The Data Center Interconnect (DCT) Market was valued at USD 3.48 billion in 2019 and is expected to reach USD 7.65 billion in 2025 with a CAGR of 14% during the forecast period (2020 - 2025). Along with traditional telecom carriers with pre-existing optical fiber networks, dedicated Internet Content Providers (ICPs) are also utilizing this technology.
- Exponential increase in video and OTT traffic is the major driving force. In order to reduce total bandwidth costs, OTT content is cached locally in data centers, which needs to be transferred via data center interconnects for delivery. Moreover, the evolution of cloud services to reduce individual capital expenditure is also causing the market to grow.
- However, growing demand for content-based delivery is putting pressure on DCT, which is causing congestion and bottlenecks and is restraining the market growth.
Key Market Trends
BFSI Sector to Occupy a Significant Market Share.
- Digitization of financial services, especially in emerging economies are one of the major factors positively influencing the market growth. DCI is also necessary for sharing data with third-party providers and financial exchanges that are part of a bank’s digital services ecosystem.
- Lately, Switzerland has been gaining a strong foothold in data centers from providers such as Equinix, Swisscom, Orange Business Services, Green Datacenter, Interxion and Colt Technology Services due to presence of world’s largest banks and financial institutions.
- Equinix offers data center colocation and interconnect services to many of the capital markets participants, insurers and electronic payments firms to facilitate the operation of financial IT workloads.
- Ciena provides DCI technologies for bank’s networking infrastructure since they need to support traffic for a full range of digital products, from digital money transfers to real-time payments, and open banking via APIs.
Asia-Pacific to Witness a Significant Growth During the Forecast Period
- Asia-Pacific region is growing significantly due to the rise in cloud-based services and data centers originating from factors such as the growth of content providers, investment by giants in data centers as well as various ongoing government initiatives.
- Explosive digital needs of emerging economies such as India, China and Indonesia which are booming with huge population are also driving the market demand.
- In January 2019, Equinix invested USD 85 million for a 4th data center in Singapore. It will provide interconnection and data center services to help businesses with their ITG transformation and cloud adoption initiatives while supporting Singapore’s digital infrastructure.
- To support research & education, Cisco and Australia’s Academic and Research Network (AARNet) announced live production traffic on the AARNet portion of the INDIGO subsea cable, connecting data centers in two countries which are over 9000 km apart.
- In May 2019, UK-based Colt Group announced its entry into India with plans to build a 100MW IT hyper-scale data center facility. The campus will allow for the larger deployment of cloud computing services and further development of DCI.
The market is concentrated due to enterprises relying on only pioneers occupying the majority market share. Lately the vendors offering data centers are also providing data center interconnect solutions as a combined offering.
- September 2019 - Cisco and Australia’s Academic and Research Network (AARNet) announced live production traffic on the AARNet portion of the INDIGO subsea cable, which connects data centers in two countries, over 9000km apart, to support research and education.
- September 2019 - Cosemi Technologies, a pioneer in high-speed connectivity solutions partnered with Foxconn Interconnect Technology Ltd. (FIT) Under this collaboration, Cosemi will license its 25G SFP28 and 100G QSFP28 AOC platforms to FIT
- September 2019 - ADVA announced its 3-year initiative called Photonic Embedding of Active Region Laser chips in Silicon (PEARLS) to create optical transceiver chiplets. It will manage urgent bandwidth needs by enhancing density, flexibility and efficiency in data center interconnect (DCI) networks.
- July 2019 - Intel announced to buy chipmaker Barefoot Networks to boost its hyperscale cloud data center business. Barefoot is knowns for its P-4 programmable Tofino Ethernet switches that are widely used for interconnect in major cloud providers’ data centers.
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