EdgeConneX: We're not for sale and we're doing just fine
EdgeConneX executives have denied reports that the company has hired investment bankers to explore strategic alternatives or an outright sale. Further, they said that EdgeConneX -- one of the market's earliest players in the edge computing scene -- is doing just fine, thank you very much.
"We're seeing as much demand for organic growth as we ever have," Joe Harar, the company's CFO, told Light Reading.
Harar confirmed that EdgeConneX -- a private company that does not disclose its financials -- routinely raises money from both strategic and institutional private equity investors, including Providence Equity Partners and Brown Brothers Harriman. He said the company is fully funded from an equity standpoint.
"There's been a lot of chatter in the market. We've been very active in the development front. We're always raising capital," he added, reacting to reports from financial publications like Acuris' Inframation and TMT Finance that EdgeConneX has hired investment banking firm Evercore to explore "strategic alternatives" including a possible sale.
"There's not a formal, active process going on," Harar said, noting that EdgeConneX has used Evercore for various financial efforts, but that there's "no active engagement in place today" with the firm.
So if EdgeConneX isn't for sale, what is it doing?
5G and the IoT "is going to be the next wave for us certainly as we build out our existing footprint," said Phillip Marangella, the company's CMO.
Indeed, EdgeConneX's corporate story essentially works as a microcosm for the development of the wider computing and cloud industries -- and the company's trajectory could well point to how the telecommunications industry could eventually integrate into the cloud computing and data center sectors.
A short history of cloud and edge
EdgeConneX got its start in 2010, long before the current buzz around 5G and edge computing. But Harar argued the company's business model hasn't changed since its founding: He said EdgeConneX still acts as a wholesale provider of space and power for computing, building data centers in the geographical locations that its customers want.
Importantly, EdgeConneX's initial opportunities came in part from the cable sector. In a widely cited anecdote, cable company Cox in 2012 struggled to keep pace with demand for the Gangnam Style YouTube video from rapper Psy, mainly because the video was stored in a data center in Los Angeles and Cox needed to transport it to customers in locations like Phoenix. Enter EdgeConneX, which promised to build relatively small data centers (2-4 watts) in locations like Phoenix where its customers needed them (Akamai, Cox, Ciena and Comcast are among EdgeConneX's investors).
Today, that kind of localized, cached storage for online videos is a standard element in most providers' services.
But then, a few years ago, "along comes cloud," said EdgeConneX's Marangella. Instead of building relatively small data centers for customers like cable companies, EdgeConneX began getting requests from giant cloud providers like Microsoft for "hyperscale" data centers -- cavernous buildings requiring up to 100 megawatts to power endless rows of servers.
The reason? Cloud providers realized they could speed up their services by building computing facilities geographically closer to their customers.
"Providing local cloud access in Portland was far better than accessing it via the public Internet. You had between 50-85% improvement in latency because in the past you had to go up to Seattle or down to Santa Clara to get onto the cloud," Marangella said. "Taking the cloud to the edge was the next driver. To engage those [cloud] guys, our model of giving them exactly what they want, when they want, where they want, really resonated. So they were like, 'Could you go bigger?' And it didn't matter to us. And so we have built very large facilities as well for hyper- and webscalers."
"We can go from 10 kilowatts to 100 megawatts and everything in between," he boasted.
Thus, EdgeConneX's story largely traces the wider development of the Internet itself: Local caching was initially critical for the delivery of bandwidth-heavy services like video, and then cloud computing from the likes of Google and others essentially centralized disparate customers' computing tasks into massive data centers.
5G, IoT and opportunities
Now, though, EdgeConneX is eyeing what many believe is the next phase of the computing industry: Pushing services closer to customers, or closer to the "edge." That push could require hundreds or even thousands of mini data centers spread all over the country and the world.
"Everyone is talking about the edge now, but we've been doing this for almost ten years," Marangella said.
And it's 5G, IoT and services like online gaming that are really driving demand now, according to Marangella and Harar. "That's the future wave." Marangella said. "We're already seeing deployments for things like autonomous vehicles and smart cities and all this kind of stuff."
"We have this very interactive and iterative approach to identifying the specific locations, identifying the type of capacity and the timelines that our customers need deployed," Marangella explained. "These happen to be the guys that are pushing the limits of latency… and so the emerging technologies that exist have manifested themselves at the edge. And that's why our focus has exclusively been in these location-specific edge deployments."
Questions remain on edge and telecom
However, there's not much clarity around how this space will play out. Both Marangella and Harar acknowledged that IoT and 5G providers will likely need more computing and storage resources, in a variety of geographical locations, and will likely try to meet those needs through a combination of internal resources and resources from third parties like EdgeConneX. But exactly where and how that will play out remains a bit of a mystery, particularly in the mobile space.
"For these mobile networks, there's not enough power at the tower to be able to handle the edge computing," Marangella said. "So you have to be smart about how you deploy your applications and workloads and where you handle that. Is that handled at the extreme edge or do you go to just a standard edge location?"
Continued Marangella: "You really need to be smart about how you architect not only where your deployments are but how the traffic flows more efficiently and effectively. And because, as we're wholesale, we work with these guys to say, hey, it doesn't matter whether it's at the tower, whether it's in the building, or a traditional edge data center, or back to a large facility, we can help along that entire continuum, and also work with others to interconnect them."
Google, Equinix, others eye the edge
Although EdgeConneX is an early mover in the edge computing space -- it now counts over 40 data centers in 30 different markets across the US, Europe and Latin America, ranging in size from 2-50 megawatts -- the company isn't alone. Other companies that are building edge computing data centers of various sizes and locations include EdgeMicro, DataBank, Compass Datacenters, Baselayer, Switch, DartPoints, vXchnge and 365 Data Centers.
Moreover, large data center companies are concurrently building out new locations into new geographies. For example, Google announced earlier this year it would spend a whopping $13 billion in 2019 to expand operations into a total of 24 total states.
And Google is working to leverage that massive investment. For example, the company's recently announced Stadia online gaming service would rely on the company's network of fiber and data centers to provide the low latency speeds necessary for twitchy shooting games like "Doom Eternal."
Similarly, data center giant Equinix has begun to build data centers in new markets where it sees growth. As noted by Data Center Frontier, the company has constructed new facilities in Oman, Bulgaria, South Korea and Hamburg, Germany.
But Equinix CEO Charles Meyers recently acknowledged that it's unclear exactly how close to the edge the company should get. "We do believe the evolving edge is a real, strategic question for the company," Meyers said at an investor event in January, according to an SDX transcription of his comments.
"Most of the things we've seen in terms of opportunities, for things like IoT use cases and workloads, we've been very successful in competing with our current macro edge," Meyers added. "The harder question is: do we play [at the extended edge]? Do we expand our franchise into it? Do we partner with others? And how do people differentiate at that more extended edge? We are watching closely for what it means for our business long term."
Edge computing community pushes for cohesion
Meantime, the smaller companies focused on edge computing are working to stamp out the opportunity in every way they can. Just today, a coalition of edge computing companies released a new "state of the edge" report focused on how companies should handle data at the edge. Matthew Trifiro, chief marketing officer of Vapor IO (a startup that recently disclosed plans to build mini edge computing data centers in up to 30 US cities), explained that the coalition's initial "state of the edge" report last year was "successful beyond our wildest dreams," in part because it brought some clarity to the "Tower of Babel" around edge computing.
As a result, Trifiro said Vapor IO, Packet and other members of the coalition plan to release not only a major "state of the edge" update this summer but also a handful of smaller reports on different areas of the industry. The next mini report will focus on edge computing in the telecommunications space.
Trifiro said members of the coalition behind the reports have moved from a sponsorship model to a flat $7,500 fee for participation. He said there are now almost 50 members of the coalition behind the reports, all seeking to gain some visibility in the edge computing space.
The upshot, according to Trifiro, is that there's now a critical mass of players in the edge computing space. "These are significant dollars that are being deployed," he said. "It's tangible."
— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano