Study Green IT - More than a passing fad!
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Study Green IT - More than a passing fad! Study Green IT - More than a passing fad! Document Transcript

  • 81 Green IT Digital economy and structural change January 13, 2011 More than a passing fad! A joint study by: IT harbours huge “green” potential. This applies on the one hand to the saving of resources in IT itself (―green in IT‖). But on the other hand it also applies to the resources that can be saved by implementing intelligent IT systems in the economy as a whole (―green by IT‖). 54% of the companies we surveyed for this study know the difference between the two concepts. So while the difference is starting to sink in, there is still scope for raising awareness. Best-practice examples should be given greater prominence. As our survey makes clear, only 26% of companies feel compelled to implement green IT projects for operational reasons. Instead, at many companies the key factor is the strength of the convictions held by the executive on the idea of green IT. At 45% of the companies, it is top management that initiates such projects. Best-practice examples can help in efforts to make the complexity of prospective projects transparent. Gearing project planning to positive examples makes it easier for companies to estimate the measures necessary for their own IT system. To be able to leverage untapped potential, structures will need to change. To fulfil the environmental and resource targets, though, the companies will have to revamp their structures and rigorously integrate their environmental and energy management activities into their IT design. That is still a long way off, however. Some 38% of the companies in our sample have appointed an environmental officer. At the same time, some green IT projects have to proceed even though only 32% of the companies have installed overarching budget responsibility for energy and IT. Authors Stefan Heng +49 69 910-31774 stefan.heng@db.com Bernd Klusmann +49 30 27576-457 b.klusmann@bitkom.org Florian König +49 30 27576-456 f.koenig@bitkom.org Editor Antje Stobbe Technical Assistant Sabine Kaiser Deutsche Bank Research Frankfurt am Main Germany Internet: www.dbresearch.com E-mail: marketing.dbr@db.com Fax: +49 69 910-31877 Managing Director Thomas Mayer “Green by IT” opens sizeable scope for economic and ecological action. Companies from different sectors hope on the one hand that by means of intelligent IT systems and innovative resource-saving processes they can counter cost pressures. On the other, they say they want to be able to offer customers new goods and services and offer their staff more flexible job models in the competition for top talent. Companies are more likely to implement ecologically relevant innovations if these pay off in the short run. Our survey finds that investment risk is the major hurdle thwarting the implementation of green IT (43% of respondents agree strongly or very strongly). On this score, 60% of the companies see the amortisation period of green IT projects falling in a depreciation framework of up to four years.
  • 81 The Green IT Advisory Office established by BITKOM e.V. is a special project sponsored by Germany‘s Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), the Federal Environment Agency (UBA) and KfW Bankengruppe. It was set up on an initiative of BITKOM – the Federal Association for Information Technology, Telecommunications and New Media – with the focus of support on the ―IT goes green‖ platform of the BMU Environmental Innovation Programme (UIP). The Advisory Office supports professional users in the implementation of green IT projects, primarily offering consultation on the potential to save energy and materials via green IT technologies as well as on subsidy programmes for priority and general promotion. In addition to traditional projects on energy and materials efficiency the BMU‘s priority promotion activities also support the reduction of emissions through the use of information and communication technologies, or ICT (―green by IT‖), which often offers even greater savings potential. Besides the targeted expansion of innovative and environmentally-friendly ICT and system solution concepts, a further focus of the Advisory Office is on the communication and representation of best-practice examples in order to publicise the technologies and encourage others to follow suit. Further information (in German): www.green-it-beratungsbuero.de Deutsche Bank Research is responsible for macroeconomic analysis within Deutsche Bank Group and acts as consultant for the bank, its clients and stakeholders. Deutsche Bank Research analyses trends that are relevant for Deutsche Bank in the financial markets, the economy and society, including their potential risks and opportunities. For over 10 years Deutsche Bank Research has been conducting research into the impact of continuing digitisation on business and society as well as the related changes. Further information: www.dbresearch.com/Technology and Innovation 2 January 13, 2011
  • Green IT: More than a passing fad! Intention and methodology in this study ―Green IT‖ can easily be misinterpreted, so prematurely kindled expectations may soon be dashed. After all, IT is not ―green‖ at first glance – and not only because more intensive use results in higher energy consumption. Nonetheless, IT does have ―green‖ potential. This applies on the one hand not only to the saving of resources in IT infrastructure itself (―green in IT‖), but it also applies on the other to the resources that are ultimately saved by the use of IT in the economy as a whole (―green by IT‖). Green IT and its related potential are understood and assessed in very different ways in practice across the broad spectrum between ―green in IT‖ and ―green by IT‖. This observation was the starting point for the present study by Deutsche Bank Research and BITKOM‘s Green IT Advisory Office. Glossary of main abbreviations ICT Information and communication technology SaaS Software as a Service CO2e Carbon dioxide equivalent Wh Watt-hour Measure of greenhouse gas effect of emissions, standardised to CO2 Unit of energy kWh Kilowatt-hour, 1 kWh = 103 Wh TWh Terawatt-hour, 1 TWh = 1012 Wh Source: DB Research, 2011 1 Our study, with its focus on economic aspects, seeks to analyse the trends shaping up in practice and the motives driving green IT projects in the first place. With this objective, our study is divided into three sections: the first section summarises the main findings of our survey, depicting the results in an overview featuring individual charts and graphs. The second section gives a breakdown of the findings of the survey in light of the experience gathered in consultations on green IT and thus illustrates the practical challenges facing green IT. Finally, the third section presents the conclusions drawn from the survey and actual advisory experience in the context of a more highly aggregated macroeconomic assessment. A word of thanks We would like to thank the German Association for Small and Medium-sized Businesses (BVMW), the Association of German Chambers of Industry and Commerce (DIHK), ICTswitzerland and Microsoft Germany, who supported our survey. Survey on Green IT Deutsche Bank Research and the Green IT Advisory Office established by BITKOM e.V. joined forces to conduct a survey among industry providers and users on the subject of green IT. With a response rate of 10%, we were able to evaluate a total of 237 completed questionnaires in our analysis. At the majority of the respondent companies, the responses came from the top management (69%). Some 32% of the companies classified themselves as only green IT users and, logically, 68% as green IT providers. Among the green IT providers 25% identified themselves as vendors, 44% as service providers and 30% as both vendors and service providers. Bulk of participants from the IT sector January 13, 2011 The bulk of the participants say they belong to the IT sector (53% of all responses); this is followed at a large interval by the manufacturing sector and the liberal professions (12% each). In terms of revenues and headcount, participation in our survey was particularly pronounced among very small companies (35% have less than 50 employees) and very large companies (26% with over 2,500 employees). At 53% of the respondent companies the decision-makers had an academic background in engineering or the natural sciences. The providers of green IT technologies group was 3
  • 81 explicitly also queried about experiences to date in their in-house use and their expectations and assessments of green IT. Majority based in Germany The majority of the companies that participated in our green IT survey are based and operate in Germany (96%) – regional focal points being the metropolitan areas of Berlin, Munich, the RhineMain region and Stuttgart. Nonetheless, thanks to the support of ICTswitzerland there were also five users and three providers from Switzerland. Two other users from third countries also participated in the survey. Key findings of our survey Investment risk, stakeholder consent and inadequate experience curb progress After the initial hype that typically accompanies the launch of new technologies, green IT has now entered the phase of constructive debate and actual implementation in company structures. Some 40% of the companies surveyed in this study consider the amortisation period for green IT projects to be in the depreciation framework of up to four years. Despite this significant progress in implementation there is nonetheless still no lack of hurdles to be cleared. A number of companies in our survey say these major hurdles thwarting the implementation of green IT projects lie in investment risk (43% agree strongly or very strongly), stakeholder consent and the as yet still inadequate degree of in-house experience with green IT projects (33% each). Support needed from policymakers and consumers In our sample, many companies say the explanation for the sluggish implementation of green IT projects is that it has too little importance on the public agenda (14%: agree strongly; 34%: agree), the lack of transparency of the product range (7%: agree strongly; 30%: agree) and the lack of a budget (11%: agree strongly; 21%: agree). By contrast, the potential pressure from the competition or an internal lack of agreement is only seldom cited as a reason for sluggish implementation. Apparently policymakers and consumers in particular are also key in deciding whether green IT makes faster progress. Need for a committed executive and attentive staff 38% of the respondents have explicitly appointed an environmental officer who is responsible for meeting the company‘s climate and resource targets. In 66% of the companies the upper management or the head of the in-house IT section initiates the green IT projects. In addition, the survey participants also often cite the commitment of staff as one of the ―other‖ stimuli. Company training is very important here and is already being conducted at one-third of the companies surveyed. So green IT needs a committed executive, but also attentive trained staff. Budget responsibility seldom converges below top management Need for specific IT support So far, green IT has had to proceed in many companies despite the fact that budget responsibility for energy and IT does not converge below the top management level. Overarching budget responsibility below this level is to be found in 32% of the companies analysed. Many companies have explicitly formulated climate and resource targets in their strategies and are addressing the strategic sustainability objective with specifically coordinated IT support. 60% of the companies surveyed use management and control technology or management systems to achieve these strategic corporate goals. In the following we give an overview of the findings of our survey: 4 January 13, 2011
  • Green IT: More than a passing fad! Findings of our survey among users of green IT Nearly 40% have an environmental officer Companies with an environmental officer n.a. 8% yes 38% no 54% N=237 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 2 At many participating companies green IT has so far had to proceed despite the fact that budget responsibility for energy and IT only converges at the uppermost level of decision-making. Overarching budget responsibility below the top level is to be found in over one-third of the companies we analysed. Green IT must often proceed without overarching budget responsibility Has budget responsibility for energy and IT converged? n.a. 17% 38% of the respondents have explicitly appointed an environmental officer who is responsible for meeting the company‘s climate and resource targets. With this finding it should be noted that the majority of the respondents are from small and medium-sized companies. 75% of the subgroup of larger companies with more than 2,500 employees that is not represented here say they have appointed an environmental officer. Differences in capital and human resources are part of the reason for the fact that large companies tend to work with an appointed officer on the subject of green IT more than small companies do. yes 32% no 51% N=237 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 3 At 66% of the participating companies the upper management or the head of the IT section initiates the green IT projects. In addition, the participants in our survey also often cite the commitment of staff as one of the ―other‖ stimuli. So green IT needs a committed executive, but also attentive staff. Green IT often initiated by upper management Places where green IT is initiated in companies 10% 11% 8% 21% 45% Environment officer Upper management Head of IT Other 5% Finance / Purchasing n.a. N=237, multiple responses possible Source: DB Research and Green IT Advisory Office (BITKOM), 2011 January 13, 2011 4 5
  • 81 In keeping with the central role of upper management in the implementation of green IT projects it emerges that in close to 90% of the respondent companies the stimulus for such projects comes from merely one or, at most, two places. Green IT needs lone wolf Number of places that initiate green IT in the company 2 27% 3 10% >3 3% 1 60% N=201 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 5 Majority know the difference Difference between "green in IT" and "green by IT" has sunk in n.a. 9% yes 54% no 37% N=237 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 6 A majority of the respondent companies know the difference between ―green in IT‖ and ―green by IT‖. The significantly differing approaches of the concepts that fall under this keyword have sunk in with many decision-makers, but there is still scope for raising awareness. In the subgroup of companies that have already implemented green IT projects some two-thirds have realised there is a difference between green in IT and green by IT – but still not everyone. More than two-thirds of the companies surveyed have set climate targets. Within this group, half of the companies have explicitly anchored at most two targets in their strategy, and onequarter of them four. Many have defined one or two climate and/or resource targets Number of climate and/or resource targets anchored in company strategy 25% 2% 25% 25% 23% 1 2 3 4 >4 N=176 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 6 7 January 13, 2011
  • Green IT: More than a passing fad! Only 26% of the respondent companies feel compelled to implement green IT projects. At those companies that do feel this compulsion, the pressure is often explained by pointing to heat build-up in the server room and energy costs. Thus, in many companies, reasons other than the ones listed here play the crucial role in decisions on the implementation of green IT. Only a minority feels compelled to implement green IT Q: "Do you feel compelled to implement green IT in the near future? If so, by which factor?" 18% 5% 5% 10% 56% 6% Bottleneck in energy supply Heat build-up in server room no Scarcity of space Other n.a. N=237, multiple responses possible Source: DB Research and Green IT Advisory Office (BITKOM), 2011 8 One-third of the respondents provide training for their employees on the subject of green IT. So this area will still harbour considerable potential going forward. Considerable potential for training on subject of green IT Participating companies that train stafff on green IT n.a. 16% yes 34% no 50% N=236 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 9 Some 60% of the companies surveyed use management and control technology or management systems to achieve the company‘s strategic targets. Among the other supporting IT systems the participants often refer to virtualisation. Only a minority of the participants say they want to approach the targeted objectives without any special supporting IT systems whatsoever. Some 60% use management systems or management & control technology IT systems used to achieve targets 7% 24% 28% 7% 34% Management systems (with focus on CSR, carbon life cycle management) Management & control technology (for data centres, facility management, PCs) Other no n.a. N=237, multiple responses possible Source: DB Research and Green IT Advisory Office (BITKOM), 2011 January 13, 2011 10 7
  • 81 Pressure from policymakers and consumers plays important role Q: "What would you say are the reasons that green IT is not being implemented?" No pressure from policymakers or consumers No green IT budget Green IT product range is not transparent Competitors not doing anything either Lack of in-house agreement Lack of agreement between IT and users 0% Agree strongly Rather disagree 25% Agree Disagree altogether 50% 75% 100% Agree partly n.a. N=237 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 11 A number of companies say the major hurdles thwarting the implementation of green IT projects lie in investment risk (43% agree strongly or very strongly), stakeholder consent and the as yet still inadequate degree of in-house experience with green IT projects (33% each). Besides, the participants also refer to the conflict between attaining short-term returns on investments and installing strategic, long-term projects. By contrast, the respondent companies regard the availability of the IT infrastructure (7%) as the smallest hurdle in the implementation of green IT projects. Hurdle of economic efficiency Hurdles thwarting realisation of green IT projects at companies Investment risk Lack of experience with individual solutions Steakholder consent Potential conflict over data security Financing risk (availability, costs of funding) Complexity of instruments for achieving energy efficiency Availability of IT infrastructure 0% 25% 50% Many companies explain the really slow implementation of green IT projects as being due to the often insufficient pressure from policymakers and consumers (14%: agree strongly; 34%: agree), the lack of transparency of the product range (7%: agree strongly; 30%: agree) and the lack of a budget (11%: agree strongly; 21%: agree). By contrast, the potential pressure from the competition or an internal lack of agreement is only seldom cited as a reason for sluggish implementation. Obviously, the sustained interest of policymakers and consumers could give the realisation of green IT projects at companies an additional fillip. 75% 100% Agree very strongly Agree strongly Agree more or less Agree little Disagree n.a. N=237 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 12 Internal financing with equity capital is by far the most important method of funding for green IT projects. Obviously, many companies do not bank on green IT until they have already generated the required capital. Green IT projects usually financed internally Usual method of funding green IT projects 1% 1% 15% 6% 5% 57% 11% 4% Internal equity financing Leasing Financing via bank of provider Other External equity financing External debt financing Government promotion n.a. N=237, multiple responses possible Source: DB Research and Green IT Advisory Office (BITKOM), 2011 8 13 January 13, 2011
  • Green IT: More than a passing fad! Findings of our survey specific to the providers of green IT Over half of the respondent providers regard investment in green IT projects to typically have a very minor volume of less than EUR 200,000. By contrast, only almost one provider in ten says the typical volume is more than EUR 500,000. The responses given here might also suggest that green IT users initially approach the issue cautiously, assuming a manageable level of financial risk owing to their overall profitability. Green IT mainly linked with small investment volume Typical investment volume for green IT projects (EUR 10,000) 34% 14% 5% 4% 18% 5% 20% <1 1 - 4.99 5 - 19.9 20 - 49.9 50 - 99.9 >99.9 k.A. N=162 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 14 As to be expected with new technologies, 66% of the respondents look for rapid revenue growth over the coming five years; the majority call for a rate of 1% to 15%. Nonetheless, nearly an equal number of providers expect either a still more substantial upswing or else a period of flat growth in green IT. This shows that the market picture on the outlook for green IT is still pretty mixed. Broad mix of expectations for green IT Forecast of green IT revenue growth in 5 years (% vs. 2010) 2% 15% 21% 17% 45% -15% - -1% Nearly unchanged +1% - +15% > +15% n.a. N=162 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 15 Over 40% of the respondents estimate that users of green IT can achieve energy savings of more than 15%. As to be expected, only a negligibly small minority think that customers will not achieve tangible savings with green IT. Evidently, green IT and energy conservation go hand in hand in the overwhelming majority of projects for the user. Green IT and energy conservation go hand in hand Typical energy savings for users thanks to green IT according to providers 14% 23% 28% 4% 31% No significant savings 15% - 30% No estimate Up to 15% >30% N=162 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 January 13, 2011 16 9
  • 81 More than one respondent in four of the green IT providers expects that their clients‘ investment in green IT will pay off within two years. Nearly two-thirds of the providers see green IT projects being amortised within a period of three to four years. This means that managers who focus exclusively on very short-term profitability will be more reluctant to invest in green IT. Green IT is not for impatient investors Typical amortisation period for green IT (years) 7% 33% 5% 32% 23% Stefan Heng (Deutsche Bank Research, <1 1- 2 3- 4 >4 n.a. +49 69 910-31774, stefan.heng@db.com) N=162 Source: DB Research and Green IT Advisory Office (BITKOM), 2011 10 17 January 13, 2011
  • Green IT: More than a passing fad! Experience gathered in green IT advisory This second section gives a breakdown of the findings of the survey in light of the experience gathered in consultations on green IT projects. The insights of BITKOM‘s Green IT Advisory Office are meant to help readers get a more concrete idea of the practical challenges facing the green IT sector. Everything depends on the individual case Much of the efficiency potential can still be tapped They really do exist, positive examples, that is, of how green IT projects are being successfully implemented in companies and organisations of various sizes. However, advisory practice and discussions with users also show that despite the availability of technologies and solutions much of the potential for energy and materials efficiency in ICT infrastructures and ICT systems has not yet been tapped. The question ―why‖ is what moved the Green IT Advisory Office to conduct this joint analysis with Deutsche Bank Research. The findings may help many decision-makers to eliminate the obstacles that are still blocking the implementation of green IT projects. Measure, measure, measure Uncover hidden energy consumption at weekends and during the night Every step towards optimisation should be preceded by detailed monitoring of energy consumption. When these analyses are conducted over an extended period, hidden energy consumption and peak loads at weekends and during the night can also be uncovered. The daily work of the Advisory Office provides evidence that optimisation projects are frequently launched without running a battery of tests beforehand. For this reason, it is not always the biggest energy consumption units that are exchanged first nor is optimisation potential fully tapped. It has been a very positive experience in planning and implementing green IT projects to work with users who have focused on issues above and beyond cost savings alone. In such cases it is not even absolutely essential that these projects be monitored by in-house environmental managers or officers to enable their successful completion. Well-trained employees and/or IT officers with advanced skills, but especially responsible, conscious efforts to do something positive for the environment have a major influence on a project‘s success. Subsidised energy consultations Fund for energy efficiency in SMEs Germany‘s small and medium-sized enterprises (SMEs) in particular can be helped in the search for hidden energy use by an energy consultation subsidy from the Sonderfonds für Energieeffizienz in KMU, a fund set up especially for energy efficiency in SMEs by Germany‘s Federal Ministry of Economics and Technology (BMWi) and KfW Bankengruppe. The BMU’s Environmental Innovation Programme Demand for grants for green IT projects January 13, 2011 Priority promotion in the BMU‘s Environmental Innovation Programme usually sees investment being supported by a KfW loan subsidised by the ministry. However, what is nearly in sole demand from the Green IT Advisory Office is a grant variant (up to 30% of the investment costs) which, as an exceptional subsidy, requires a special application. 11
  • 81 On the general promotion side, the ERP Environmental and Energy Efficiency Programme of the BMWi and KfW Bankengruppe, support is offered without exception via low-interest loans. Nevertheless, interest in grant funding is expressed regularly. Green IT promotion General promotion meant to take consideration of differing project durations Users are in a favourable position in that they are being offered attractive financing plans from ICT vendors and system houses as an alternative to general promotion funding. The practice of general promotion provides that energy and materials-efficient technologies with differing useful lives (as an example: server vs. photovoltaics system) obtain uniform funding offers via loans from the funding sponsor. As a result, loan maturities for green IT projects which often have useful lives of less than five years are longer than the useful life. This may explain why there is frequently demand for investment grants. Successful energy and materials-efficiency projects Imperative to thoroughly scrutinise necessity and complexity of new systems to be purchased As a further development to general promotion, preferential support could be given to best-practice examples in which the amount of energy or materials-efficiency potential tapped is particularly high. On the one hand, partial investment subsidy grants could be examined, while on the other hand positive reference projects could be highlighted via acknowledgement and accolades from the funding sponsor. A number of successful energy and materialsefficiency projects already exist in which extensively tested technologies are being used. The success of these projects is partly attributable to the fact that the officers responsible have closely scrutinised the necessity and complexity of their systems and infrastructures. This enabled procurement plans to be adjusted to actual demand and the best technologies available to be deployed. Such projects also prove to be landmarks in general promotion and may encourage others to follow suit. Even if the pronounced heterogeneity of the individual IT environments invariably allows only limited scope for comparisons, such positive project examples may generate a great many ideas for other users. Bernd Klusmann (Green IT Advisory Office (BITKOM), +49 30 27576-457, b.klusmann@bitkom.org) Florian König (Green IT Advisory Office (BITKOM), +49 30 27576-456, f.koenig@bitkom.org) 12 January 13, 2011
  • Green IT: More than a passing fad! Analysis of green IT: Hype has given way to rational consideration This third section puts the previously obtained findings into the context of a more highly aggregated macroeconomic analysis. This section should provide readers with an aid to find their way around the multi-faceted realm of green IT. In the public focus everywhere Close correlation GDP growth and power consumption, real terms, Germany (% yoy) 9 6 3 0 -3 71 77 83 89 95 GDP 01 07 Electricity Source: Bundesverband der Energie- und Wasserwirtschaft, 2008 18 Given this broad coalition of supporters, who would want to dispute that green IT is not a key issue of this day and age? The following examples alone say it loud and clear: CO2e-emissions of ICT sector, Germany 2007 (%) — In Germany, power consumed by information and communication 9 devices totalled some 55 TWh (1 TWh = 10 kWh) in 2007 and thus accounted for over 10% of total power consumption. The overall information and communication technologies sector is thus responsible for 2% of CO2e (carbon dioxide equivalent) emissions – the lion‘s share being generated by the segment of PCs, desktops, laptops, monitors and other hardware (Chart 19). 25 9 48 Data centres PCs, other hardware Telecommunications terminals Telecommunications networks Source: GeSI et al. 2009 Since companies have spent years seeking to meet the rapidly increasing demand for data-processing and memory capacities, these supplemental aspects of the strategy are now switching the focus to energy efficiency and greater job flexibility. Correspondingly, the big IT trade fairs such as the Symposium/ITxpo in Cannes or CeBIT in Hanover have in recent years selected green IT as one of their key themes. Since the hype over the initial technological fascination with green IT has now given way to rational consideration of the issue, policymakers are also seizing on it in a constructive way; they want to drive green IT forward in order to loosen the link between energy consumption and economic growth and lend a hand in global climate protection (Chart 18). Practical cases draw attention to green IT PC segment is biggest emitter in ICT sector 18 Owing to increasing energy prices, looming climate change and the related tightening of environmental regulatory policy many companies are currently revising their ecological strategy. In most cases, ICT has a key role in structuring these strategic considerations. In this context, companies from a broad spectrum of sectors may hope on the one hand that by using intelligent IT systems they can counter cost pressures. On the other hand, they can ideally offer their customers new goods and services and, furthermore, offer more flexible labour organisation models in the competition for top talent. 19 — The energy requirements of Germany‘s data centres alone probably totalled some 11 TWh (over 2% of total power consumption in Germany) in 2010, according to numbers 1 published by Fichter et al. (2009) ; this equals the annual output of five coal-fired generating plants. The CO2e emissions caused 2 by German data centres thus total nearly 6 million tonnes. In Germany, CO2e emissions of the ICT sector are likely to increase between 2007 and 2020 by an average of 0.9% p.a. and then 1 2 January 13, 2011 See Fichter, Klaus et al. (2009). Green IT: Zukünftige Herausforderungen und Chancen. Background paper for the BMU/UBA/BITKOM annual conference in Dessau in 2009. See GeSI et al. (2009). SMART 2020 Addendum Deutschland: Die IKT-Industrie als treibende Kraft auf dem Weg zu nachhaltigem Klimaschutz. Berlin. 13
  • 81 total 26 million tonnes; this corresponds to an increase in the 3 total share of CO2e emissions from 2% to 3%. Green IT helps slash costs Example of annual IT electricity costs in a company with 130 FTEs (EUR '000) 18 16 14 12 10 8 6 4 2 0 -75% Initial situation Optimised IT Jobs Server room Source: dena, 2009 20 Attraction of 75% savings potential Potential reduction in energy costs at a typical data centre (%) Reduction of data and applications Procurement of energy-efficient equipment Optimisation of climate control Improvement in server utilisation 0 10 20 30 Source: dena, 2009 40 21 IT making an ever larger contribution Share of IT industry in global GDP (%) 9 8 7 6 5 4 3 2 1 0 2002 2020 Source: GeSI et al., 2009 22 — If the German data centres rigorously retooled to efficient green IT, power consumption could be lowered from over 10 TWh in 2008 to about 6 TWh in 2015. At an electricity price of 0.12 4 EUR/kWh this adds up to around EUR 500 m (see also Charts 20 and 21). Inaction often due to misunderstanding Based on the increasing importance of ecology issues, the Global e-Sustainability Initiative (GeSI), a not-for-profit organisation of the ICT industry sponsored by the UN Environment Programme (UNEP) and the International Telecommunications Union (ITU), estimates that between 2002 and 2020 the contribution of the IT industry to global GDP is going to grow from 5.8% to 8.7% (Chart 22) – thanks not least to the growth segment of green IT. Deutsche EnergieAgentur (dena), an energy agency in Germany, expects the world market for desktop virtualisation to increase nearly twenty-fold between 2008 and 2013. During this same period, the market for retooling to energy-efficient data centres in Germany in particular is expected to be worth EUR 400 million. Furthermore, the market for 5 ―green by IT‖ is likely to total EUR 84 bn by 2020. Thus, research on green IT produces impressive facts and assessments everywhere. So why is it that some people always want to refer to green IT as nothing more than a passing fad? One reason for this perception probably has something to do with the terminology. ―Green IT‖ can easily be misinterpreted, so prematurely kindled expectations may soon be dashed. After all, at first glance, IT is not ―green‖ – and this is not only because of the energy consumption which is naturally linked with the rapidly increasing demand of companies and end-users for more and more data processing capacity. Critics of green IT note that on the liabilities side there are additional items to consider besides energy consumption, for example, the environmental compatibility of the materials used in production or the waste electrical and electronic equipment that eventually requires disposal. On disposal issues, green IT critics emphasise that outdated hardware is the source of much of the waste electrical and electronic equipment. Such ICT waste totals 5 million tonnes per year in Germany. Nonetheless, legislation and directives at the EU level have compelled manufacturers to introduce recyclable designs to increase the recycling ratio and reduce environmental strains. This was necessary in particular because decommissioned equipment can contain as many as 60 chemical elements – including trace 6 elements such as indium. Up to now it has been difficult to recycle this valuable IT waste because of the material‘s properties. IT has green potential Disregarding the clear focus on energy consumption, manufacture and waste disposal, IT does most certainly harbour ―green‖ potential. This applies not only to the saving of resources in IT 3 4 5 6 14 See GeSI (2009), ibid. Average price of electricity for industry from 2008/2009 according to data from VEA (Bundesverband der Energie-Abnehmer e.V.) and BDEW (Bundesverband der Energie- und Wasserwirtschaft e.V.). See dena (2009). Green IT Potenzial für die Zukunft: Energieeffizienz steigern, Wachstumsmärkte erschließen und Nachhaltigkeit sichern. Berlin. Further tightening of the rules results today in substitutes being used whose properties are much less damaging to the environment. January 13, 2011
  • Green IT: More than a passing fad! infrastructure itself (―green in IT‖), but also to the resources that can ultimately be saved by the use of IT in the economy as a whole (―green by IT‖). IT induces this overall macroeconomic effect via two factors. One of these is intelligent IT systems that help to monitor existing processes better and manage them more efficiently. Another is intelligent systems that, also in the larger context, lead to completely new resource-saving business models and processes. Companies at work on green targets Many measures focus on data centres As our survey, like other surveys, illustrates (see for example Chart 2 or 5 of our survey), a number of companies have already embraced the subject of green IT and sought to reduce CO2e emissions and resource consumption, with the measures implemented primarily focusing on data centres. In this context, virtualisation is an approach that seeks to combine resources of a computer (in the server area in particular) via virtual capacities, instead of operating huge monolithic servers for individual applications. Besides location-allocated software applications (e.g. SaaS) discussions focus here in particular on cloud computing approaches. Cloud computing describes the variable deployment of data processing capacities, setting the currently predominant, primarily local client-server approach against variable deployment of processing capacities, infrastructures and applications in decentralised networks. However, our survey leaves no doubt about it: there is still a long way to go from discussions of its benefits through to practical implementation in companies. The virtualisation ratio of data centres now comes to 15%, and so far even in big international companies virtually no grid or cloud computing projects 7 have been realised yet. On the long road towards integrated environment management PC remains biggest emitter CO2e-emissions of ICT sector, Germany (m tonnes) 2007 2006 2005 2004 2003 2002 0 2 4 6 8 10 12 14 16 18 20 22 Data centres PCs, other hardware Telecommunications terminals Telecommunications networks Source: GeSI et al., 2009 23 Not enough to simply replace old equipment with new There is an impressive amount of potential to be tapped in the realisation of green IT projects. GeSI et al. (2009) calculate that given rigorous, rapid implementation of what is possible will enable the ICT industry‘s CO2e emissions to be reduced by 25% by 2015 and as much as 50% in 2020. In a comparison of the four ICT segments (data centres, PCs and other hardware, telecommunications terminals and telecommunications networks) in Germany the biggest relative savings potential may be found at data centres. Emissions there may be reduced by 2,300 tonnes of CO 2e (35%) by 2015, and by as much as 60% or so (4,200 t CO2e) by 2020. By contrast, the largest absolute savings potential is to be found in the PCs, desktops, laptops, monitors and other hardware segment (by 2020: -7,000 t CO2e) – however, this segment will remain the biggest emitter in absolute terms even after this reduction (Chart 23). In the context of possible measures it emerges that switching from old equipment to new already boosts the energy efficiency of hardware significantly. The energy efficiency of computers – as measured in processing operations per watt – has been increasing rapidly for years; over the past 10 years, for example, by a factor of 100. However, this efficiency gain is in most cases cancelled out by the heavier use of IT. Nonetheless, simply replacing old equipment with new equipment will not be nearly enough to achieve the often ambitious 7 January 13, 2011 See Kolbe, Lutz M. et al. (2009). Studie Nachhaltigkeit und Green IT in ITOrganisationen. Status Quo und Handlungsempfehlungen. Berlin and Göttingen. 15
  • 81 environmental and resource targets. Rather, what is more important is that companies go beyond their commitment on hardware and software, shake out entire corporate structures and in doing so rigorously combine the environmental and energy management portfolios with IT design. Only a company that has addressed the subject of green IT in an overarching manner, also taking into account the position of the staff and communicating the measures internally in proper fashion, can actually tap the huge operational and strategic potential of green IT. Establish interface between IT and environmental management Staff challenge Until such an ideal situation is anywhere close to materialising, though, much still has to be done in other areas. For instance, in tune with other studies, our survey emphasises that with the bulk of companies the interface between IT and environmental management is still not established as a matter of course (see for example Charts 2, 3 and 4 of our survey). This usually results in not only strategic disadvantages within the organisation but also an inadequate level of communication with the staff on the environmental targets. Like other empirical analyses, our survey also refers to the fact that the potential to be tapped by means of technology is currently not being used on account of the lack of insight on the part of the staff (see for example Charts 10 and 12 of our survey). In many organisations, for instance, it is common that employees do not shut down their PCs overnight or over the weekend. For example, Kolbe 8 et al. (2009) measure a ratio of 50% in this context in German companies. If the energy-saving mode is not activated, workplace PCs consume up to 100 Wh even when they are idle. “Green by IT” breaking new ground Buildings offer the greatest potential Potential IT sector revenues on "green by IT", DE 2020 (EUR bn) Far beyond the aspect of ―green in IT‖, the aspect of ―green by IT‖ opens sizeable scope for economic and ecological action. For example, ―green by IT‖ enables implementation of new offers and innovative resource-saving processes in many sectors of the economy. GeSI et al. (2009) put the potential savings to be achieved via information and communication technology outside of the actual ICT sector at close to 200,000 tonnes of CO2e p.a., i.e. eight times the emissions of the ICT sector as a whole. These huge potential savings are to be found among the biggest CO2e emitters in industry, transport and logistics, energy and facility management in particular. Besides the potential directly linked with a given sector, as an overarching technology ―green by IT‖ is already noticeably changing the economy today. Particularly promising examples under discussion are (Chart 24): Smart grid Smart motors — Smart agriculture (IT-assisted agriculture); Dematerialisation — Smart buildings, connected living (e.g. climate management systems, planning tools, equipment control); Smart logistics — Smart consumption (e.g. shopping navigator, equipment control, online coaching); Smart buildings 0 10 Lower estimate 20 30 40 Upper estimate Source: GeSI et al., 2009 24 — Smart logistics (e.g. city street tolls, traffic control management, car electronics/navigation); — Smart motors (e.g. frequency inverter, system automation, optimised power plant operation); 8 16 See Kolbe, Lutz M. et al. (2009), ibid. January 13, 2011
  • Green IT: More than a passing fad! — Smart services (innovative services, e.g. efficiency concepts for internet shopping); — Smart closed loop economy (e.g. recycling); — Dematerialisation (e.g. e-invoicing, e-media, e-paper, telework, virtual conferencing); — Smart water supply (IT-assisted water supply and use). Saves resources via various levers Smart grid and smart metering on everybody's lips These examples save resources by substantially different potential amounts via various levers – from saving paper by digitising documents right through to saving mineral oil deposits by reducing commuter traffic. The subjects of smart grids and smart metering are on everybody‘s lips at present in connection with the politically intense debate on the future of energy policy. Power consumption has grown by more than 15% since 1991 and gross power generation has now increased to over 625 TWh. The nearly 400,000 gigatonnes of CO2e emissions that arise in the process represent 40% of Germany‘s total greenhouse gas emissions. A fundamental change in energy supply is taking place with the increasing decentralisation of the feed-in of renewable energy sources (wind, solar). This substantially boosts the complexity of network operations and raises the bar for the controlling information technology. With demand for electricity constantly increasing (up 15% in Germany since 1991), green IT can do much to reduce CO2e emissions in the smart grid and smart metering segments. Government can play an instrumental role How ecologically relevant innovations can be implemented in a market environment Nielsen’s “law” remains valid: +50% p.a. — Direct monetary subsidies (e.g. promotion programmes, stimulus package II); Speed of internet access, UK, Mbit per second 1,000 — Adjustment for a consistent legal framework (e.g. Germany‘s energy industry legislation (EnWG)); 100 — Formulation of political objectives (e.g. the German government declared in November 2008 that it intended to reduce energy consumption in the federal administration‘s IT operations by 40% by 2013 from the highest reading before 2009); 10 1 — Consolidation, structuring and publication of technological and market-relevant information on the subject; 0.1 0.01 — Recommendations for the implementation of such projects at company level; 0.001 0.0001 80 85 90 95 00 05 10 15 Actual Estimate by Nielsen‗s ―law‖ Source: FttH Council Europe, 2008 As ―green in IT‖ and even more so as ―green by IT‖, green IT offers clearly positive externalities for the entire economy. However, given the ecological hype linked with the issue it should not be forgotten that, in a market environment, ecologically relevant innovations can only be implemented on a broad scale if they are ultimately also economically viable for the relevant company. This is where the government can step in and support the advancement of green IT projects. Instruments include: — Creation of fora for information exchanges between users and providers (e.g. EU Code of Conduct for Data Centres); — Establishment of focal areas for promoting academic research; 25 — Assumption of pioneer function as user of resource-saving 9 technologies (e.g. in virtualisation, thin clients ); 9 January 13, 2011 A thin client is a computer terminal whose hardware is deliberately reduced compared with a PC and mainly designed for inputting and outputting data. 17
  • 81 — Promotion of increased cable and wireless-based network infrastructure as a technological prerequisite for the rapid increase in data traffic with the new applications (see Chart 25). It happens all too often also in the green IT sector that government support is confined to direct funding. Nonetheless, the examples show that government promotion can be much more comprehensive and creative. There is a raft of instruments available to do so, including infrastructure promotion in related segments (e.g. the 10 development and expansion of broadband telecommunications ). At the end of the day, it applies as much to the promotion of green IT as to any other cross-sector technologies that the impact should not be viewed in isolation but rather as to how it is imbedded technically and functionally in long-term economic relationships. Conclusion: Green IT is more than just a passing fad! "Green in IT" and "green by IT" harbour huge potential IT harbours huge ―green‖ potential. This applies not only to the saving of resources in IT infrastructure itself (―green in IT‖), but also to the resources that can ultimately be saved by the use of IT in the economy as a whole (―green by IT‖). So the difference is starting to sink in, but it still has potential to spread: 54% of the companies in our random sample know the difference between the two concepts ―green in IT‖ and ―green by IT‖. The macroeconomic impact of green by IT is induced via two factors: intelligent IT systems help for one thing to make existing processes more efficient. For another, the systems also lead to completely new resource-saving business models and processes. Cross-divisional approach is most promising But to be able to meet the often ambitious environmental and resource targets in the first place, the companies have to go beyond isolated investments in hardware and software and address the subject of green IT in a cross-divisional approach that integrates the staff members. There is still much to do before such an ideal state can be attained. Our survey underscores the fact that at the bulk of companies the interface between IT and environmental management has not yet been established as a matter of course. Some 38% of the companies say that they have appointed an environmental officer. 32% of the companies have defined an overarching position for budget responsibility for energy and IT. "Green by IT" opens sizeable scope for action Far beyond ―green in IT‖, ―green by IT‖ in particular opens sizeable scope for economic and ecological action. 26% of the companies consider themselves compelled by operational requirements to implement green IT projects. Companies in different sectors hope that intelligent IT systems can not only help them to counter cost pressures, but in the best of cases also enable them to offer their customers new goods and services and their staff members more flexible job models in the competition for top talent. Promising fields in the ―green by IT‖ segment include, for example, smart agriculture, smart buildings, smart grid, smart logistics, smart services and dematerialisation. These examples save resources by substantially different potential amounts via various levers – from saving paper by digitising documents right through to saving mineral oil deposits by reducing commuter traffic. 10 18 See Heng, Stefan (2010). Broadband infrastructure: The key factors are the regulatory framework, market transparency and risk-sharing partnerships. Deutsche Bank Research. E-conomics No. 77. Frankfurt am Main. January 13, 2011
  • Green IT: More than a passing fad! Emphasise best-practice examples in advisory practice The resource-saving potential that can be tapped thanks to green IT is huge and totals roughly eight times the emissions of the information and communication industry itself. Practical advisory experience shows that when green IT is implemented at companies, promotion programmes should focus more attention on best-practice examples. Such examples can help in advisory practice to break down the complexity of proposed projects. Gearing project planning to positive examples makes it easier for many companies to estimate the concrete impact of their investment in green IT. Economic efficiency is decisive for realisation Considering the ecological expectations that often go hand in hand with the subject of green IT one should not forget that companies are more likely to implement ecologically relevant innovations if they also pay off economically. Our survey highlights the general importance of the economic efficiency of such projects. A number of companies say the major hurdles thwarting the implementation of green IT projects lie in investment risk (43% agree strongly or very strongly), stakeholder consent and the as yet still inadequate degree of in-house experience with green IT projects (33% each). On this note, 60% of the companies in our sample see the amortisation period of green IT projects in a depreciation framework of up to four years. This also points to the conflict between attaining short-term returns on investments and installing long-term projects. Support the advancement of green IT projects Thanks to the positive externalities of green IT, government promotion is certainly warranted for a limited period. The government can support the advancement of green IT projects with a broadly based set of instruments ranging from direct subsidies and adjustments to the legal framework alongside the formulation of political objectives and recommendations, right through to the establishment of public services and the promotion of communication infrastructures. Stefan Heng (Deutsche Bank Research, +49 69 910-31774, stefan.heng@db.com) January 13, 2011 19
  • ISSN 1619-3245 Innovative capacity in the aftermath of the crisis: German companies banking on R&D, No. 80 ........................................................................... November 12, 2010 Majority of bank customers in Germany do research online: Findings of a clickstream analysis, No. 79 .................................................................................... October 14, 2010 Enterprise 2.0: How companies are tapping the benefits of Web 2.0, No. 78 ............................ September 8, 2010 Broadband infrastructure: The regulatory framework, market transparency and risk-sharing partnerships are the key factors, No. 77 ................................. May 26, 2010 E-invoicing: Final step of an efficient invoicing process, No. 76 ............................................................................... May 3, 2010 Age-appropriate information technology on the advance: Putting paid to olden times, No. 74 ............................................................................................ December 29, 2009 Brave new firms: High-tech entrepreneurship in the United States, No. 75 ............................................................ December 9, 2009 Online advertising in Germany Ray of light in the crisis, No. 73 ................................................................................................. November 25, 2009 Our publications can be accessed, free of charge, on our website www.dbresearch.com You can also register there to receive our publications regularly by e-mail. Ordering address for the print version: Deutsche Bank Research Marketing 60262 Frankfurt am Main Fax: +49 69 910-31877 E-mail: marketing.dbr@db.com © Copyright 2011. Deutsche Bank AG, DB Research, D-60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”. The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change without notice. Opinions expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made. In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht. In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange regulated by the Financial Services Authority for the conduct of investment business in the UK. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Limited, Tokyo Branch. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Printed by: Otto Lembeck GmbH & Co. KG, Frankfurt ISSN Print: 1619-3245 / Internet ISSN: 1619-3253 / E-Mail: ISSN 1619-4756