EUR 850.00 For Business Accounts Only

Morningstar | With Greater Focus on Interconnection, Digital Offers Tenants a Full Suite of Data Center Options

Digital Realty has transformed its business from one that merely provided large companies vast amounts of space and power (a typical wholesale data center) to one that can offer customers of all sizes the full spectrum of space, power, and connection needs. Prior to its acquisition of Telx in 2015, Digital Realty garnered almost 95% of its total revenue from wholesale data centers and had no interconnection revenue. As of June 2018, wholesale space comprised 75% of revenue, while colocation space provided 14% and connections generated 11%. We think the trend toward colocation and the need for interconnection will continue as enterprises relying on hybrid cloud models need to connect with multiple providers and data use rises. In our view, Digital Realty was smart to get into the more attractive colocation and interconnection business, and we think its ability to provide those services in conjunction with the capacity to offer wholesale space to the largest cloud providers leaves it well positioned to win in an evolving technological landscape, where huge cloud providers drive the industry but need to connect to virtually all other enterprises.We think interconnection is the key that makes colocated data centers much more valuable than simple leasable real estate. In Digital Realty's data centers, tenants can directly connect with each other, resulting in reduced latency and superior security. Even when in different locations, Digital Realty customers can bypass the public Internet to connect with other Digital Realty data centers via direct fiber connections within cities or through a software-defined network between cities. With many networks connecting to data centers to move traffic, data centers are also prime locations to connect to the public Internet and for networks to peer with each other. We expect connections to become even more important as enterprises increasingly rely on the cloud for applications they traditionally performed in-house, and we believe the Internet of Things, artificial intelligence, and augmented reality will contribute to data center demand, all driving Digital Realty's business.