Sustainability as a Driver for Profit and Innovation in Indian IT Companies
6.5 Building the Business Case for Profit and Innovation in Indian IT Companies
6.5 Building the Business Case for Profit and Innovation in Indian IT Companies
The next step for IT companies is to build a business case that illustrates why it should pursue a set of principles/strategies that are well grounded in the principles of sustainability. These strategies could very well enable these companies to become market leaders while staying competitive in this sustainable environment. Firms are under increasing pressure from regulators, competitors, customers and community groups to implement innovative sustainable practices. Hence balancing economic and environmental performance to be green and competitive is a strategic issue worth pursuing. We now highlight some of the key strategies going forward
6.5.1 Engaging the Smart “Green” Grid
Green IT needs to be viewed from a holistic perspective that requires cross- disciplinary efforts. One area where IT will contribute involves the implementation of smarter “power” grids and in smart meters that can be employed in homes and commercial buildings. These smart meters and green grids will enable efficient mon- itoring, analysis and pricing of electrical usage. In India, where power production
creates 60% of all emissions, a smart green grid can reduce power losses by nearly 15%. This could save over $ 13 billion a year while shrinking the carbon footprint at the same time.
Although Green Grids are useful metrics to help guide efficiencies, the data center industry, as a whole, is significantly behind other industries with regard to certifica- tion and regulation. Data centers consume about 30–100% more energy per square foot than office buildings partly due to the fact that the enormous amount of heat generated needs to be dissipated. In order to increase the energy efficiency, there has been an increased focus on the design of LEED rated data centers and use of EN- ERGY STAR rated data center servers worldwide. The first LEED rated data center was built by Netmagic, a leading Indian IT infrastructure provider. It has been esti- mated that this facility consumes, on an average, 20% less energy and 50% less water than conventional data centers15. Recently, the data center of HCL Infosystems, a leading Indian IT service vendor, was awarded LEED platinum rating16, making it the first platinum rated LEED data center in the country.
6.5.2 Cloud Computing
One of the most important upcoming trends in the field of Information Technology is the concept of cloud computing. For long, managers in the IT world have been thinking of a way to increase data storage capacity or add computing capabilities on the fly without investing in new infrastructure, training new personnel or licensing new software. Cloud computing, which essentially is internet-based access to highly scalable pay-per-use IT capabilities is defined as a potentially cost effective model for provisioning processes, applications and services while making IT management simpler and increasing business responsiveness17. Cloud computing thus is a funda- mental shift to an operational model in which applications don’t live out their lives on a specific piece of hardware and in which resources are more flexibly deployed than was the historical norm. It’s also a fundamental shift to a development and con- sumption model that replaces hard-wired, proprietary connections among software components and the consumers of those components with lightweight web services and web-based software access.
Cloud computing has lead to a convergence of technologies and trends that are making IT infrastructures and applications more dynamic, more modular and more consumable. Cloud computing provides the means to ramp up new services or re- allocate computing resources rapidly, based on business needs. It means having the ability to run an application either on-premises or off-premises (or a combination of the two) based on cost, capacity requirements and other factors. Cloud shifts the costs for a business opportunity from CAPEX to OPEX, which allows finer control of
15http://www.netmagicsolutions.com/new-datacenter-launch.html
16http://www.hclinfosystems.in/news206.htm
17http://www-01.ibm.com/webcasts/podcasts/channels/gts/transcripts/cloud.pdf
expenditure and avoids costly asset acquisition and maintenance reducing the entry threshold barrier. Cloud computing is at an early stage, with a crew of large and small providers delivering a slew of cloud-based services, from full-blown applications to storage services to spam filtering. Broadly, the following are the types offered:
• Infrastructure-as-a-Service (IaaS)—IaaS lets the user or creator of the service provision processing, storage, networking, and other computing resources on which they can then run operating systems and applications. The deployer of the service does not manage or control the underlying compute infrastructure and is responsible only for configuring and maintaining the software. Example—IBM Cloud
• Platform-as-a-Service (PaaS)—PaaS provides computational resources via a platform upon which applications and services can be developed and hosted. With PaaS, one can build entire applications from scratch on a leased platform without having to buy and maintain the underlying hardware and software. Example—
Amazon web services.
• Software-as-a-Service (SaaS)—Sometimes referred to as Service or Applica- tion clouds, offer implementations of specific business functions and business processes as direct consumables for end users. Example—SALESFORCE.COM CRM
Cloud computing comes with a lot of benefits at all levels of an organization where it is deployed. At the macro level, cloud computing catalyzes achieving economies of scale by centralizing compute power and democratizing access to all resources At the CIO level, cloud computing helps shift the mindset to commoditize computing power, therefore drive efficiencies through greater utilization rates which allows systems to scale up or down due to load fluctuations and not idle when not required.
At the data center level, cloud computing’s drive towards consolidation paves the way for new standards for energy efficiency, as discussed in the previous section. At the R&D level, cloud computing creates incentives for software engineers to code more efficient and re-usable applications so that they can be hosted.
In order to understand the environmental benefits of cloud computing, one has to understand the following three independent factors18 that contribute to cutting a company’s carbon footprint, either directly or indirectly:
Dynamic Provisioning A methodology in which computing resources are provided on need basis so that actual demand and server capacities allocated are more closely matched. Infrastructure planning by firms is typically conducted with a conserva- tive, “just in case” mindset that results in capacity allocation that is not aligned with actual demand. On the other hand cloud providers can manage capacity much more diligently and accurately by forecasting their client’s demands. Dedicated per- sonnel monitor and predict demand and continually adjust capacity thus negating inefficiencies in resource allocation. This leads to lesser computational needs, lesser
18Cloud computing and sustainability—The environmental benefits of moving to the Cloud—
Accenture consulting paper 2010
requirement of cooling and maintenance of the servers, leading to energy savings and reduction in the firm’s carbon footprint.
Multi-Tenancy Just as multiple tenants in an apartment building use less power overall than the same number of people owning their own homes, so do the multiple tenants of a cloud-provided infrastructure reduce their overall energy use and asso- ciated carbon emissions. The cloud architecture allows providers to simultaneously serve multiple companies on the same server infrastructure. Disparate demand pat- terns from numerous companies flatten overall demand peaks and make fluctuations more predictable. The ratio between peak and average loads becomes smaller, and that in turn reduces the need for extra infrastructure. Major cloud providers are able to serve millions of users at thousands of companies simultaneously on one massive shared infrastructure. By operating multi-tenant environments, cloud providers can reduce overhead for on-boarding and managing individual organizations and users.
Server Utilization Cloud computing can dramatically improve the utilization of servers and consequently help in saving energy and reducing a company’s carbon footprint. It has been found that while the utilization of on-premise servers typically ranges between 5–10%, utilization of servers on the cloud can be as high as 40–70%19, thus increasing the numbers of users served per machine sharply.
According to a study done by a global consulting firm—Zinnov Management Con- sulting, Cloud Computing market in India, which currently stands at $ 110 million may go up to $ 1 billion by 2015. Software-as-a-service (SaaS) in India is likely to reach a mark of $ 650 million by 2015, while Platform-as-a-service (PaaS) and Infrastructure-as-a-service (IaaS) markets cumulatively would touch 434 million each by then. The growth of IT spending in India is one of the fastest in the world and is expected to be higher than China soon. India is the world’s fastest growing mobile market with over 20 million subscribers added every month. Companies have invested heavily in services such as 3G for enhanced data utilization. The emergence of Cloud technology is also linked to the rise in Telecom sector. Indian customers are ideal for cloud offerings, as these offerings enable cost savings, less maintenance worries and better operability.
So how does Cloud help in Sustainability? The Information and Communication Technology (ICT) contributes to as much as 15% of total global carbon emissions (or 7.8 billion tons of CO2 equivalents per year). Broad adoption of cloud computing can stimulate innovation and accelerate the deployment of these enabled solutions.
Consequently, cloud computing may have a major impact on global carbon emissions through indirect benefits in addition to the direct savings from replacement of on- premise infrastructure. An average data center’s Power Usage Effectiveness (PUE) is typically around 2.0 or 50%. Massive data centers built by Google, Amazon and Microsoft typically operate on a PUE of 1.2 or 1.3—Reason—Large scale application of water and air cooling techniques.
19Silicon Valley Leadership Group. Data Center Energy Forecast. 2008. IDC. The Economics of Virtualization: Moving Toward an Application-Based Cost Model—2009
It will be some years before people realize the true potential of the Cloud. In con- clusion, though Cloud Computing is in its nascent stage, it holds a lot of promise, not just for companies to reduce their operating expenses, but also for the environ- ment. Increasing the density of hardware used and introduction of cloud computing in the data management space have been identified as the future trends of data center greening. It has been estimated that enterprises can save $ 4 billion every year just by following more efficient practices in managing their data centers20. Through better management of assets, more accountable management and setting clear goals for re- ducing energy costs and carbon emissions, most companies can double IT efficiency and halt the growth of greenhouse gas emissions.21