If you’ve seen the TV ads being run by IBM lately, the theme seems to be ‘green’. This is quite a dramatic shift in focus of their marketing message from ‘innovation’ to ‘green business’.
This makes me wonder: “How big is green computing? How can a technology company identify (and target) businesses that are more green than others?”
How big is green computing?
According to a Feb 2007 report by Dr Jonathan Koomey, commissioned by AMD (click here): “In 2005, the electrical bills for U.S. companies totaled $2.7 billion. The cost of electricity for the entire world topped $7 billion. Within the United States, the total cost of powering data center servers represented about 0.6 percent of total electrical use within the country. When the additional costs of cooling and other usage is factored in, that number jumps to 1.2 percent.”
An August 2007 report by the US Environmental Protection Agency (EPA) states that: “The energy used by the nation’s servers and data centers is significant. It is estimated that this sector consumed about 61 billion kilowatt-hours (kWh) in 2006 (1.5 percent of total U.S. electricity consumption) for a total electricity cost of about $4.5 billion. …. Federal servers and data centers alone account for approximately 6 billion kWh (10 percent) of this electricity use, for a total electricity cost of about $450 million annually.”
Based on these reports, one can say that energy consumption in US data centers is between 1.2% to 1.5% of total US electricity consumption.
Quick analytics quiz: How much should US companies be willing to spend (on a purely economic basis) for technologies that could save 25% (EPA estimate) of the $4.5 BN spent on data center energy? Assuming a 5 year payoff, and assuming a doubling of data center energy costs in 5 years, the number is around $10 BN (over the next few years).
This is surely a large number, but hardly a number that would get IBM, HP and Dell excited. So what’s the logic behind IBM’s excitement.
The real story is virtualization and consolidation. Currently a lot of data centers use old servers (10-15 yrs old) running at capacity utilization less than 15% (click here for details). IBM quotes the case of PG& E. PG&E consolidated nearly 300 UNIX servers onto 6 IBM System p5 servers, helping to reduce 80 percent of its energy and facilities consumption, and used IBM virtualization technologies to boost utilization of the systems from 10 percent capacity to over 80 percent. More importantly, virtualization and consolidation drive savings in employee costs, maintenance costs and rent, in addition to energy costs.
According to a discussion that Bob Moffat and Rod Atkins (senior executives of IBM’s Systems & Technology Group (S&TG)) had with analysts in late September 2008, virtualization and consolidation have driven S&TG’s growth in 2008. ” In the second quarter, these efforts resulted in approximately 30% year-to-year
growth in both mainframes (System z) and converged System p. Mainframes have been fully virtualized since the 1960s and, in second quarter, over 60% of POWER servers were virtualized – up nearly three-fold from the same period in 2007″.
‘ Green business’ is a good corporate marketing concept that couches the real economic impact of virtualization & consolidation in a context (enviromental responsibility) that is very relevant for the boards of Fortune 500 companies. Lower energy consumption is a side-effect of virtualization & consolidation, but is clearly more palatable to C-level executives.
How can a technology company identify (and target) businesses that are more green than others?
Since green is a side-effect of virtualization and consolidation, technology companies should identify businesses that will benefit most from it. These businesses have the following characteristics:
A regression analysis of recent purchasers of virtualization & consolidation servers could confirm the exact variables that predict the ‘green’ tendency of businesses.
Meanwhile I am wondering about an associated issue: What is the environmental impact of disposing 300 old servers and installing 6 new servers? Is that ‘green business’?