fund data center construction for xScale, the new brand for the Equinix hyperscale initiative. Equinix will form a joint venture with GIC, Singapore’s sovereign wealth fund, that will fund six new hyperscale data centers in Europe.
The deal completes a lengthy search for a joint venture partner to finance the Equinix hyperscale program, which will build data centers for huge global cloud technology companies like Google, Microsoft, Oracle, Amazon Web Services and Alibaba Cloud. The joint venture will target the “FLAP” markets – Frankfurt, London, Amsterdam and Paris – that have emerged as the focal point for data center deployment in Europe, along with Dublin.
GIC has deep pockets and a growing interest in the data center sector. It is one of the backers of EdgeCore Internet Real Estate, which is building six hyperscale campuses across the United States. GIC has also recently created a joint venture with Polymer Connected to build hyperscale data centers in Indonesia. The joint venture with Equinix provides GIC with a partner for a similar venture in Europe.
Equinix continues to characterize xScale as “not a broader entry into the wholesale market.” But the initiative has grown in scale and ambition since it was first announced in late 2017, saying it would compete on deals for up to 5 megawatts of space. The deal announced today envisions xScale building six hyperscale facilities across Europe with 155 megawatts of capacity – approximately 25 megawatts per facility.
Deepening Ties to Hyperscale Customers
Equinix is the global market leader in “retail” colocation, in which tenants buy smaller amounts of space by the cabinet or cage. Until recently, it primarily competed for deals of less than 1 megawatt in IT capacity. In the wholesale data center model, a tenant leases a finished suite of “turn-key” raised-floor space. Recently, wholesale players have leased larger data halls and entire buildings to single customers.
These business models have been blurring for years, as wholesale data center developers began pursuing smaller deals (under 1 megawatt) that would traditionally be thought of as “retail” scale. In 2015 the largest wholesale player, Digital Realty, made a major push into colocation by acquiring Telx, one of Equinix’ leading rivals in the interconnection space.
“It has been a long journey to reach this point, but we are tremendously excited to announce the formation of our first xScale data centers joint venture,” said Charles Meyers, President and CEO of Equinix. “Partnering with a world-class investment partner like GIC will provide the opportunity to make significant capital investments in order to capture targeted large-footprint deployments while continuing to optimize our capital structure.
“The JV structure will enable us to extend our cloud leadership while providing significant value to a critical set of hyperscale customers,” Meyers added. “We look forward to launching similar JVs in other operating regions and believe that these efforts will continue to further differentiate Equinix as the trusted center of a cloud-first world.”
Still Leading With Interconnection
Equinix says xScale will provide hyperscale companies with the ability to tap directly into its rich ecosystem of network connections, simplifying their operations as they move large volumes of data to users around the globe. Equinix said the xScale center “will be engineered to meet the technical and operational requirements and price points of core hyperscale workload deployments.”
The price point is significant, as Equinix has historically been successful in gaining a premium for its colocation space due to the strong connectivity in its data centers. Hyperscalers are known to drive a hard bargain on pricing, as their requirements draw plenty of competitive interest from data center developers coveting large wholesale deals.
Free Resource from Data Center Frontier White Paper Library
Equinix has moved deliberately thus far, placing hyperscale customers in several suburban London data centers, including the LD10 facility it acquired from IO in 2017. Equinix pioneered its hyperscale design in its Paris 8 facility.
The $1 billion joint venture, which will be a limited liability partnership with GIC owning 80 percent. Equinix will own 20 percent, and contribute the LD10 and Paris 8 data centers, which have leased “a significant portion” of their available space. New xScale data centers are expected to be developed in Amsterdam, Frankfurt (two sites) and London.
“By increasing the number of hyperscale facilities in the EMEA region, the joint venture between Equinix and GIC aims to accelerate the adoption of hybrid and multi-cloud as the IT architecture of choice by companies throughout the region,” said Kelly Morgan, Vice President – Datacenter Infrastructure & Services at 451 Research.
Equinix also said today that credit ratings agency Fitch has upgraded Equinix to investment grade, which will make it less expensive for the company to finance borrowing for growth. The cost of capital is important in the data center business, which requires significant cash to build new facilities.