By Ellen Pearlman
Strategy: Energy Efficiency
Big Idea: It's not easy going green, but it could be the next big global business transformation
Articles: "Taming the Guzzlers That Power the World Wide Web" by Matthew L. Wald, The New York Times, Nov. 7, 2007
"The Dawn of E2K in India" by Thomas L. Friedman, The New York Times, Nov. 7, 2007.
High energy prices and concern about fallout from the recent turmoil in credit markets are giving top global executives a pessimistic view of economic conditions in their countries, particularly in Europe and North America, according to the results of a just completed McKinsey Quarterly report called the "Global Survey of Business Executives: Economic and Hiring Outlook, Fourth Quarter 2007." A little over one-third of the 1,409 global executives expects their country's economy to be worse by mid-2008 than it is now; in North America 46 percent of respondents took that viewpoint. What's to blame for this negative view? Eighty-seven percent of all global respondents pointed to rising oil and gas prices as the chief reason for concerns about rising inflation. And half the respondents laid the blame on an increase in electricity costs.
So, do the companies these executives work for have a plan for addressing inflation worries? Forty-three percent said, "No" and 24 percent didn't know-only one-third could say, "Yes."
Today having a plan for reducing the costs of energy consumption can provide a strategic edge to an organization. In November, The New York Times reported an estimate from experts that energy costs can be 40 percent of the cost of operating a data center. And according to EPA statistics, it costs $4.5 billion a year for the electricity to run the nation's server farms ["Taming the Guzzlers That Power the World Wide Web" by Matthew L. Wald, The New York Times, Nov. 7, 2007].
Another problem noted in the Times article is the conflicting priorities of IT professionals and facilities managers. Typically data center managers-who are not responsible for paying the utility bills-are more concerned with choosing servers based on "speed, performance and reliability, but generally not on energy use," says Wald. The article also reports on what some manufacturers are doing to improve the efficiency of their servers. But, clearly, CIOs need to be in the forefront of developing a comprehensive, global energy strategy, with the support and buy-in of other key business executives.
Another well-known Times columnist, Thomas L. Friedman, had a different take on the energy question. In his November 7, 2007 column ("The Dawn of E2K in India"), Friedman uses the term E2K to describe all the "energy programming and monitoring that thousands of global companies are going to be undertaking in the early 21st century to either become carbon neutral or far more energy efficient than they are today." He sees this as a huge opportunity for outsourcing companies in India-even bigger than Y2K was for establishing them as outsourcing leaders-to show global companies how to use energy technology to gain a competitive edge.
As more and more companies recognize the importance of becoming carbon neutral, and as legislators debate the best way to get them there, it is going to become the "next big global business transformation," says Friedman. Is your company one of the few that has an energy plan in place? If not, what are you doing to raise awareness and make energy strategy a priority at your company?
Also of interest:
about the McKinsey Global Survey.
"Energy Budgets at Risk (EBaR): A Risk Management Approach to Energy Purchase and Efficiency Choices" by Dr. Jerry Jackson, published by Wiley Finance in March 2008. An innovative approach to energy efficiency investment and purchase decisions, shows how to reduce energy costs and increase cash flows using risk management concepts developed in the financial industry.
"Energy Roundup", a blog from the Wall Street Journal about energy news
"The Energy Blog", a blog from James Fraser on all things related to the energy revolution
"Cleantech Blog", news and commentary on next generation energy and the environment
CIOZ Question: Should companies be required to become carbon neutral? Post your thoughts below.
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