“The COVID-19 outbreak had a huge impact on society and AMS-IX. Daily life was severely disrupted as a result of all the governments’ containment measures. The healthcare sector suffered (and still suffers) heavily. Governments around the world struggled to get on top of the pandemic, keeping their citizens safe and the economy going. ‘The world’ started working from home almost overnight which resulted in a steep incline of Internet traffic. Many organisations realized they need(ed) to make serious work of their digital strategy. As one of the global leading Internet Exchanges, AMS-IX had a front row seat to these developments. The exchange saw double digit traffic growth and 3 milestone peaks in just over a year, approaching the 10 Tbps peak.
The Interconnectivity market
Public Peering remains an important form of Interconnectivity. This is demonstrated by the steep incline in traffic across Internet Exchanges throughout 2020. Many of our existing customers upgraded their capacity, confirming our key role in reliable and trusted facilitation of exchanging Internet traffic. The number of new customers was relatively low in 2020, as most organisations implemented a budget freeze to wait and see what the pandemic would bring.
Despite the capacity and traffic growth, the underlying trends have not changed fundamentally. Consolidation continues to drive change in mature Internet markets. In other parts of the world, such as the Middle East, South East Asia, South America and Africa there is rapid growth as more and more users get online to benefit from digital and mobile services. This is also reflected in the growth of sea cables and data centres in those parts of the world. Finally, with technology trends such as Internet of Things (IoT), Edge and the push for 5G we are heading to a hyperconnected society that will require a solid mix of interconnectivity solutions, including Public Peering.
“In terms of business performance, I am proud of the team. They have done a great job despite the challenging circumstances”
Another important development is governments changing attitude and increasing interest in “Digital”. All aspects of life and society are moving to the virtual world, such as business, social interaction, criminality, national security, even espionage. Governments themselves are also becoming more digital in their interaction with their citizens and businesses. As an industry, we need to continue investing in the relationship with governments to bridge knowledge gaps and ‘differences’ to implement good, solid policies for our Digital Society.
Long term strategy – Innovate, Optimise, Grow
Based on our purpose of “building a better internet to contribute to a better society” we defined the following three Long Term Strategy pillars: Innovate, Optimise and Grow. Across all three strategic pillars, we see the results of the investments and hard work of the team. Together with a number of partners, we are developing new innovative solutions and services focused on open and neutral but secure exchange of data, specifically for Communities of Interest such as healthcare and other market segments.
Innovation is essential to remaining relevant in a consolidating market. AMS-IX is investing in both Market and Product Innovation to develop new value-added services for its members and customers
Every organisation needs to continuously optimise to increase efficiency and drive down cost. At AMS-IX, we are constantly looking for more efficient ways to run the platform and business. Therefore, we continue to invest in our Digital Transformation and create benefits from economies of scale for our customers
Size does matter. Scaling up will support the push for more value to our members and customers. Additionally, to support the greater good of the Internet and the interests of our members and customers, size matters to remain relevant and having a ‘seat at the table’ of the multiple realms of influence, such as the EU, local government and the various Internet organisations
Our tech team is constantly optimizing the platform, deploying new technology and features to improve switching and routing efficiency. Although the platform could handle the strong growth, the team spend the second half of the year upgrading and updating the platform to support further growth. The investments in our Digital Transformation are showing with the release of new CRM and ERP tooling, phasing out legacy applications, updating the provisioning technology and preparing for end-to-end process automation and customer self-service. This also resulted in the launch of the new ams-ix.me community portal in December 2020. In 2021, new functionality will become available every month.
During the year, we experienced 35% traffic growth and almost 10% growth in 100 GE ports in Amsterdam alone, signifying the relevance of AMS-IX and Amsterdam as a leading connectivity hub. Based on our IXaaS (IX as a Service) offering, we will expand further in India together with our partner Sify by adding 4 new exchanges in 2021. During the year, AMS-IX signed two more international deals with Telecom Egypt for a new Exchange in Cairo and with SNS for a new Exchange in Uzbekistan, which will both launch in 2021. International expansion will continue throughout 2021 and beyond with many opportunities already lined up.
The pandemic also had a big impact on AMS-IX. No longer able to travel to events and meet our customers and members or industry peers meant that we had to think of new ways to interact with our stakeholders. Throughout the year the team worked hard and supported colleagues in the difficult lockdown period. We also saw numerous initiatives from colleagues supporting each other, underpinning the pride of the AMS-IX team.
It took a while to get used to recruiting new employees through videoconferencing, let alone onboarding them, but we managed to do so and strengthen the team with a number of talented new colleagues. Of course, a number of colleagues also left the organisation, most notably Henk Steenman, who retired from AMS-IX in December after 18 years of service. It has been a personal privilege and honour to work with Henk for the past three years and we will miss his knowledge and experience. (On March 1st, 2021 Ruben van de Brink joined AMS-IX as the new CTO, taking over the responsibility for the full tech team.)
In terms of business performance, I am proud of the team. They have done a great job despite the challenging circumstances. We have made many improvements in a difficult operating environment, and we have been able to maintain our momentum. I am thinking of all the updates and upgrades to the platform, passing the ISO 27001 recertification audit, multiple releases in our Digital Transformation, but also the implementation of a new Employee Management system and updating our Core Values. We also laid the foundation for a Learning Management System and an upgrade of our mail and collaboration systems in 2021. Last but not least, together we agreed on a new Job Reference Framework with the Works Council.
2020 in numbers
AMS-IX is part of an industry that did not directly experience negative economic effects of lockdowns and other restrictive measures. This also shows in the financial results for 2020. Gross revenues grew with 9% to EUR 21.0 million, primarily driven by growth in the Public Peering business and 100GE ports to deal with increased traffic due to working from home. Gross margin declined to 88.5% due to increasing data centre costs.
Personnel costs increased 6% while the number of FTE declined to 59.1. The increase in costs is mainly due to the hire of outsourced labour to support the implementation of new ERP and CRM tooling. A number of costs were lower than budgeted, most notably depreciation (EUR 1.3 million lower) and marketing and travel (EUR 0.5 million lower) due to lockdown and travel bans. Furthermore, a Deferred Tax Asset of EUR 0.2 million has been accounted for at 31 December 2020 as a result of dissolving AMS-IX, Inc. because the management believes compensation for tax purposes of part of the losses is likely.
I want to thank our members and customers for their continued trust in our services and our partners for their support in providing those services. Of course, none of this would be possible without the continued effort and commitment of the AMS-IX team. The pride the team brings to serving our members and customers every day is a joy to see and be part of. Finally, I would like to thank the AMS-IX Board for their continued support, constructive dialogue and interaction with the management team and myself.”