Shaping the future: value creation in digital infrastructure

October 2022  |  FEATURE | OPERATIONAL STRATEGIES

Financier Worldwide Magazine

October 2022 Issue

Digital infrastructure has come a long way in a short period of time, to the extent that it now makes a persuasive case for being the fourth utility after water, gas and electricity.

To summarise, digital infrastructure brings together and interconnects physical and virtual technologies such as computers, storage, network, applications, and infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS) platforms, to build the foundation for a company’s digital operations.

“Companies use this foundation to rearchitect their services for global digital delivery and to access the ecosystems and capabilities they need to rapidly build products and services and deliver them at scale,” says Wellington Lordello, marketing and business development manager at Equinix. “While digital infrastructure was once an enabler for businesses, it is now a primary source of competitive advantage.”

According to analysis by KPMG, in the past few years there has been a 45 percent per annum growth in enterprise internet data traffic and an ongoing demand for more fibre, more data centres and more towers – the ‘holy trinity’ of digital infrastructure in the view of industry practitioners.

Underpinning this growth is the inexorable shift to a digital life, exemplified by annual growth of 35 percent in high definition video and 40 percent in mobile data. KPMG’s figures also reveal a 15-20 percent annual growth in cloud workloads to support database analytics, enterprise resource planning (ERP), computing and collaboration.

Moreover, while technology trends such as these were already well underway, they shifted into overdrive during the pandemic. The results of Equinix’s ‘2020-21 Global Tech Trends Survey’ show that 47 percent of IT decision makers said their companies had accelerated their digital transformation initiatives as a result of coronavirus (COVID-19), while 60 percent said the pandemic forced them to revisit and revise their IT strategy.

“Digital technologies came to the fore during the pandemic, with millions of people successfully working from home, schoolchildren being taught remotely, consumers buying their groceries online and people maintaining social contact via social media and Zoom calls,” concurs Tom Walker, co-head of global listed real assets at Schroders. “The digitisation of almost every aspect of our lives means that we are now reliant on the infrastructure that enables this connectivity.

“The ‘mission critical’ nature of this infrastructure is perhaps best highlighted by the categorisation of digital infrastructure staff as ‘key workers’ during the pandemic,” he continues. “The digital revolution represents a seismic shift in how we live and work and as investors in global cities, we believe that this presents a compelling, long-term investment opportunity.”

Opportunities and challenges

By going digital, companies can access a wealth of opportunities to build digital advantage, boost agility and deploy faster. These opportunities are underpinned by the three key trends identified by Equinix, as outlined below.

First, digital infrastructure is shifting to the edge. Companies are starting to understand the value of shifting their digital infrastructure to the edge, rather than relying exclusively on a centralised digital core. By distributing infrastructure at the edge, digital leaders can analyse data closer to the source to gain insights quickly and efficiently.

Second, digital infrastructure is increasingly developer-led and software-defined. Developers are gaining more influence in their company’s technology buying decisions. As these developers move into the driver’s seat, one of their top priorities will be to increase business agility through greater adoption of new technologies, such as virtualisation, containerisation and automation.

Third, digital infrastructure is increasingly comprised of interconnected partner ecosystems. Global digital businesses simply cannot be successful operating in a vacuum. They need to be able to capitalise on their own strengths, while also quickly and easily drawing from the respective strengths of a diverse group of partners.

However, as well as creating value, such opportunities can also leave companies open to an array of complex cyber security threats, threats that can only be mitigated by using new and innovative security strategies.

Digital frontiers

Undoubtedly, digital infrastructure is now a primary source of competitive advantage for companies. Moreover, the World Economic Forum (WEF) estimates that 70 percent of new value created in the economy over the next decade will be based on digitally enabled platform business models.

According to KPMG, demand for digital infrastructure will continue to grow over the next decade and is likely to become an attractive investment asset class. In addition, whether it be smaller disruptors or large incumbents, companies will need to digest changes and respond proactively as business models continue to evolve.

“As businesses plan for a post-pandemic future, many of the same technology trends first brought to light by the pandemic will continue to play a significant role in driving infrastructure change,” suggests Mr Lordello. “These trends represent new opportunities that digital leaders are already beginning to capitalise on, as well as new challenges they will have to adapt to in order to overcome.”

© Financier Worldwide

BY

Fraser Tennant