Analysis: Carbon tax to define IT success

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Analysis: Carbon tax to define IT success

Winners and losers divided by data centre refresh.

The Australian Government's plans to introduce a carbon tax from mid-2012 will define the winners and losers in Australia's IT landscape.

The inevitable increase in power costs driven by the carbon tax will create notable gaps between the cost overheads of those providing services from the latest generation of data centres fitted with innovative cooling technology and those operating ageing facilities.

Those that clung onto outmoded technology will struggle to remain competitive in an era of steadily rising power bills, according to Greg Goode, senior data centre practice consultant at The Frame Group.

"The power efficiency of a data centre will have a knock-on effect in terms of cost," he said. "The biggest winners will be data centres who make headway into improving energy and CO2 efficiency. They'll get a savings on energy use and carbon – data centres that don't will find it difficult to compete."

"A carbon tax will increases electricity prices, which will increase data centre costs," agreed Bob Hayward, chair of the Australian Information Industry Association's Environment and Sustainability Council.

"However this should force all companies to understand what they are paying in energy costs for IT and put in place techniques and practices to reduce energy consumption for more efficient data centres or consider alternatives, such as outsourcing of data centres, managed services and cloud computing."

Verb IT chief Damien Wilde welcomed the announcement. "The market needs price signals to drive sustainability and energy efficiency in all sectors if the economy," he said.

Duncan Bennet, managing director of VMware ANZ said the IT industry was "one of the largest contributors of carbon emissions in Australia – larger even than the airline industry."

Bennet predicted large cost implications, and said it was "essential that businesses put strong measurement in place to create a baseline understanding of overall energy usage – because businesses cannot reduce what they can't measure."

The former Sun executive also predicted a shift within corporate IT departments, to save on domestic energy, management and real estate costs by migrating workloads into third party cloud computes.

"Businesses who have already embarked on this journey will have a clear competitive advantage over those who have taken a 'wait and see' approach to carbon pricing," he said.

But whether those cloud computes are built within Australia's borders remains to be seen.

Fujitsu A/NZ's director of sustainability Chris Seale said that even the cloud footprint has to be "kept as small as possible" by making sure the servers are hosted in a highly energy-efficient facility.

The company claims to have one of the world's most environmentally friendly Tier 3 data centres, located in Perth.

Darren Mann, managing director at Equinix A/NZ, one of the country's largest suppliers of independent data centres, is amongst those that have made significant investments in new power-efficient plant.

But he warns of escalating prices from power utilities that - once burdened with a carbon tax - could inflate prices end users pay when consuming IT services hosted in Australia.

Power bills have gone up steadily over the past three years, he said, and the price hikes are "becoming increasingly difficult to continue to absorb.

"Couple this with higher charges from suppliers as a result of the carbon tax next year, and something has to give. I think the data centre industry will have no choice but to pass on such increases."

Services more expensive

Goode said consumers of IT services will pay higher prices, and not just for those consuming from the worst 500 polluters.

Data centres are ubiquitous with many industries, he said, and take up a part of the property portfolio and energy use.

In the case of one financial services company he has spoken to, data centres represent in excess of 35 percent of total costs.

"Every aspect of society will be touched by it," he said. "Everyone in our society is a data centre user. We connect directly to a financial institution's data centre to make a transaction, there is not an intermediary anymore."

Bob Hayward said the pros for the IT industry outweigh the cons.

"While there will be cost implications across all Australian business with the introduction of the carbon pricing mechanism for data gathering, monitoring, analysis, reporting for emissions, the costs of implementing best practices around 'green IT' are partly offset by the government assistance," he said.

"Some of this should be used to allow business to invest in the required IT solutions. Technology will be central to the development of robust measurement, reporting and monitoring of carbon use and abatement strategies.

"AIIA will be taking this discussion up with the Government."

Mann said he hoped the Government would provide incentives to reward those businesses that shift to more efficient facilities.

"Perhaps the Government should look to compensate efficiently run data centres by way of rebates that help to contain costs," Mann said.

"Then customers who have moved from inefficient server closets and data rooms are in effect rewarded for moving to a greener, more sustainable option that couldn't be achieved in-house."

Dr Steve Hodgkinson, research director at Ovum doesn't like the odds of the industry getting any help.

"Some have commented that the IT industry, as a significant consumer of electricity, should have been specifically considered for assistance and transitional arrangements," he noted.

"The speed of technology obsolescence in the IT industry is such, however, that large IT providers have strong commercial incentives anyway to invest in the latest technology, which is also the most energy efficient."

The introduction of a carbon tax might also drive where facilities are built.

Goode says efforts to build smart grids in areas of Australia with cooler climates will prove attractive to data centre builders seeking to utilise free air cooling, a technique more popular in the Northern Hemisphere.

"The dynamics are going to change – in next five years, market forces will change the mix of where data centres are located and how data centres are constructed."

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