From green to gold: Sustainable IT efforts can drive opportunity

March 30, 2011

 First published in knowITMarch 2011 

Green IT initiatives already have proven their payback. In 2008, IBM used server consolidation to cut energy use companywide by 6.1 percent. KPMG slashed half a million kilowatt hours from 2009 energy purchases by switching to IT products that met efficiency standards. SunGard Financial Systems launched a virtualization and consolidation effort to cut data-center electricity use by 1.5 megawatt hours and reduce greenhouse gas emissions more than 1,000 metric tons annually.  

Such efforts, while laudable, are only the beginning of what information technology professionals might be working toward, according to Haluk Demirkan, professor of information systems at the W. P. Carey School of Business and Robert R. Harmon, professor of marketing and technology management at Portland State University's School of Business.  
Beyond energy savings and cost reductions, this duo sees "green IT" evolving into "sustainable IT." The latter, the team asserts, will be more externally focused; it will leverage IT to address both corporate needs and societal concerns, thereby boosting competitiveness. In some cases, sustainable IT developments may morph into service-based technology that companies can offer to their customers.

From green to greenbacks

When it comes to launching green IT efforts, dollar savings loom large in corporate motivation. For one thing, IT is a huge part of corporate expenses. Worldwide IT spending is forecast to total $3.6 trillion during 2011, according to the latest outlook by Gartner, Inc. Among the line items contributing to this forecast, you'll find $391 billion on computing hardware and $465 billion on telecom equipment.  
 
Gartner's figures don't include the cost of running IT equipment. Enterprise-scale data centers can account for up to 50 percent of corporate energy use, Demirkan and Harmon note in a paper they wrote for IEEE's ITPro. In 2007, energy costs in the U.S. and European Union topped $10 billion USD.  
 
According to the U.S. Department of Energy, by 2012, the cost of running data-center equipment over its useful life will likely exceed the original capital investment for the equipment itself. By 2020, DOE expects U.S. data centers to have a carbon footprint that tops emissions from the nation's airline industry.
 
Along with costs, there's waste and e-waste, also called Waste Electronic and Electrical Equipment (WEEE). "Computers are changing so fast, most companies have stopped buying PCs," Demirkan says. "They've started leasing them, instead."
Still, he continues, companies change employee computers every two or three years. "If there are 10,000 employees, that's a lot of computers headed to the landfill. There are really no good processes in place for recycling yet."
Indeed, the U. S. Environmental Protection Agency maintains that some 63 million computers were traded in for replacements during 2007. Right now, only about 15 percent of electronic devices are recycled in the U.S.
In the United Kingdom, officials estimate that more than a million metric tons of WEEE winds up discarded each year, and e-waste is growing three times faster than other waste types. Statistics like that will force greater regulation, Demirkan says.  
Some already is showing up in Europe, where the European Parliament has recently backed new recycling targets, urging member states to reuse or recycle 85 percent of e-waste by 2016.
Such regulations reflect a bigger force impacting businesses today, as environmental concerns take an increasingly larger place in the minds of consumers, corporations and governments. What may have started as a way to shave computing costs is rapidly becoming a social-responsibility imperative.
Eco-nomic reality
"Sustainability has emerged as a business megatrend that fundamentally impacts how businesses compete," Harmon and Demirkan maintain in their IEEE paper. In the world of consumer products, demand for green goods has been rising steadily for years, studies show. And, a 2009 survey conducted by the Boston Consulting Group (BCG) revealed that 73 percent of consumers considered it important that companies have good environmental records.
Meanwhile, a study conducted this year by BCG and the MIT Sloan Management Review found that 69 percent of companies plan to increase investments in sustainability, and only 2 percent anticipated cutbacks.
What's the difference between green IT and sustainable IT? "Green IT was mostly about energy savings," Demirkan notes. "Sustainable IT is more about how to be economical and, at the same time, more socially responsive, more responsive to the market.
"Our research gives guidelines for corporations to implement sustainable information technology innovation and strategies," he continues.  
The research he refers to is what the team wrote about for IEEE. It started as a project Harmon launched to examine software-as-a-service (SaaS) initiatives and cloud computing, but the study quickly brought Harmon and Demirkan face-to-face with sustainability as an innovation driver, which got the researchers thinking, "what next?" Harmon says.
"We started to see patterns of how green IT would play out," he explains, noting that there is a strong similarity between the unfolding of green IT and the evolution of manufacturing in the U.S.  
"The percentage of our economy that comes from manufacturing has dropped, and growth is in service," he continues, referring to the dramatic drop in non-farm manufacturing jobs in the U.S. since the end of World War II. Back then, 38 percent of non-farm jobs were in manufacturing. By 2000, the number of U.S. workers in service jobs outnumbered those in manufacturing by five to one, according to the Bureau of Labor Statistics.
Harmon claims that a similar shift is what we're seeing now with computing. That is, what started as cost-cutting and efficiency measures in IT departments has given way to SaaS and cloud-computing solutions that companies can sell. This evolution is simplified through the four "megatrend strategies" Harmon and Demirkan see underway among IT departments of leading-edge companies.
The path ahead
According to the researchers, green IT -- the first strategy -- covers the reductions in costs, wastes and risks that companies achieve. Server virtualization and consolidation fit into this category. As Demirkan points out, companies rarely exceed 15 percent capacity usage of servers, but virtualization strategies, which let people pay for servers based on how much capacity they use, dramatically improves usage and, therefore, efficiency of the data center.
Strategy two involves reengineering, which the research team identifies as finding ways to increase reuse, fine-tune recycling efforts, minimize e-waste and implement other end-of-pipe strategies.
Thirdly, Harmon and Demirkan see IT departments "engaging stakeholders," which includes developing "a sustainable organizational culture to increase employee awareness of the issues, opportunities and actions required for sustainability-based innovation."
As an example of building sustainability awareness into corporate culture, Demirkan points out that while the information technology field has preached reuse of assets, such as computer code or programs, for a good 25 years, few companies put the policy into paychecks. "Companies tell employees to reuse things, but they never change their reward structure. There is no incentive for the person who wrote the code to have it reused or for anyone else to reuse it," he says. But, if employees do reuse code, "they save computer horsepower," he continues. "They save money for the company. That's the whole idea."  
Along with spreading the sustainability credo throughout the company, Harmon and Demirkan see companies adopting strategy four, in which organizations will "develop new business models for disruptive innovation and differentiation."
As Harmon explains, this is where companies can take "computer-based technology they used internally and repackage it to offer customers" in the form of services. Examples he cites include the smart systems design Cisco has been pushing by identifying IT as "the forth utility," and working with building developers to ensure that IT is as integral to building design as plumbing, telephony and electrical infrastructure.
Or, as another example he notes, Hewlett Packard has repackaged green IT and systems knowledge into a service aimed at helping municipal water systems operate with more efficiency and conservation.
Such offerings not only add to the bottom line through product sales, they enhance corporate image and increase the company's competitiveness. But, the researchers say, "it is doubtful many in the IT industry appreciate the full range of opportunities and risks they face as expectations for IT become more impacted by external stakeholders" and societal sustainability demands.  
Be green, talk green
In the future, it likely won't be enough to come up with an environmentally friendly product. You'll need to tout it as such. Just as a fast-food restaurant's coffee cup might note its percentage of recycled paper, Demirkan foresees a day when it will be commonplace to see a little label on your laptop citing what percentage of recycled material was used in its manufacture. "Right now, if I go to Best Buy, there are 10 different laptops with the same capacity and same price tag. People are going to start looking at something else," he says.
Along the same lines, Harmon maintains that it's time for IT departments to look at sustainability efforts as a springboard for innovation and service-based offerings. "IT departments tend to stop at the data-center door," Harmon notes. "They're very tech oriented. They don't usually engage with customers." But, that needs to change.
The same kind of technologies IT departments use for green initiatives  are becoming the foundation for the innovation platform for future corporate offerings, he adds. If people have the foresight to grab the opportunities, IT can "do well by doing good."
Bottom line
  • Sustainability has become a megatrend that will impact how companies develop and peddle their offerings.
  • IT departments already have started responding to this trend with "green IT," but now must evolve to address "sustainable IT."
  • Green IT has focused on cost cutting. Sustainable IT will focus also on societal concerns, giving IT departments a way to support corporate branding and produce solutions companies can offer customers.
  • Sustainable IT solutions that IT departments produce will likely be based on software-as-a-service models.