Back in July, peaking energy prices driven by hypergrowth in China and India prompted the urgency for businesses to formulate “green” planning, and for vendors such as IBM to promote the role of information technology in helping businesses reduce their carbon footprints and costs. Fast-forward a couple of months to the collapse of Lehman, and suddenly a new wave of events triggers oil prices to undergo a 75% decline in less than six months.
Green IT will take a backseat to cost-cutting and survival in 2009, but it won't go away
To paraphrase Dickens, the economy of 2008 was 'A Tale of Two Decades'. The “first decade” of 2008 resembled the dot.com bubble of the late 1990s. Although fears of a credit meltdown were gradually increasing, conventional wisdom was that growth of the global economy – especially hypergrowth regions in the world’s two most populated countries – would help contain the coming economic crunch. Ironically, rapid action after the collapse of Bear Stearns reinforced that belief, and with it the urgency of energy pricing, resource management, and carbon footprints to business strategic planning and IT operations.
The “second decade” of 2008 looked more like the recessions of 1981, 1991, or 2001, having been triggered by the failure of Lehman Brothers in September. At that time oil prices had only seasonally dropped from their $130/bbl July peaks. But following that hellish weekend, conventional wisdom changed to a realization that the entire world would get dragged down in the credit crunch together. By the end of the year, oil prices declined to roughly $35/bbl.
Consequently, business and IT now have other things on their minds. Low environmental concern among IT executives will drop even lower. As nobody yet knows when the economy will finally bottom out, sustainability will take a distant backseat to cost-cutting and retrenchment.
While cutbacks and retrenchment in 2009 will reduce carbon footprints, for green IT there’s a silver lining in the cloud. 2009 will become the year of the cloud because in a downturn no business wants to make long-term commitments. Clouds are convenient in that they allow businesses to rent, rather than buy IT capacity or new software capability. That in turn translates to greater sustainability, as single multi-tenanted IT services have much lower carbon footprints than if all customers ran their instances separately on premises.
Sustainability will be a short-term casualty of the recession, but the wounds will hardly be fatal.
Stable planning horizons are essential for any business strategy, including green IT
Like any business strategy, green IT requires a long-term planning horizon. Conventional wisdom is that it is impossible to make long-term decisions when the world changes overnight.
This is where historical data, aided by the ability to massively crunch data for comparing alternate scenarios, can help businesses hedge uncertainty. And in the case of energy pricing, environmental concerns, and economic cycles, the only things new in the current cycle are that the mix of factors has changed, and that globalization has compressed the impacts of changes that formerly spanned decades to occur in a matter of weeks. Consider the following:
- For energy prices, the “first decade” of 2008 resembled the Iranian oil crisis of 1978–79. The “second decade” of 2008 resembled the post-1981 period where consumers gained bargaining power over producers.
- For the economy at large, the “first decade” of 2008 featuring hypergrowth in the BRIC countries resembled the excesses of the dot.com bubble.
- For the environment, world population has increased nearly 50% since 1980; like the 1980s, most of the increase has occurred in the developing world. Mass awareness of global warming has only recently emerged.
- For government policy, the issues of energy security are just as relevant now as they were during the Iranian oil crisis of 1979–80.
IT is in a pivotal position to help businesses make sense of uncertainty while learning from the lessons of past decades. Green may not be Priority 1 in today’s economy, but advanced forecasting and simulation might actually make it sustainable for a change.
Tony Baer leads Ovum's research on the software lifecycle and has been a noted authority on software development platforms and integration architecture for nearly 20 years. A prolific blogger on the onStrategies Perspectives blog, Tony's career began as journalist with publications including Computerworld, Information Week and Manufacturing Business Technology.