Equinix forms $1 billion venture for 'hyperscale' datacenters

Equinix, the data center colocation giant, is forming a $1 billion joint venture with Singapore's sovereign fund to build bigger facilities for 'hyperscale' data centers.

Equinix currently runs 200 mammoth facilities worldwide where cloud giants, such as Amazon Web Services or Microsoft Azure, set up datacenters to support their massive networks, and offer faster service in specific locations.

The company formed the venture to build even bigger facilities that could typically hold more than 10,000 servers each.

An analyst said the venture is a “significant investment” in a market that's expected to be worth $62 billion by 2025.

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Equinix runs huge facilities where cloud giants set up thousands of servers in huge datacenters that support their massive networks. These so-called “hyperscale” data centers help them provide faster, more reliable services to customers within

Equinix, a Redwood City, California-based tech company, already runs more than 200 such facilities worldwide, but the need is still growing. That's why Equinix said it is forming a $1 billion venture with Singapore's sovereign fund to build even more massive facilities to serve the ever-growing computing power requirements of cloud giants.

Indeed, Equinix already counts Amazon Web Services, Microsoft Azure, and Google Cloud as customers — though the company doesn't say if they're using these specific hyperscale data centers.

“They are growing faster than they can build their own capacity, so they turn to outside suppliers like us to provide that large-scale capacity in various locations,” Eric Schwartz, Equinix's chief strategy and development officer, told Business Insider.

Equinix operates like a landlord that also offers technical services to major cloud companies. The company provides the real estate where cloud giants set up their servers, as well as the technology that makes it easier for these data centers to connect with their main datacenters and the outside world. Cloud giants typically deploy these hyperscale datacenters to enhance their main networks, Schwartz said.

“Our facilities are designed to be the junction points,” he said. The cloud giants “build their networks from their facilities to facilities like ours” setting up “small deployments that operate like a gateway.”

The joint venture with the Singapore sovereign fund, known as GIC, plans initially to build six facilities in Europe, including Amsterdam, Frankfurt and London. Equinix will own 20% of the venture, while Singapore venture, known as GIC, will control 80%. The venture is expected to close in the third quarter, Schwartz said.

Analyst Ray Wang of Constellation Research called the Equinix venture “a significant investment.”

“These are larger facilities with more than 5,000 servers and 10,000 square feet” with “higher densities, less power consumption, massive compute power,” he told Business Insider. “Enterprises and brands who want to access hyperscale compute have limited options as they must go to public cloud options which limit their agility and security.”

Through the venture, Equinix will be able to “tap into a huge market that gives customers choice without the capex build out requirements.” The market for hyperscale datacenter facilities is projected to be a $61.2 billion market by 2025, according to Constellation Research.

Equinix is building the facilities at a time of heightened focus on data privacy, including the requirement in some countries and regions, including Russia, China and the EU, for tech companies to store data in the countries they serve, not in foreign locations.

However, Schwartz says that the major reason why customers turn to Equinix isn't for purposes of meeting those requirements, but rather for reasons of performance: The main reason their customers would want to set up a hyperscale data center in a specific location, he says, is to improve the quality and speed of their networks.

“Our customers want to be geographically distributed,” he said. “This is about performance and hosting the datacenter near users. People's tolerance for delay on their applications is going down.”

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