The Expansion Of Hyperscalers

Moving beyond core locations to enhance proximity and speed

Hyperscalers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud have become ubiquitous in our lives. From searching the Internet to online shopping and storing data in the cloud, few of our online interactions and transactions escape the reach of hyperscalers.

Like any businesses, hyperscalers have to pursue new opportunities while tracking the evolving needs of their customers and partners so they can adapt and scale accordingly. Traditionally focused on operating large-scale data compute and storage facilities in core (Tier 1) market locations—either their own or leased colocation space—hyperscalers are increasingly responding to opportunities around their customers’ moves to the Edge, which allows reduced latency,  improved performance, and better support for new products and services.

The results from Equinix’s 2023 Global Interconnection Index (GXI)1 study reinforces this shift: hyperscalers are recognized as the fastest growing segment of service providers in terms of interconnection bandwidth consumption, with a CAGR of 37 percent. And like other leading service providers, hyperscalers are also building out Edge infrastructure at a rate 150 percent faster than they are within their digital core.

The challenge for hyperscalers is to place colocation, compute, and storage services in locations where enterprises can use those services most efficiently and cost effectively.

Krupal Raval, Managing Director, Equinix xScale Data Centers

Moving away from the core

The traditional centralized infrastructure approach (focused on Tier 1 core markets) enabled efficient management and control of resources, took advantage of economies of scale, and facilitated speedy transactions among network participants. Yet as the Internet matured and experienced accelerating levels of adoption along with increased demand for private connectivity via interconnection, this approach has become less practical.

Growing population density, local regulations, community resistance to large data centers, and the lack of off-site redundancy (which is essential for business continuity and disaster recovery) have made it increasingly difficult for hyperscalers to acquire the land or power required to open new facilities in centralized locations. Instead, they deploy infrastructure in wholesale colocation facilities to avoid the space, power, and expense demands involved in making CAPEX investments.

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