IBM's SoftLayer Cloud Services Join Equinix Cloud Exchange - Analyst Blog

International Business Machines Corp. (IBM) recently announced that it has entered into an agreement with Equinix Inc. (EQIX) to facilitate direct access of its full cloud services to customers. With this agreement, IBM became the latest contributor to Equinix's Cloud Exchange, after Google Inc. (GOOGL) and Amazon.com Inc. (AMZN).

Per the agreement, Equinix will provide high-performance direct network access to IBM's cloud services providing company, SoftLayer via Equinix Cloud Exchange in nine markets across the Americas, Europe and Asia Pacific. With the collaboration, Equinix will offer IBM customers the benefit of its cloud infrastructure, including a secure connection, outstanding scalability and infrastructure dependability.

The Equinix Cloud Exchange provides seamless, on-demand and direct access to multiple clouds, across multiple global networks. These virtual circuit connections allow customers to use the cloud of their choice with dedicated, low-latency connections.

The partnership will enable IBM to expand the reach of its cloud platform and provide private connectivity to corporate customers globally in an uncongested and cost-effective manner. Moreover, Equinix helps to manage multiple connections through a single port, therefore making it easier for customers to access the IBM Cloud Platform.

This is not the first time when IBM has worked with Equinix to boost its cloud business. Previously, IBM's SoftLayer has used Equinix International Business Exchange (IBX) data centers through its dedicated network connection service, Direct Link, to offer direct cloud connection to its customers.

These deals will facilitate SoftLayer's customers to easily move their production workloads in and out of the cloud, thereby allowing them to fully utilize their cloud capabilities.

On the other hand, Equinix could benefit from the rising demand for cloud deployments by enterprises. A recent survey showed that 77% of the 650 IT decision makers intend to implement multi-cloud architectures by the next year.

Equinix remains positive on the growing demand for data centers attributed to the Big Data exchanges. To meet this demand, Equinix is expanding its IBX data centers globally and becoming popular among tech companies looking for data management. Thus, the company expects its total addressable market for retail data centers to increase at a CAGR of 8% from 2013 to 2017 and reach $24.0 billion. Based on this projection, the company projects a 10% revenue growth rate through 2017.

Nonetheless, Equinix competes with Internet data centers operated by established communications carriers such as AT&T, Level 3 Communications, COLT and Verizon.

Moreover, the telecommunication industry is currently undergoing consolidation. As customers combine businesses, they may require less co-location space, and there may be fewer networks available to choose from. In addition, increased utilization of existing co-location space could reduce the attractive expansion opportunities available to Equinix.

Currently, Equinix has a Zacks Rank #3 (Hold).