Why did Microsoft tap this German exchange as premier U.S. partner for cloud peering?

DE-CIX's major global competitor is Equinix. (Pixabay)

Love a mystery? Here's one: Why did Microsoft tap a German exchange, with relatively little U.S. visibility, as the premier North American partner for its Azure Peering program for enterprise customers?

Azure Peering Service is provided by Microsoft in partnership with telcos to help enterprises get reliable, high performance connectivity from their premises to the Azure Cloud. Other cloud providers, including Amazon Web Services and Google Cloud, have their own connectivity services, often in partnership with service providers, to serve enterprise customers. As cloud services become more important to enterprises, those businesses can no longer rely on the vicissitudes of the public internet to connect to applications in the cloud, and that creates an opportunity for service providers.

"If you're an enterprise offering email on Office 365, a prime use case, you want to be sure you have dedicated connection to Office 365 independent of any network issue you might have," said Thomas King, CTO of DE-CIX, the German exchange that offers Azure Peering Service in partnership with Microsoft in both Europe and North America. For enterprises dependent on cloud applications, service disruptions can disrupt businesses. "This peering service enhances uses of Office 365 and makes it reliable," said King. "What we bring is we have a very strong network; we have connected many service providers and enterprises that directly use Office 365."

Microsoft named 11 partners for its worldwide peering program, including NTT in Japan, PCCW and Singtel in Asia and Colt, DE-CIX, and Intercloud in Europe.

DE-CIX who?

For its North American partner, Microsoft names DE-CIX, a German internet exchange that's little known in the U.S., rather than better known brands such as AT&T or Equinix. And it's unclear why.

"Microsoft probably picked DE-CIX because it is a neutral internet co-location provider with broad global coverage. The cloud providers have a history of working with neutral co-location providers to build out their cloud peering points. They might be leery of the major carriers because they can be perceived as competitors, and the carriers would prefer to keep the traffic and data on their own networks," said Scott Raynovich, founder and chief analyst of Futuriom. Raynovich notes that DE-CIX has numerous peering partners and is strong in Europe.

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DE-CIX's focus is on peering: interconnecting networks that need to exchange traffic, providing control over path, latency and bandwidth. Cloud exchange is a main product, providing connectivity between enterprises and service providers that need to connect with Amazon Web Services, Microsoft Azure and other platforms. DE-CIX also provides data center interconnect.

Founded in 1995, DE-CIX is owned by the eco - Association of the Internet Industry, based in Cologne, with 1,100 enterprises and service provider members, mostly from central Europe, who make up the bulk of DE-CIX's 1,700 customers. DE-CIX revenue is about $44 million, and growing about 15% annually. "Our revenue compared with other competitors looks a little small; the reason is we are not maximizing profit. The association controls what we do with revenues, mainly pushing us to reduce pricing," King said. The company has 120 employees, and 23 locations.

DE-CIX's customers include carriers such as CenturyLink and Colt, content providers such as Netflix, Amazon, Microsoft and Google, and "eyeball networks" providing consumer and enterprise internet connectivity, King said. Its U.S. customer base is located mainly on the East Coast and Midwest. For customers in the US not local to DE-CIX's Dallas and New York locations, DE-CIX partners with carriers.

"Our offering is what we call software-defined internet exchange," King said. The service provides an API for automated management and orchestration through a customer portal.

DE-CIX's major global competitor is Equinix, King added.

The German company provides network interconnection services and operates carrier and data center neutral interconnection platforms in Europe, the Middle East, North America and India. The company claims DE-CIX Frankfurt is the largest internet exchange in the world.

The peering program is part of a long game by Microsoft to partner with service providers to help enterprises connect reliably to Microsoft Azure and cloud applications such as Office 365. In July, Microsoft partnered on connectivity with eight managed service providers (MSPs), including SD-WAN specialist Aryaka as well as Equinix and Tata Communications.

RELATED: Equinix serves up private onramp for Amazon Web Services interconnections

Microsoft followed up in November, certifying five networking vendors to deliver Office 365 networking to minimize latency and maximize performance: Citrix SD-WAN, NTT Communications SD-WAN service; Silver Peak Unity EdgeConnect, NetFoundry Network-as-a-Service and ZScaler Internet Access. As part of that launch, Microsoft debuted a preview of its Peering Service, of which DE-CIX is a part.

Microsoft said in November that network reliability and low latency between Office 365 clients and the cloud is the most significant factor determining quality of experience.

The peering service uses a technique called "cold-potato routing" to keep network traffic that originates on the Microsoft cloud on Microsoft's own network, which offers high capacity, low latency and high reliability, until it's as close to the destination as possible, Microsoft says.

AT&T and Microsoft launched an edge partnership last year to deliver Azure closer to the 5G edge. Amazon Web Services launched a Global Accelerator networking program in November, to improve performance and availability of applications running on AWS by sidestepping the public internet and instead using AWS's own Global Network. And Google launched connectivity services, using its own network as well as service provider partners.