Competitive Advantage from Environmental Sustainability?
Energy efficiency, environmental sustainability, we hear these terms all the time. Sustainability is becoming more and more important in many industries, particularly in the data center market globally. We all know the drivers of this desire; lower operating costs, being better citizens of the planet, positive PR from ‘going green’ or using sustainable energy sources. But, can these efforts provide more than just cost savings and good PR? Can a company gain a competitive advantage from environmental sustainability?
This was the subject of my most recent talk at MIT Sloan. I have been speaking to this particular graduate course for a few years now and the topic has changed slightly. Initially I was talking about energy efficiency in data center design, construction, and operations, but now it has involved into a conversation about gaining competitive advantage from environmental sustainability. Can we really move from cost savings to creating a market advantage? The answer that the class members and I continue to come to is yes! Savvy organizations will recognize this fact and seize the opportunity to create an advantage over their competition.
The data center market is quite competitive and in varying levels of sophistication and maturity, depending on where you are operating in the global market and the service stack. There is a standard energy efficiency measure in data centers called Power Use Efficiency (PUE). PUE is the ratio of total amount of energy used by a data center facility to the energy delivered to the computing equipment. This ratio can (obviously) never be below 1.0 (perfectly efficient where only the computing equipment is consuming energy). The global average PUE is something like 1.7-1.8. State-of-the art efficiency is approaching 1.1. This ratio can (obviously) never be below 1.0 (perfectly efficient where only the servers are consuming energy). There are a number of ways organizations and designers are ‘gaming’ PUE to make their installations look more efficient than they really are, but this is perhaps a subject for another post at some point. To put it simply, the more energy you spend getting rid of waste heat or humidity, the less efficiently you are operating. This fact becomes more apparent when you are in harsh environments, like the tropics.
Environmental stainability, however, goes beyond mere energy efficiency. The data center market may well be at the leading edge of this movement. I was speaking to my friend at the Economic Development Board (EDB) of Singapore the other day. In a market with very limited available property, he was pointing out how important it is to be more intensive in the property use and in the harsh environment of the tropics, everyone is already claiming they are energy efficient. It is increasingly becoming ‘table stakes’ just to build a data center in Singapore to be well advanced in both of these things. So how can you turn environmental sustainability into an advantage?
It is well known that there are companies who have big corporate social responsibility programs and will pay more for environmentally sustainable products, services, energy, etc. Think Facebook and Google, to name two. Can you turn this demand into an advantage for your data center business? I think you can. Consider more intensive building use, higher interior temperatures combined with advanced cooling technologies (most data centers are kept cool for the humans, the servers can handle much higher temperatures), and modular build out of electrical and mechanical equipment as the building fills (not to be confused with modular, palletized, or containerized data centers, which are inherently less efficient). The customer installations in data centers are getting ever more dense, requiring more power to the site and more heat (and humidity) rejection from the building.
As a final thought, what about building or participating in an ecosystem? Why do we have businesses, like data centers, generating waste heat to keep servers cool and businesses creating heat because of their production needs? Is there a way we can trap and use that heat, or be more efficient and sustainable in a holistic sense?
I would love to hear your thoughts. Please get in touch to discuss.