Putting green in the bank
- 01 October, 2008 17:15
Green IT has been brushed off as just another fad, but for many industry players it has generated strong revenue streams and is now considered part and parcel of good practice. TREVOR CLARKE reports.
Green IT has been lambasted for marketing hype and unsubstantiated claims from all corners. It has been brushed off as just another sales pitch with scant legitimacy from a business standpoint. But isn’t there more in the environmental sustainability movement for enterprises large and small? Can we not derive a genuine and repeatable business case for turning a deeper shade of green? Do we want to?
One year ago the answer might have skewed to the negative – companies were just not convinced and maintained a deserved scepticism. However, with a much greater understanding of the magnitude of the issues and recognition of the transformational potential inherent in IT, some players are finding green IT can be a hearty and repetitive revenue stream that leads to healthy relationships. In fact, with most tenders in government and larger enterprise including environmental sustainability requirements the balance is precipitously tipping towards the positive: Green IT is a real financial story.
“We have been doing this for 12 months now and there has been a real education focus around breaking through some of the myths,” Fujitsu’s national head of sustainability consulting, Alison O’Flynn, said. “We’ve seen real acceptance in the market that this is not an extra cost, it’s actually an opportunity to look at your business and generate new sources of revenue or reduce costs.”
A recent Federal Department of the Environment, Water, Heritage and the Arts contract win by Hitachi Data Systems (HDS) is a good example. Although by no means the largest deal out there, HDS was awarded the $2.2 million contract to implement storage virtualisation because of the firm’s recommendations on how to better utilise the department’s storage capacity without consuming more energy.
And for many in the industry, it is this kind of consulting play which provides the best platform from which to develop a green IT business, especially as education on environmental issues continues to be lacking.
“We really started down this track around two years ago and it has mainly been R&D until a solution was finalised,” Prima Consulting managing director, Robert Riegert, said. “We are really just going to market in a more structured way now with our solutions. We have found a lot of confusion as to what really needs to be done in terms of sustainability practices and compliance obligations with Federal Government legislation.”
Prima bases its whole operation on being environmentally sustainable through information management and won the Microsoft Sustainability Solution Award this year. Riegert claimed companies have an idea they need to do something around green IT, but don’t really understand what that is – hence a business opportunity exists.
“To be honest, our point of view is your sustainability outcomes are very closely linked to your financial outcomes and it will be even more so in future with things like carbon trading, carbon credits and perhaps carbon taxes,” he said.
“When you say green IT most people think about cutting electricity out of your datacentre, going to blade servers and server virtualisation. Those sorts of things are the first things that come to mind rather than using the technology that you have available to assist you in your green practices in the other areas of your business.”
Dimension Data chief technology officer, Gerard Florian, agreed and said that this kind of advisory and consulting operation represented a solid revenue stream. This makes it important to focus on the technologies that enable green practices.
“The business community, the IT executives are sitting there and saying ‘where do I start?’” he said. “The revenue stream when we talk about green IT is not new products. The revenue stream is virtualisation. The revenue stream is videoconferencing. They are existing products that are being sold because there is a greater requirement than ever to reduce cost and also your carbon footprint.
“I think the ‘not so sexy’ answer when we talk about revenue streams for green IT is more of some very specific pieces around collaboration, travel reduction, power efficiency; all those sorts of things.”
To be sure, the technologies on the market today, like virtualisation and power management software, are essentially already taking companies down the sustainability path.
“You can’t separate them and that is why when you see people talk about green IT being just another fad or the latest hype, to us green IT certainly isn’t that; it is good business sense,” IBM’s IT optimisation leader A/NZ, Chris Fasseau, said.
“These are things you should be doing within your business anyway. But now we do them and actually have a far greater view of how they are impacting our carbon footprint, how they are affecting our total green footprint. But there is no magic wand. It is just good IT practice.”
Optimal PrimeAlthough there is little quantitative data to reference, the consultative or advisory side of green IT is an opportunity in Australia with legislative obligations already in place and more on the horizon, IDC associate research director for green IT and services, Philip Carter, said.
“We haven’t tracked any numbers along those lines in terms of how much people are making,” Carter said. “It is something that we are looking at and asking, but the vendors themselves aren’t breaking it out as a separate line item. From a qualitative perspective the big money at the moment is around infrastructure optimisation and then reducing electricity consumption as a result of that.”
Datacentre assessments and follow on services projects when firms are able to offer hardware and software products are where revenue is found, according to Carter.
“At a large scale that is where we see the money being made,” he said. “For the big vendors such as IBM and HP it’s all about infrastructure optimisation, infrastructure management and they tag the need to reduce electricity consumption on top of that; this is where the revenue is being made.”
In fact, ongoing power management is one area that many industry leaders highlight as an opportunity. Fujitsu, for example, includes power management as one of its four key green IT tenets – the others are cleaning up operations, optimising infrastructure and procurement.
“We look at the actual sources of energy as a start,” Fujitsu’s O’Flynn said. “Is there a combination of green power or is there an option to have some renewable energy sources?”
While conceding Australia was not at a practical level yet with green power, she contended it was on the horizon and that with further developments using green power would not be overly costly.
“I don’t think we are far away from that being a cost neutral situation if we look at 2010 and carbon trading with the expected increases in electricity cost,” she said. “There will be a point where that is beneficial to have green power as part of the strategy.
“I think that is where the gap in the market is. The last 12 months in Australia has been around education and breaking the myths. We are starting to see a real intent by organisations to look at green IT not as an additional cost but as a driver for business. I still think we are a while away from people grappling with the fact that this is a real opportunity to create credit. I have worked with some companies that do that, but they are the few rather than the majority.”
With the impending introduction of an emission trading scheme (ETS), companies will be forced to factor in the cost of carbon. For EDS green practice leader, Sundeep Khisty, this is clearly a business issue and places green IT at the forefront of planning.
“Certain companies are but mostly the government agencies are taking the lead to understand their liability or their carbon footprint,” he said. “In terms of repeat business I am more interested in ongoing carbon management.”
The first point of focus for companies should be to conduct an assessment so they know their baseline emissions and are able to introduce governance measures prior to the start of the ETS, Khisty said. And as most companies are ill-equipped to conduct this kind of operation, it provides an opportunity for service providers.
“It has multi benefits and one needs to re-paint the business case evaluation criteria,” he said. “Once the carbon cap and trade system comes you will have a cost to your carbon.
“At the moment it is not in the focus, it will come into focus once the ETS comes into place. National Greenhouse and Energy Reporting (NGER) compliance has already kicked off so from a CIO perspective it is now. They cannot ignore energy costs, they can’t ignore the compliance obligations and because of the cost of carbon it will impact the P&L; the bottom line.”
To be sure, green IT is a business issue and there should be a return on investment whenever you are looking to develop environmentally sustainable policies and practices.
“We have to be very pragmatic that we have to show savings,” Khisty said. “At the moment electricity is an indirect or hidden item. Once you go through having a focus on the electricity line item or cost you will find more opportunity for operational innovation.
“Of course, you are going to do continuous improvements and engineering but specifically focused on operational innovation which looks at using the best of the technology and leapfrogging to an environment which is more efficient, otherwise you are leaving money on the table.”
While you could claim green IT consultation is a one-off play – once a company knows what their environmental sustainability needs are they could arguably go it alone – those companies that do have the right credentials and experience will be in a better position to cement their position as trusted advisors once green IT becomes business as usual.
“It’s quite different from a consulting engagement which might be around a specific project,” Fujitsu’s O’Flynn said. “This is really about building a relationship and supporting a business in their goals for a long-term future and setting them up to achieve that and making sure they get the benefits.”
IDC’s Carter agreed and said the green trend would not be limited to government or large enterprise.
“For the large accounts, providing that extra advice is going to better client relationships and develop more strategic value,” he said. “But it’s a bit difficult to quantify. It is going to be a tiebreaker for some of the big deals that come through on the government side specifically.
“Most of our presentations are around large enterprise and when I stand up and do a presentation they ask ‘what does this mean to us in small- and medium-sized business?’ My feedback is always, even though SMBs are much more focused on just getting by and making the top line and bottom line numbers, there has to be an increased awareness around both positive environmental and business outcomes.
“When you look at some of the small changes at a business process level that can be made, in terms of the devices that you use, default printing options, small things like that which SMBs can do, they realise it is not going to develop into millions of dollars in savings, but it is going to have an impact on the bottom line.”
Indeed, regardless of a client’s size, repeatable green IT business comes as a product of providing clients with the optimal customer experience and delivering on promise, according to Datacom general manager, Andrew Peel.
“In the area of green IT, repeatable business will come from providing customers with sustainable solutions that can be easily implemented and managed, have minimal fiscal impact and provide future cost savings due to efficiency gains,” he said.
Overall the technologies and processes involved in green IT are part and parcel of best practice – particularly in datacentres – and will continue to be so going forward as demands on IT infrastructure increase.
“We’ve got to keep going down this path and got to carry on driving it harder because IT requirement will continue to grow and just doing good housekeeping won’t get you there,” IBM’s Fasseau said.