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Wednesday, September 23, 2009

Cost/ROI - A Double Edged Sword

In June of this year we surveyed IT professionals on their attitudes towards, and action on, environment and climate change. You can read the full survey results here. In some forthcoming posts I will draw out conclusions that I think are of particular interest to sustainability practitioners. Let's start with this.

At a headline level 81% of respondents identified lowering cost as a major goal of their green IT initiatives. A much lower 47% identified reducing the negative impact of company activities on the environment and 22% specifically identified climate change. We are more likely to see Green IT action because off the cost savings than because of the green benefit.

But 64% identified 'difficulty of showing ROI' as a significant barrier to implementation of green programs. So, cost/ROI is a double edged sword. Both the most significant driver when it is in our favor and the most significant barrier when it is not.

On the one hand, this does not bode well once the IT teams have picked the low hanging fruit. Although I suspect that it is a couple of years off, when the cost reduction opportunities start to dry up, the green driver itself will not be enough to maintain momentum. On the other hand, I think that impending regulation (noted as a driver by 31 % of respondents), the impact of cost of carbon and rising energy prices and continued innovation by ICT companies and Green IT teams will result in significant opportunity for continuing action. I hope the latter outweighs the former.

1 comment:

  1. Hello Kevin,
    Nice post.

    I believe there is a significant opportunity to reduce the costs through Green IT. For example, 50% of the power that gets into a Data center is lost as heat. And then you have cool this heat so you have to use more AC power. Huge opportunity to reduce the power losses and cut down heat and cooling costs.

    But when we talk to IT professionals about Green IT they talk about virtualization and other techniques that make them use their resources better. These have good benefits, but the main problem of power loss and additional cooling required still remains.

    And this is because in many companies the utilities bills are paid by facilities and shows up in the facilities expenses. But the IT bill goes to CIO and then to CFO. Though CFO sees the facilities bill also, he/she might not have information or guidance to connect the dots. So the positive ROI of greening data centers is not obvious.

    So as you have already mentioned , the way we use, account for and pay for our energy should change. This change should make the CFO feel the impact of this expense and provide him better control to realize ROI from the change.