21 July 2011

Move to Cloud Can Save $ Billions, C Millions of Tons

A new report from the Carbon Disclosure Project, prepared by consultancy Verdantix, finds that there are significant savings in energy costs and carbon emissions for large companies that shift IT functions from dedicated servers to the cloud.
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The findings suggest that as large U.S. companies move a significant fraction of their IT functions to cloud platforms the total reduction in CO2 emissions could be in the range of 100 million tons per year by 2020.

Although that is a Big Number, it is only about 1.5% of current U.S. greenhouse gas emissions. Cloud computing isn't going to save the world. But it can make the dollar cost and the environmental cost of business computing grow more slowly.

The corresponding projected annual savings in energy costs is $12.3 billion by 2020, with widespread adoption of cloud computing. That may be more interesting to companies than the emission reductions.

Case Studies

Verdantix used a case study approach, collecting data from 11 global firms which have used cloud computing for at least two years. The findings from the case studies were used to build models to estimate savings. They looked at both private and public clouds. Both had very significant energy and carbon savings over traditional IT platforms, though public clouds were better. They also assert that there were other non-financial benefits found in their case studies, from improved business flexibility, rapid implementation, greater process efficiency and the like.

The case studies came from such firms as Applied Materials, Boeing, Dell and Deutsche Bank. They also got input from cloud computing suppliers AT&T, CloudApps, IBM and Hewlett-Packard.

There were some barriers to switching to cloud-based services. For instance financial firms felt they couldn't move customer information to a public cloud because of the strict data security requirements of the Gramm-Leach-Bliley Act and other regulations. Similarly, drug companies were concerned about the security of intellectual property in the cloud.

The study's business model calculates that a typical large food and beverage firm could move its HR functions to a public cloud with a payback of less than one year, and to a private cloud with a payback under two years. The financial attractiveness of switching to cloud systems was so strong that their analysis suggested that 69% of the IT spend of large firms in the U.S. might be on cloud computing by 2020.

This study might be interesting to anyone interested in the future of enterprise IT, and it is relatively short and clear.

(Of course the notion of projecting cloud adoption to 2020 is a bit comical, since the rapid technological advance of IT may mean that "cloud computing" will be a quaint and old-fashioned concept by then, when technologies we haven't anticipated will be having significant impact.)

CDP's page on the report is here. The full report is in PDF here.

This has been cross-posted to the SAP Community Network here.

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