Cloud Computing Can Save Big Firms Billions in Energy Costs

By: Tilde Herrera

Want to save money while shrinking your company's carbon footprint? Look no further than cloud computing, experts say.

A new report released today by the Carbon Disclosure Project (CDP) makes the case for why technologies such as virtualization and third party-hosted services, applications and websites can save big bucks for big companies while avoiding millions of tons of greenhouse gas emissions in the process.

"The reason I'm so excited about this report is the ICT sector has a decisive role to play in reducing greenhouse gas emissions and the accelerating of economic growth," said CDP Executive Chairman Paul Dickinson. "That decoupling is at the heart of what ICT is capable of."

ICT -- information and communication technology -- has long been hailed as a weapon for reducing emissions in many industries, despite the sector's own growing carbon footprint. The report argues that one aspect of ICT -- cloud computing, which relies on a shared pool of computing resources, such as networks, servers and storage -- is more efficient than traditional setups where companies own and manage their own servers, applications and platforms.

Cloud computing may save large companies $12.3 billion a year in energy costs by 2020, the CDP found. That translates to 85.7 million metric tons of carbon emissions that could be avoided annually if these large firms boost cloud computing expenditures from 10 percent now to 69 percent of their IT resources, as they indicated in the report.

"Cloud Computing – The IT Solution for the 21st Century," prepared by research firm Verdantix on behalf of CDP and sponsored by AT&T, included insights from 11 companies with $1 billion-plus revenues that have used cloud computing for at least two years. Among the company highlights:

• Boeing began its cloud initiative in 2008 and now has more than 8,000 servers virtualized, resulting in big gains in process efficiency. "Previously, it could take up to three months to provision and install a new server in the data center," said Jim Rupert, the company's enterprise technical architect. "With the development of a private cloud for the firm’s infrastructure, servers will be provisioned within minutes."

• Novartis' internal private cloud will reduce the total cost of ownership by as much as 50 percent, the company estimates. "Ten to 15 percent of that savings will come from better usage of hardware and the rest from improved operations basically introducing a self-provisioning portal that requires minimal human intervention," said Juergen Basse-Welker, Novartis' Lead Architect, Infrastructure.

• For Citigroup, the primary driver behind its cloud computing push is time to market, not carbon reductions. "Developers used to take 45 days to get new servers, but in our virtualized private cloud environment, it takes just a couple of minutes," said Paul Stemmler of Citigroup.

The main cloud computing challenges cited were concerns over security, reliability and vendor lock-in, as well as confusion over the business case. Some companies are seeking alternatives to outsourcing ICT to cloud computing, as my colleague Matthew Wheeland writes about today in his profile of Vantage Data Centers.

But for companies that migrate to cloud computing, the benefits loom large: The report offers two hypothetical scenarios using a large food and beverage company (chosen because the sector has uniform IT requirements that can be easily modeled), and finds that moving its HR application to a public cloud would yield $12 million in savings over five years, while a private cloud would rack up $5 million in savings.

The report recommends that companies develop an enterprise-wide IT strategy and understand IT costs and business processes. Dickinson advises firms to recognize the "inevitability" of cloud computing and that reducing emissions helps to reduce costs.

"The trend over the next few decades is toward the cloud," he said. "The economic and environmental benefits are so clear and the desire of increased profits and reduced emissions is so strong that there is no alternative. It's just a great solution, not just for this year but for the next decade or two."