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Where to reduce waste and where to spend to save? How to prepare for a tough 2023
“We are on a highway to climate hell with our foot on the accelerator,” said United Nations secretary general Antonio Guterres speaking at the climate change conference COP27 in November. It’s a sobering comment but one that we have been made only too aware of in recent years. More needs to be done, of course, especially in IT but we are also in the middle of an energy crisis, costs are spiralling and inflation is rising across Europe. Yes, businesses need to prioritise… but how?
It's becoming something of a cliched question; should costs be cut or should companies invest and go for growth? It’s a difficult one to know for sure, although it’s probably somewhere between the two - Harvard Business Review research from 2010 on business performance post-2008, seems to support this theory.
Also, there was an interesting piece by McKinsey global managing partner Bob Sternfels recently that suggested great companies and leaders will be those “who seize opportunities to play offense now, making bets on new green energy businesses, deploying capital at scale, and decarbonising incumbent businesses with new technologies.” It certainly plays to the idea that to survive difficult trading conditions and to emerge strong and competitive, organisations need a strategy that encompasses both economic and sustainability measures. The challenge is how to get the balance right.
How do you know which technologies are going to have the biggest impact on your business without undermining your environmental plans? It’s what McKinsey called a “defining leadership moment” recently and it is right. How technology leaders address this will determine the future of their organisations but where do you start?
It’s important to try and free-up cash by focusing on waste. Is the business running too many software applications? Should there be consolidation of tools and a shift to subscription models? What about cloud spend? Are there opportunities to optimise cloud usage by removing the ‘nice-to-have’ tools that are not necessarily critical to the business? Are you paying for unused capacity? Revisiting agreements with cloud suppliers is crucial to not just saving money but also increasing transparency and focus. That shouldn’t mean organisations should stop cloud migrations, far from it. They should just be smarter about how they go about it.
Almost certainly one of the biggest areas of concern at the moment, both from a cost and environmental point of view is energy consumption. A lot has been made of the role of AI and automation in helping to reduce emissions and costs but it’s also worth bearing in mind AI will make increased demands on technology services. As a recent Stanford University panel suggested, no one really knows the true impact of AI algorithms in terms of emissions yet but focusing on more efficient data management and datacentre infrastructures is key.
It's an important point because what we are really talking about here is measurement, understanding what each and every asset within an organisation costs financially but also in terms of emissions. If it is not measured, as the old saying goes, how can it be managed? This certainly applies to datacentre structures which are at the very heart of modern-day enterprise computing. According to recent research by Atlantic Ventures, in 2020, datacentres consumed 375 TWh of energy, which corresponds to around 1.5% of global energy consumption. The research adds that as digitalisation increases, the energy requirements of European datacentres will increase to 96.2 TWh by 2025.
How organisations use datacentres, either on-premise or through co-location or hyperscalers, the reality is that as energy costs increase, so will the cost of using these services. Increased demand and increased energy usage also increases emissions and so enterprises fall into a trap where growth can actually hurt the business. Servers and storage typically consume over half of the total energy consumption within a datacentre, which is why we believe a hyperconverged infrastructure (HCI) makes so much more sense. Less hardware means less cooling and more efficient storage and CPU utilisation. This means less energy use but increased datacentre performance.
Sustainability is becoming a strategically relevant topic for CIOs as energy efficiency in IT operations and the CO2e footprint now play a central role, due largely to the energy crisis and ESG reporting obligations. There is still considerable efficiency potential “slumbering” in European corporate datacentres, while modern datacentre architectures - such as HCI - can be an essential lever to improve energy efficiency, reduce the carbon footprint and lower IT operating costs.
Interestingly, the Atlantic Ventures research estimated that by 2025 a full changeover to HCI across UK datacentres could potentially save 8.1 TWh of energy and 1.8 million tonnes of CO²e, roughly the same as taking 400,000 cars off the road. It also found that large-scale co-location datacentres offer a much lower PUE (Power Usage Effectiveness) factor than typical on-premise facilities. Switching these to HCI architectures could potentially boost energy saving towards 30-40%. Also, next-generation co-location datacentres could provide access to renewable energy through long-term Power Purchase Agreements (PPA) and so contribute to an organisation’s climate neutrality goal without having to invest in CO2 certificates.
For many CIOs, there may be a moment of reservation, where the idea of spending on new IT equipment and infrastructures may seem ludicrous in today’s economic climate but think for a minute. How much does legacy tech really cost to run? How does it compare with the ROI on new equipment? How efficient is legacy tech when it comes to sharing data? Does legacy tech tie the business to certain, perhaps more expensive application licenses?
The double transformation towards climate-neutral IT operations and reduced costs is an opportunity for businesses to find efficiencies but also resilience. One thing leads to another. By getting the datacentre structure right organisations can start to realise savings across the IT estate, from digital infrastructures and workplaces, cloud services, data and applications, as well as DevOps and analytics processes. This is perhaps one New Year’s resolution that’s really worth making and keeping, for the sake of the business and the environment.