12 December 2023

Five reasons connecting to an interconnection platform makes financial sense

Building connectivity cost savings

When it comes to enterprise technology spending, many businesses are tightening their belts. Given that the purpose of investing in new technologies is usually to make businesses more efficient, productive, or competitive, this might seem counter intuitive.

But according to Gartner, global IT spending contracted 0.2% last year. Although it’s expected to increase 2.4% this year, that’s still relatively slow growth by 21st century standards. With high inflation and rising interest rates impacting revenues, many businesses are currently looking for opportunities to cut costs rather than focusing on growth opportunities.   

In this environment, every cent spent on enterprise technology needs to be justified to the CFO, and that includes the cost of connecting to an interconnection platform. Interconnection platforms include Internet Exchanges and Cloud Exchanges, and they facilitate data sharing between networks and clouds, giving access to all the networks and cloud providers your business needs to reach. Using one ultimately reduces costs and allows revenue to be reinvested elsewhere. But the case will need to be made for the up front investment and a change to the status quo.

With that in mind, here are five reasons connecting to an interconnection platform makes financial sense for your business:

1. Reducing transit costs

The traditional method for connecting to the Internet is via IP transit, where one network pays another for access. When businesses buy IP transit directly, or rely on an ISP to buy it for them, they have to pay fees to send data over the public Internet, and often have to maintain agreements with multiple providers.

When businesses use an Internet Exchange they connect via a process known as peering rather than IP transit. Peering enables networks to exchange traffic for their mutual benefit on a cost-neutral basis, bypassing transit providers. While there are exceptions relating to regions and usage volumes, peering at an Internet Exchange will usually incur lower operating costs than connecting to the Internet via traditional IP transit.

2. Transmitting data efficiently

Peering at an Internet Exchange allows your data packets to be transmitted cost efficiently to their intended destination via the shortest, most direct route. This direct path to exchange traffic – avoiding the long, unpredictable, and often expensive routes through the public Internet – will save your business a considerable amount in ongoing operating expenses.

In addition, you won’t need to arrange connections and peering agreements with each individual network. Instead, your business only needs a single cross connect to an Internet Exchange to gain access to the vast majority of the networks it is likely to need, including multiple cloud service providers.

You can also significantly reduce the egress fees charged by cloud service providers for data that is transferred out of their cloud. For instance, you can directly route data between two clouds without it traveling via your on-premise systems, reducing unnecessary transport costs as well as the egress fees.

3. Increasing business agility

In a dynamic digital environment, it can be difficult to know how your enterprise interconnection needs will change over time, and to budget accordingly. Connecting to an interconnection platform gives you access to a scalable infrastructure that you can upgrade at any time if demand increases.

Automation and virtualization make booking services at interconnection platforms simple and flexible, so you only pay for what you need. If you have a significant technology rollout on the horizon you can scale up to make sure you have sufficient capacity, and then downgrade again if you find you have too much. You can also explore network as a service, giving your business ultimate flexibility and agility. 

4. Reducing business risk

Opportunities to reduce costs and free up revenue are compelling. But when you’re making the financial case for connecting to an interconnection platform, you’ll also need to factor in the potential costs of getting connectivity wrong. Internet Exchanges and Cloud Exchanges enable secure, reliable connectivity which significantly reduces business risk.

In a recent article about reliability we referenced an Uptime survey that revealed two-thirds of outages cost businesses over 100,000 USD. And a quarter of businesses said their most recent outage actually cost them more than 1 million USD. Equally, in an article on security we cited IBM research that indicated the average total cost of a security breach reached 4.45 million USD this year. Connecting to an interconnection platform might cost hundreds of dollars per month for a large enterprise, but that’s a drop in the ocean compared with the cost of an outage or breach that results from not doing so.

Some of the risks to consider when making the financial case for connecting to an Internet Exchange include:

Security: data breaches and cyber security attacks can cost millions

Availability: the inability to access business-critical IT systems can result in lost revenue

Performance: limited access to IT systems can reduce business productivity

Compliance: failure to follow data regulations can damage reputation and incur costs

5. Boosting business performance

In addition to reducing costs, increasing agility, and limiting risk, connecting to an interconnection platform boosts business performance, which makes it great value. This is perhaps the biggest factor in convincing your finance department to make the investment.

At a time when fast, reliable network infrastructure is critical, connecting through an Internet Exchange or Cloud Exchange improves the end-user experience through increased reliability and responsiveness. In fact, simply knowing you use an interconnection platform can be a valuable indicator of your commitment to quality in your customers’ eyes. It also enables you to do business more easily with the hundreds, if not thousands, of other participants, opening up valuable business opportunities and partnerships.

Connecting to an interconnection platform meets your business’ needs for capacity, speed, reliability, and security, as well as cost efficiency, and helps you build a foundation of connectivity resilience with which any CFO should be able to get on board. At a time of tightening budgets it will free up revenue to reinvest elsewhere and help to future-proof your business.

Check out our guide Building connectivity for the world of tomorrow to learn more about how interconnection platforms can transform your digital infrastructure and support your business long into the future.