Tech Views

Greening of the Indian IT sector—an opportunity to achieve higher operational efficiency

Companies that take an early action to embrace ‘green’ challenges can reap the first mover’s advantage, writes Sudipta Das

Sudipta Das

Uncertainty over the global economy has left no organization immune to the tighter credit situation compounded by low business spending and shattered consumer confidence. Although, it is difficult to predict how long the economic recession will last, there is an element of optimism. Technology continues to develop and mature with steady improvement of productivity, new business opportunities continue to emerge showing new direction to the industry.

Globally organizations have perennially explored opportunities to achieve cost-cutting and reduce risks in the interest of greater profitability, above average return on investment and hence strengthened competitiveness. The concept of ‘Green IT’ features here quite prominently, which in the short-term can achieve higher operational efficiency through reduced expenditure on energy. The green IT mandate is driven primarily by factors such as improvement of business results, increased efficiency as an indicator of good business sense, lower operational and energy costs along the entire supply chain, enhancement of customer and public perception due to a green brand image and better management of regulatory risk.

Indian IT service companies have not only responded to their own growing needs for sustainable development but are also providing end-to-end customer services for better utilization of their capacity, thereby helping enterprises to minimize their power, cooling and housing equipments which help to mitigate GHG emissions. This in turn contributes to the growing concerns of energy security and climate change.

The information and communication technology (ICT) sector is ever expanding and so is its need for energy to power the solutions developed. Fingers point to the energy guzzling data centers which cause the heating up of IT buildings as a whole and increases the air conditioning load considerably. Critical computational systems such as servers, networks and their storage and power distribution units are highly energy intensive components within data centers. Few highlights from the IDC Green IT Survey 2008 results illustrate these facts as below.

Figure 1: Regional GHG emissions from the ICT sector
Figure 2: Emissions from data centers worldwide, Mt CO2

There are enough reasons to believe that as the IT industry achieves further growth there will be mounting pressure to achieve low carbon growth and green transformation.

Global drivers for IT/ITES companies to initiate responsible action towards climate change include:

• Globally governments taking action and the evolving global consensus on the urgent need to act on climate change, formation of UNFCCC, signing of Kyoto Protocol, to name a few
• Increased stringency on automobile fuel efficiency standards, mandated bio fuels use, improved energy efficiency standards
• Government incentives and regulations are driving market activity, increasing renewable energy production and creating carbon markets requiring environmental reporting
• Increasing resource scarcity and energy prices have become critical issues. The global financial downturn has increased the need for pro climate mitigating actions which will improve energy bottom-line and result in cost savings opportunities

Growing stakeholder pressure such as consumer/client’s demand for clean or green products and services. Outsourcing clients are increasingly emphasizing on entering into contract with service providers who have a carbon-friendly supply chain.

Reduction of climate change risk, maximizes business opportunities related to climate change transformation and differentiates a company from its competitors.

Investors increasing align with sustainability principles and link between corporate sustainability practices and stronger financial performances.

A set of strategic and operational levers would be useful in structuring a well planned response to such challenges and reposition the industry in the climate-friendly landscape. While the operational levers primarily involve energy efficient utilization of existing assets, infrastructure and logistics optimization; strategic levers encompass value chain greening, re-positioning asset and/product portfolio, internal capacity building and organization structure, shaping of external policy and regulatory environment to achieve climate leadership. Achievement of carbon neutrality will require reduction of carbon intensity of operations through the adoption of short-term operational levers and long-term strategic levers for GHG mitigation which in-turn needs to be aligned with the overall business strategy. Indigenous players are faring well in terms of switching ground from an energy intensive sector to an energy efficient one.

The logical roadmap to accomplish the goal of carbon neutrality involves achieving the following key steps:

a) Measure emissions: Quantification of inventory

b) Reduce emissions: Reduction of emissions by all possible means

c) Offset unavoidable emissions: Purchase of emission reduction credits

A good number of Indian IT companies have completed the first step and are in the process of implementing the second step.

A plethora of solutions have been developed to optimize energy utilization in an IT company’s activities. Reduction of emissions could be possible through levers like data center virtualization, cloud computing, data server consolidation, PC power management solutions, VoIP networking, video conferencing paperless office solutions and a green building for an office. Power manager softwares are sensitized to PC usage. The applications on PCs are being designed to pass off into the ‘Sleep’ or ‘Resume’ mode, when not in use. As an industry best practice, the Indian IT sector is also keen on server virtualization, which minimizes the use of equipment for operation and has turned around the server power efficiency from nearly 80% to an impressive 93%. The ‘green’ processor efficiency is increased multifold by the use of quadruple core technologies. Higher level of performance is achieved by the use of nano-sized process technology and greater density with lesser cooling challenges. Data center cooling techniques have proven to be effective in cutting down power consumption of servers by cooling them effectively and preventing their heating up. Printers, scanners and copiers are becoming more and more energy efficient with Energy Star labels. Document managers reduce the overall cost associated with document management, empowering businesses to deploy enterprise level functionality for a fraction of the cost.

Today, the choice in front of technology organizations is either to delay or to embrace ‘green’ challenges as a chance to restructure their supply chain for economic and environmental benefits. Companies that take an early action can reap the first mover’s advantage that may be denied to those who wait for the regulatory hand. There have been innumerable instances of major IT

corporations across the globe giving their image a noticeable green facelift. To cite some examples: Cisco and Dell have Design for Environment (DfE) programs to ensure products are energy efficient and recyclable, and to minimize environmental impact in manufacturing through resource conservation; HP offers solutions in Dynamic Smart Cooling for data centers, consolidation and virtualization solutions.

We are perhaps in the middle of a period when key technology trends—more powerful energy efficient devices, efficient utilization of resources, new ways of connecting with each other and interacting with computers—are converging in a way that will usher in a revolutionary phase. Organizations that are well positioned to take advantage of these trends to transform their businesses will surely have a competitive advantage in the market and at the same time ensure a sustainable future. Indian IT and ITeS companies should place significant emphasis in understanding and analyzing strategic implications of upcoming carbon regulations on the company’s profitability, competitiveness and shareholder’s value and subsequently devise the corporation’s overall stance on climate change.

Sudipta Das is Partner & Leader–Climate Change & Sustainability Services, Ernst & Young. The views expressed herein are the personal views of the author and do not necessarily represent the views of Ernst & Young Global or any of its member firms