Study Green IT - More than a passing fad!

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Authors

Stefan Heng

+49 69 910-31774

[email protected]

Bernd Klusmann

+49 30 27576-457

[email protected]

Florian König

+49 30 27576-456

[email protected]

Editor

Antje Stobbe

Technical Assistant

Sabine Kaiser

Deutsche Bank Research

Frankfurt am Main

Germany

Internet: www.dbresearch.com

E-mail: [email protected]

Fax: +49 69 910-31877

Managing Director

Thomas Mayer

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IT harbours huge “green” potential. This applies on the one hand to the

saving of resources in IT itself (―green in IT‖). But on the other hand it also applies

to the resources that can be saved by implementing intelligent IT systems in the

economy as a whole (―green by IT‖). 54% of the companies we surveyed for this

study know the difference between the two concepts. So while the difference is

starting to sink in, there is still scope for raising awareness.

Best-practice examples should be given greater prominence. As our

survey makes clear, only 26% of companies feel compelled to implement green IT

projects for operational reasons. Instead, at many companies the key factor is the

strength of the convictions held by the executive on the idea of green IT. At 45% of

the companies, it is top management that initiates such projects. Best-practice

examples can help in efforts to make the complexity of prospective projects

transparent. Gearing project planning to positive examples makes it easier for

companies to estimate the measures necessary for their own IT system.

To be able to leverage untapped potential, structures will need to

change. To fulfil the environmental and resource targets, though, the companies

will have to revamp their structures and rigorously integrate their environmental

and energy management activities into their IT design. That is still a long way off,

however. Some 38% of the companies in our sample have appointed an

environmental officer. At the same time, some green IT projects have to proceed

even though only 32% of the companies have installed overarching budget

responsibility for energy and IT.

“Green by IT” opens sizeable scope for economic and ecological

action. Companies from different sectors hope on the one hand that by means of

intelligent IT systems and innovative resource-saving processes they can counter

cost pressures. On the other, they say they want to be able to offer customers new

goods and services and offer their staff more flexible job models in the competition

for top talent.

Companies are more likely to implement ecologically relevant

innovations if these pay off in the short run. Our survey finds that

investment risk is the major hurdle thwarting the implementation of green IT

(43% of respondents agree strongly or very strongly). On this score, 60% of the

companies see the amortisation period of green IT projects falling in a depreciation

framework of up to four years.

January 13, 2011

Green IT

More than a passing fad!

A joint study by:

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2 January 13, 2011

The Green IT Advisory Office established by BITKOM e.V. is a

special project sponsored by Germany‘s Federal Ministry for the

Environment, Nature Conservation and Nuclear Safety (BMU), the

Federal Environment Agency (UBA) and KfW Bankengruppe. It was

set up on an initiative of BITKOM – the Federal Association for

Information Technology, Telecommunications and New Media – with

the focus of support on the ―IT goes green‖ platform of the BMU

Environmental Innovation Programme (UIP). The Advisory Office

supports professional users in the implementation of green IT

projects, primarily offering consultation on the potential to save

energy and materials via green IT technologies as well as on

subsidy programmes for priority and general promotion.

In addition to traditional projects on energy and materials efficiency

the BMU‘s priority promotion activities also support the reduction of

emissions through the use of information and communication

technologies, or ICT (―green by IT‖), which often offers even greater

savings potential. Besides the targeted expansion of innovative and

environmentally-friendly ICT and system solution concepts, a further

focus of the Advisory Office is on the communication and

representation of best-practice examples in order to publicise the

technologies and encourage others to follow suit.

Further information (in German):

www.green-it-beratungsbuero.de

Deutsche Bank Research is responsible for macroeconomic

analysis within Deutsche Bank Group and acts as consultant for the

bank, its clients and stakeholders. Deutsche Bank Research

analyses trends that are relevant for Deutsche Bank in the financial

markets, the economy and society, including their potential risks and

opportunities.

For over 10 years Deutsche Bank Research has been conducting

research into the impact of continuing digitisation on business and

society as well as the related changes.

Further information:

www.dbresearch.com/Technology and Innovation

Green IT: More than a passing fad!

January 13, 2011 3

Bulk of participants from the IT sector

Intention and methodology in this study

―Green IT‖ can easily be misinterpreted, so prematurely kindled

expectations may soon be dashed. After all, IT is not ―green‖ at first

glance – and not only because more intensive use results in higher

energy consumption. Nonetheless, IT does have ―green‖ potential.

This applies on the one hand not only to the saving of resources in

IT infrastructure itself (―green in IT‖), but it also applies on the other

to the resources that are ultimately saved by the use of IT in the

economy as a whole (―green by IT‖). Green IT and its related

potential are understood and assessed in very different ways in

practice across the broad spectrum between ―green in IT‖ and

―green by IT‖. This observation was the starting point for the present

study by Deutsche Bank Research and BITKOM‘s Green IT

Advisory Office.

Our study, with its focus on economic aspects, seeks to analyse the

trends shaping up in practice and the motives driving green IT

projects in the first place. With this objective, our study is divided

into three sections: the first section summarises the main findings of

our survey, depicting the results in an overview featuring individual

charts and graphs. The second section gives a breakdown of the

findings of the survey in light of the experience gathered in

consultations on green IT and thus illustrates the practical

challenges facing green IT. Finally, the third section presents the

conclusions drawn from the survey and actual advisory experience

in the context of a more highly aggregated macroeconomic

assessment.

A word of thanks

We would like to thank the German Association for Small and

Medium-sized Businesses (BVMW), the Association of German

Chambers of Industry and Commerce (DIHK), ICTswitzerland and

Microsoft Germany, who supported our survey.

Survey on Green IT

Deutsche Bank Research and the Green IT Advisory Office

established by BITKOM e.V. joined forces to conduct a survey

among industry providers and users on the subject of green IT. With

a response rate of 10%, we were able to evaluate a total of 237

completed questionnaires in our analysis. At the majority of the

respondent companies, the responses came from the top

management (69%). Some 32% of the companies classified

themselves as only green IT users and, logically, 68% as green IT

providers. Among the green IT providers 25% identified themselves

as vendors, 44% as service providers and 30% as both vendors and

service providers.

The bulk of the participants say they belong to the IT sector (53% of

all responses); this is followed at a large interval by the

manufacturing sector and the liberal professions (12% each). In

terms of revenues and headcount, participation in our survey was

particularly pronounced among very small companies (35% have

less than 50 employees) and very large companies (26% with over

2,500 employees). At 53% of the respondent companies the

decision-makers had an academic background in engineering or the

natural sciences. The providers of green IT technologies group was

Glossary of main

abbreviations

ICT Information and communi- cation technology

SaaS Software as a Service

CO2e Carbon dioxide equivalent

Measure of greenhouse gas effect of emissions, standardised to CO2

Wh Watt-hour Unit of energy

kWh Kilowatt-hour, 1 kWh = 10

3

Wh

TWh Terawatt-hour, 1 TWh = 10

12

Wh

Source: DB Research, 2011 1

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4 January 13, 2011

Majority based in Germany

Investment risk, stakeholder consent

and inadequate experience curb

progress

Support needed from policymakers

and consumers

Need for a committed executive and

attentive staff

Budget responsibility seldom

converges below top management

Need for specific IT support

explicitly also queried about experiences to date in their in-house

use and their expectations and assessments of green IT.

The majority of the companies that participated in our green IT

survey are based and operate in Germany (96%) – regional focal

points being the metropolitan areas of Berlin, Munich, the Rhine-

Main region and Stuttgart. Nonetheless, thanks to the support of

ICTswitzerland there were also five users and three providers from

Switzerland. Two other users from third countries also participated

in the survey.

Key findings of our survey

After the initial hype that typically accompanies the launch of new

technologies, green IT has now entered the phase of constructive

debate and actual implementation in company structures. Some

40% of the companies surveyed in this study consider the

amortisation period for green IT projects to be in the depreciation

framework of up to four years. Despite this significant progress in

implementation there is nonetheless still no lack of hurdles to be

cleared. A number of companies in our survey say these major

hurdles thwarting the implementation of green IT projects lie in

investment risk (43% agree strongly or very strongly), stakeholder

consent and the as yet still inadequate degree of in-house

experience with green IT projects (33% each).

In our sample, many companies say the explanation for the sluggish

implementation of green IT projects is that it has too little importance

on the public agenda (14%: agree strongly; 34%: agree), the lack of

transparency of the product range (7%: agree strongly; 30%: agree)

and the lack of a budget (11%: agree strongly; 21%: agree). By

contrast, the potential pressure from the competition or an internal

lack of agreement is only seldom cited as a reason for sluggish

implementation. Apparently policymakers and consumers in

particular are also key in deciding whether green IT makes faster

progress.

38% of the respondents have explicitly appointed an environmental

officer who is responsible for meeting the company‘s climate and

resource targets. In 66% of the companies the upper management

or the head of the in-house IT section initiates the green IT projects.

In addition, the survey participants also often cite the commitment of

staff as one of the ―other‖ stimuli. Company training is very important

here and is already being conducted at one-third of the companies

surveyed. So green IT needs a committed executive, but also

attentive trained staff.

So far, green IT has had to proceed in many companies despite the

fact that budget responsibility for energy and IT does not converge

below the top management level. Overarching budget responsibility

below this level is to be found in 32% of the companies analysed.

Many companies have explicitly formulated climate and resource

targets in their strategies and are addressing the strategic

sustainability objective with specifically coordinated IT support. 60%

of the companies surveyed use management and control technology

or management systems to achieve these strategic corporate goals.

In the following we give an overview of the findings of our survey:

Green IT: More than a passing fad!

January 13, 2011 5

Findings of our survey among users of green IT

38% of the respondents have explicitly appointed an environmental officer who is responsible for meeting the company‘s climate and resource targets. With this finding it should be noted that the majority of the respondents are from small and medium-sized companies. 75% of the subgroup of larger companies with more than 2,500 employees that is not represented here say they have appointed an environmental officer. Differences in capital and human resources are part of the reason for the fact that large companies tend to work with an appointed officer on the subject of green IT more than small companies do.

At many participating companies green IT has so far had to proceed despite the fact that budget responsibility for energy and IT only converges at the uppermost level of decision-making. Overarching budget responsibility below the top level is to be found in over one-third of the companies we analysed.

At 66% of the participating companies the upper management or the head of the IT section initiates the green IT projects. In addition, the participants in our survey also often cite the commit-ment of staff as one of the ―other‖ stimuli. So green IT needs a committed executive, but also attentive staff.

yes 38%

no 54%

n.a. 8%

N=237

Nearly 40% have an environmental officer

Companies with an environmental officer

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 2

yes 32%

no 51%

n.a. 17%

N=237

Green IT must often proceed without overarching

budget responsibility

Has budget responsibility for energy and IT converged?

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 3

11%

21%

5% 45%

8%

10%

Environment officer Head of IT Finance / Purchasing

Upper management Other n.a.

Green IT often initiated by upper management

Places where green IT is initiated in companies

N=237, multiple responses possible

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 4

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6 January 13, 2011

In keeping with the central role of upper management in the implementation of green IT projects it emerges that in close to 90% of the respondent companies the stimulus for such projects comes from merely one or, at most, two places.

A majority of the respondent companies know the difference between ―green in IT‖ and ―green by IT‖. The significantly differing approaches of the concepts that fall under this keyword have sunk in with many decision-makers, but there is still scope for raising awareness. In the subgroup of companies that have already implemented green IT projects some two-thirds have realised there is a difference between green in IT and green by IT – but still not everyone.

More than two-thirds of the companies

surveyed have set climate targets.

Within this group, half of the companies

have explicitly anchored at most two

targets in their strategy, and one-

quarter of them four.

1 60%

2 27%

3 10%

>3 3%

N=201

Green IT needs lone wolf

Number of places that initiate green IT in the company

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 5

25%

23%

25%

25%

2%

1 2 3 4 >4

N=176

Many have defined one or two climate and/or

resource targets

Number of climate and/or resource targets anchored in company strategy

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 7

yes 54%

no 37%

n.a. 9%

N=237

Majority know the difference

Difference between "green in IT" and "green by IT" has sunk in

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 6

Green IT: More than a passing fad!

January 13, 2011 7

24%

34% 7%

28%

7%

Management systems (with focus on CSR, carbon life cycle management)

Management & control technology (for data centres, facility management, PCs)

Other

no

n.a.

Some 60% use management systems or

management & control technology

IT systems used to achieve targets

Source: DB Research and Green IT Advisory Office (BITKOM), 2011

N=237, multiple responses possible

10

Only 26% of the respondent companies feel compelled to implement green IT projects. At those companies that do feel this compulsion, the pressure is often explained by pointing to heat build-up in the server room and energy costs. Thus, in many companies, reasons other than the ones listed here play the crucial role in decisions on the implementation of green IT.

One-third of the respondents provide training for their employees on the subject of green IT. So this area will still harbour considerable potential going forward.

Some 60% of the companies surveyed use management and control technology or management systems to achieve the company‘s strategic targets. Among the other supporting IT systems the participants often refer to virtualisation. Only a minority of the participants say they want to approach the targeted objectives without any special supporting IT systems whatsoever.

5% 5%

10%

6% 56%

18%

Bottleneck in energy supply Scarcity of space Heat build-up in server room Other no n.a.

Only a minority feels compelled to implement

green IT

Q: "Do you feel compelled to implement green IT in the near future? If so, by which factor?"

N=237, multiple responses possible

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 8

yes 34%

no 50%

n.a. 16%

N=236

Considerable potential for training on subject of

green IT

Participating companies that train stafff on green IT

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 9

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8 January 13, 2011

Many companies explain the really slow implementation of green IT projects as being due to the often insufficient pressure from policymakers and consumers (14%: agree strongly; 34%: agree), the lack of transparency of the product range (7%: agree strongly; 30%: agree) and the lack of a budget (11%: agree strongly; 21%: agree). By contrast, the potential pressure from the competition or an internal lack of agreement is only seldom cited as a reason for sluggish implementation. Obviously, the sustained interest of policymakers and consumers could give the realisation of green IT projects at companies an additional fillip.

A number of companies say the major hurdles thwarting the implementation of green IT projects lie in investment risk (43% agree strongly or very strongly), stakeholder consent and the as yet still inadequate degree of in-house experience with green IT projects (33% each). Besides, the participants also refer to the conflict between attaining short-term returns on investments and installing strategic, long-term projects. By contrast, the respondent companies regard the availability of the IT infra-structure (7%) as the smallest hurdle in the implementation of green IT projects.

Internal financing with equity capital is by far the most important method of funding for green IT projects. Obviously, many companies do not bank on green IT until they have already generated the required capital.

0% 25% 50% 75% 100%

Investment risk

Lack of experience with individual solutions

Steakholder consent

Potential conflict over data security

Financing risk (availability, costs of funding)

Complexity of instruments for achieving energy efficiency

Availability of IT infrastructure

Agree very strongly Agree strongly Agree more or less

Agree little Disagree n.a.

N=237

Hurdle of economic efficiency

Hurdles thwarting realisation of green IT projects at companies

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 12

0% 25% 50% 75% 100%

No pressure from policymakers or consumers

No green IT budget

Green IT product range is not transparent

Competitors not doing anything either

Lack of in-house agreement

Lack of agreement between IT and users

Agree strongly Agree Agree partly Rather disagree Disagree altogether n.a.

N=237

Pressure from policymakers and consumers plays

important role

Q: "What would you say are the reasons that green IT is not being implemented?"

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 11

57%

4%

11%

5% 1%

6%

1% 15%

Internal equity financing External equity financing

Leasing External debt financing

Financing via bank of provider Government promotion

Other n.a.

Green IT projects usually financed internally

Usual method of funding green IT projects

Source: DB Research and Green IT Advisory Office (BITKOM), 2011

N=237, multiple responses possible

13

Green IT: More than a passing fad!

January 13, 2011 9

Findings of our survey specific to the providers of green IT

Over half of the respondent providers regard investment in green IT projects to typically have a very minor volume of less than EUR 200,000. By contrast, only almost one provider in ten says the typical volume is more than EUR 500,000. The responses given here might also suggest that green IT users initially approach the issue cautiously, assuming a manageable level of financial risk owing to their overall profitability.

As to be expected with new technologies, 66% of the respondents look for rapid revenue growth over the coming five years; the majority call for a rate of 1% to 15%. Nonetheless, nearly an equal number of providers expect either a still more substantial upswing or else a period of flat growth in green IT. This shows that the market picture on the outlook for green IT is still pretty mixed.

Over 40% of the respondents estimate that users of green IT can achieve energy savings of more than 15%. As to be expected, only a negligibly small minority think that customers will not achieve tangible savings with green IT. Evidently, green IT and energy conservation go hand in hand in the overwhelming majority of projects for the user.

2%

17%

45%

21%

15%

-15% - -1% Nearly unchanged +1% - +15% > +15% n.a.

N=162

Broad mix of expectations for green IT

Forecast of green IT revenue growth in 5 years (% vs. 2010)

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 15

4%

31%

28%

14%

23%

No significant savings Up to 15%

15% - 30% >30%

No estimate

N=162

Green IT and energy conservation go hand in hand

Typical energy savings for users thanks to green IT according to providers

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 16

14%

18%

20%

5%

4%

5%

34%

< 1 1 - 4.99 5 - 19.9 20 - 49.9 50 - 99.9 >99.9 k.A.

N=162

Green IT mainly linked with small investment

volume

Typical investment volume for green IT projects (EUR 10,000)

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 14

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10 January 13, 2011

More than one respondent in four of the green IT providers expects that their clients‘ investment in green IT will pay off within two years. Nearly two-thirds of the providers see green IT projects being amortised within a period of three to four years. This means that managers who focus exclusively on very short-term profitability will be more reluctant to invest in green IT.

Stefan Heng (Deutsche Bank Research,

+49 69 910-31774, [email protected])

5%

23%

32%

7% 33%

< 1 1- 2 3- 4 >4 n.a.

N=162

Green IT is not for impatient investors

Typical amortisation period for green IT (years)

Source: DB Research and Green IT Advisory Office (BITKOM), 2011 17

Green IT: More than a passing fad!

January 13, 2011 11

Much of the efficiency potential can

still be tapped

Uncover hidden energy consumption

at weekends and during the night

Fund for energy efficiency in SMEs

Demand for grants for green IT

projects

Experience gathered in green IT advisory

This second section gives a breakdown of the findings of the survey

in light of the experience gathered in consultations on green IT

projects. The insights of BITKOM‘s Green IT Advisory Office are

meant to help readers get a more concrete idea of the practical

challenges facing the green IT sector.

Everything depends on the individual case

They really do exist, positive examples, that is, of how green IT

projects are being successfully implemented in companies and

organisations of various sizes. However, advisory practice and

discussions with users also show that despite the availability of

technologies and solutions much of the potential for energy and

materials efficiency in ICT infrastructures and ICT systems has not

yet been tapped. The question ―why‖ is what moved the Green IT

Advisory Office to conduct this joint analysis with Deutsche Bank

Research. The findings may help many decision-makers to eliminate

the obstacles that are still blocking the implementation of green IT

projects.

Measure, measure, measure

Every step towards optimisation should be preceded by detailed

monitoring of energy consumption. When these analyses are

conducted over an extended period, hidden energy consumption

and peak loads at weekends and during the night can also be

uncovered. The daily work of the Advisory Office provides evidence

that optimisation projects are frequently launched without running a

battery of tests beforehand. For this reason, it is not always the

biggest energy consumption units that are exchanged first nor is

optimisation potential fully tapped.

It has been a very positive experience in planning and implementing

green IT projects to work with users who have focused on issues

above and beyond cost savings alone. In such cases it is not even

absolutely essential that these projects be monitored by in-house

environmental managers or officers to enable their successful

completion. Well-trained employees and/or IT officers with advanced

skills, but especially responsible, conscious efforts to do something

positive for the environment have a major influence on a project‘s

success.

Subsidised energy consultations

Germany‘s small and medium-sized enterprises (SMEs) in particular

can be helped in the search for hidden energy use by an energy

consultation subsidy from the Sonderfonds für Energieeffizienz in

KMU, a fund set up especially for energy efficiency in SMEs by

Germany‘s Federal Ministry of Economics and Technology (BMWi)

and KfW Bankengruppe.

The BMU’s Environmental Innovation Programme

Priority promotion in the BMU‘s Environmental Innovation

Programme usually sees investment being supported by a KfW loan

subsidised by the ministry. However, what is nearly in sole demand

from the Green IT Advisory Office is a grant variant (up to 30% of

the investment costs) which, as an exceptional subsidy, requires a

special application.

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12 January 13, 2011

General promotion meant to take

consideration of differing project

durations

Imperative to thoroughly scrutinise

necessity and complexity of new

systems to be purchased

On the general promotion side, the ERP Environmental and Energy

Efficiency Programme of the BMWi and KfW Bankengruppe, support

is offered without exception via low-interest loans. Nevertheless,

interest in grant funding is expressed regularly.

Green IT promotion

Users are in a favourable position in that they are being offered

attractive financing plans from ICT vendors and system houses as

an alternative to general promotion funding. The practice of general

promotion provides that energy and materials-efficient technologies

with differing useful lives (as an example: server vs. photovoltaics

system) obtain uniform funding offers via loans from the funding

sponsor. As a result, loan maturities for green IT projects which often

have useful lives of less than five years are longer than the useful

life. This may explain why there is frequently demand for investment

grants.

Successful energy and materials-efficiency projects

As a further development to general promotion, preferential support

could be given to best-practice examples in which the amount of

energy or materials-efficiency potential tapped is particularly high.

On the one hand, partial investment subsidy grants could be

examined, while on the other hand positive reference projects could

be highlighted via acknowledgement and accolades from the

funding sponsor. A number of successful energy and materials-

efficiency projects already exist in which extensively tested

technologies are being used. The success of these projects is partly

attributable to the fact that the officers responsible have closely

scrutinised the necessity and complexity of their systems and

infrastructures. This enabled procurement plans to be adjusted to

actual demand and the best technologies available to be deployed.

Such projects also prove to be landmarks in general promotion and

may encourage others to follow suit. Even if the pronounced

heterogeneity of the individual IT environments invariably allows

only limited scope for comparisons, such positive project examples

may generate a great many ideas for other users.

Bernd Klusmann (Green IT Advisory Office (BITKOM),

+49 30 27576-457, [email protected])

Florian König (Green IT Advisory Office (BITKOM),

+49 30 27576-456, [email protected])

Green IT: More than a passing fad!

January 13, 2011 13

Analysis of green IT: Hype has given way

to rational consideration

This third section puts the previously obtained findings into the

context of a more highly aggregated macroeconomic analysis. This

section should provide readers with an aid to find their way around

the multi-faceted realm of green IT.

In the public focus everywhere

Owing to increasing energy prices, looming climate change and

the related tightening of environmental regulatory policy many

companies are currently revising their ecological strategy. In most

cases, ICT has a key role in structuring these strategic consider-

ations. In this context, companies from a broad spectrum of sectors

may hope on the one hand that by using intelligent IT systems they

can counter cost pressures. On the other hand, they can ideally

offer their customers new goods and services and, furthermore,

offer more flexible labour organisation models in the competition for

top talent.

Since companies have spent years seeking to meet the rapidly

increasing demand for data-processing and memory capacities,

these supplemental aspects of the strategy are now switching the

focus to energy efficiency and greater job flexibility. Correspond-

ingly, the big IT trade fairs such as the Symposium/ITxpo in Cannes

or CeBIT in Hanover have in recent years selected green IT as one

of their key themes. Since the hype over the initial technological

fascination with green IT has now given way to rational consider-

ation of the issue, policymakers are also seizing on it in a con-

structive way; they want to drive green IT forward in order to loosen

the link between energy consumption and economic growth and

lend a hand in global climate protection (Chart 18).

Practical cases draw attention to green IT

Given this broad coalition of supporters, who would want to dispute

that green IT is not a key issue of this day and age? The following

examples alone say it loud and clear:

— In Germany, power consumed by information and communication

devices totalled some 55 TWh (1 TWh = 109 kWh) in 2007 and

thus accounted for over 10% of total power consumption. The

overall information and communication technologies sector is

thus responsible for 2% of CO2e (carbon dioxide equivalent)

emissions – the lion‘s share being generated by the segment of

PCs, desktops, laptops, monitors and other hardware (Chart 19).

— The energy requirements of Germany‘s data centres alone

probably totalled some 11 TWh (over 2% of total power

consumption in Germany) in 2010, according to numbers

published by Fichter et al. (2009)1; this equals the annual output

of five coal-fired generating plants. The CO2e emissions caused

by German data centres thus total nearly 6 million tonnes.2 In

Germany, CO2e emissions of the ICT sector are likely to increase

between 2007 and 2020 by an average of 0.9% p.a. and then

1 See Fichter, Klaus et al. (2009). Green IT: Zukünftige Herausforderungen und

Chancen. Background paper for the BMU/UBA/BITKOM annual conference in

Dessau in 2009. 2 See GeSI et al. (2009). SMART 2020 Addendum Deutschland: Die IKT-Industrie

als treibende Kraft auf dem Weg zu nachhaltigem Klimaschutz. Berlin.

25

48

9

18

Data centres

PCs, other hardware

Telecommunications terminals

Telecommunications networks

PC segment is biggest

emitter in ICT sector

CO2e-emissions of ICT sector, Germany 2007 (%)

Source: GeSI et al. 2009 19

-3

0

3

6

9

71 77 83 89 95 01 07

GDP Electricity

Close correlation

Source: Bundesverband der Energie- und Wasser- wirtschaft, 2008

GDP growth and power consumption, real terms, Germany (% yoy)

18

81

14 January 13, 2011

total 26 million tonnes; this corresponds to an increase in the

total share of CO2e emissions from 2% to 3%.3

— If the German data centres rigorously retooled to efficient green

IT, power consumption could be lowered from over 10 TWh in

2008 to about 6 TWh in 2015. At an electricity price of 0.12

EUR/kWh4 this adds up to around EUR 500 m (see also Charts

20 and 21).

Inaction often due to misunderstanding Based on the increasing importance of ecology issues, the Global

e-Sustainability Initiative (GeSI), a not-for-profit organisation of the

ICT industry sponsored by the UN Environment Programme (UNEP)

and the International Telecommunications Union (ITU), estimates

that between 2002 and 2020 the contribution of the IT industry to

global GDP is going to grow from 5.8% to 8.7% (Chart 22) – thanks

not least to the growth segment of green IT. Deutsche Energie-

Agentur (dena), an energy agency in Germany, expects the world

market for desktop virtualisation to increase nearly twenty-fold

between 2008 and 2013. During this same period, the market for

retooling to energy-efficient data centres in Germany in particular is

expected to be worth EUR 400 million. Furthermore, the market for

―green by IT‖ is likely to total EUR 84 bn by 2020.5

Thus, research on green IT produces impressive facts and

assessments everywhere. So why is it that some people always

want to refer to green IT as nothing more than a passing fad? One

reason for this perception probably has something to do with the

terminology. ―Green IT‖ can easily be misinterpreted, so prematurely

kindled expectations may soon be dashed. After all, at first glance,

IT is not ―green‖ – and this is not only because of the energy

consumption which is naturally linked with the rapidly increasing

demand of companies and end-users for more and more data

processing capacity. Critics of green IT note that on the liabilities

side there are additional items to consider besides energy

consumption, for example, the environmental compatibility of the

materials used in production or the waste electrical and electronic

equipment that eventually requires disposal.

On disposal issues, green IT critics emphasise that outdated hard-

ware is the source of much of the waste electrical and electronic

equipment. Such ICT waste totals 5 million tonnes per year in

Germany. Nonetheless, legislation and directives at the EU level

have compelled manufacturers to introduce recyclable designs to

increase the recycling ratio and reduce environmental strains. This

was necessary in particular because decommissioned equipment

can contain as many as 60 chemical elements – including trace

elements such as indium.6 Up to now it has been difficult to recycle

this valuable IT waste because of the material‘s properties.

IT has green potential

Disregarding the clear focus on energy consumption, manufacture

and waste disposal, IT does most certainly harbour ―green‖

potential. This applies not only to the saving of resources in IT

3 See GeSI (2009), ibid.

4 Average price of electricity for industry from 2008/2009 according to data from VEA

(Bundesverband der Energie-Abnehmer e.V.) and BDEW (Bundesverband der

Energie- und Wasserwirtschaft e.V.). 5 See dena (2009). Green IT Potenzial für die Zukunft: Energieeffizienz steigern,

Wachstumsmärkte erschließen und Nachhaltigkeit sichern. Berlin. 6 Further tightening of the rules results today in substitutes being used whose

properties are much less damaging to the environment.

0

2

4

6

8

10

12

14

16

18

Initial situation Optimised IT

Jobs Server room

-75%

Green IT helps slash costs

Example of annual IT electricity costs in a company with 130 FTEs (EUR '000)

Source: dena, 2009 20

0 10 20 30 40

Reduction of data and applications

Procurement of energy-efficient

equipment

Optimisation of climate control

Improvement in server utilisation

Attraction of 75% savings

potential

Potential reduction in energy costs at a typical data centre (%)

Source: dena, 2009 21

0

1

2

3

4

5

6

7

8

9

2002 2020

IT making an ever larger

contribution

Share of IT industry in global GDP (%)

Source: GeSI et al., 2009 22

Green IT: More than a passing fad!

January 13, 2011 15

Many measures focus on data

centres

Not enough to simply replace old

equipment with new

infrastructure itself (―green in IT‖), but also to the resources that can

ultimately be saved by the use of IT in the economy as a whole

(―green by IT‖). IT induces this overall macroeconomic effect via two

factors. One of these is intelligent IT systems that help to monitor

existing processes better and manage them more efficiently. Another

is intelligent systems that, also in the larger context, lead to

completely new resource-saving business models and processes.

Companies at work on green targets

As our survey, like other surveys, illustrates (see for example Chart

2 or 5 of our survey), a number of companies have already

embraced the subject of green IT and sought to reduce CO2e

emissions and resource consumption, with the measures

implemented primarily focusing on data centres. In this context,

virtualisation is an approach that seeks to combine resources of a

computer (in the server area in particular) via virtual capacities,

instead of operating huge monolithic servers for individual

applications. Besides location-allocated software applications (e.g.

SaaS) discussions focus here in particular on cloud computing

approaches. Cloud computing describes the variable deployment of

data processing capacities, setting the currently predominant,

primarily local client-server approach against variable deployment of

processing capacities, infrastructures and applications in

decentralised networks. However, our survey leaves no doubt about

it: there is still a long way to go from discussions of its benefits

through to practical implementation in companies. The virtualisation

ratio of data centres now comes to 15%, and so far even in big

international companies virtually no grid or cloud computing projects

have been realised yet.7

On the long road towards integrated environment management

There is an impressive amount of potential to be tapped in the

realisation of green IT projects. GeSI et al. (2009) calculate that

given rigorous, rapid implementation of what is possible will enable

the ICT industry‘s CO2e emissions to be reduced by 25% by 2015

and as much as 50% in 2020. In a comparison of the four ICT seg-

ments (data centres, PCs and other hardware, telecommunications

terminals and telecommunications networks) in Germany the

biggest relative savings potential may be found at data centres.

Emissions there may be reduced by 2,300 tonnes of CO2e (35%) by

2015, and by as much as 60% or so (4,200 t CO2e) by 2020. By

contrast, the largest absolute savings potential is to be found in the

PCs, desktops, laptops, monitors and other hardware segment (by

2020: -7,000 t CO2e) – however, this segment will remain the

biggest emitter in absolute terms even after this reduction

(Chart 23).

In the context of possible measures it emerges that switching from

old equipment to new already boosts the energy efficiency of

hardware significantly. The energy efficiency of computers – as

measured in processing operations per watt – has been increasing

rapidly for years; over the past 10 years, for example, by a factor of

100. However, this efficiency gain is in most cases cancelled out by

the heavier use of IT.

Nonetheless, simply replacing old equipment with new equipment

will not be nearly enough to achieve the often ambitious

7 See Kolbe, Lutz M. et al. (2009). Studie Nachhaltigkeit und Green IT in IT-

Organisationen. Status Quo und Handlungsempfehlungen. Berlin and Göttingen.

0 2 4 6 8 10 12 14 16 18 20 22

2007

2006

2005

2004

2003

2002

Data centres

PCs, other hardware

Telecommunications terminals

Telecommunications networks

PC remains biggest emitter

CO2e-emissions of ICT sector, Germany (m tonnes)

Source: GeSI et al., 2009 23

81

16 January 13, 2011

Establish interface between IT and

environmental management

Staff challenge

environmental and resource targets. Rather, what is more important

is that companies go beyond their commitment on hardware and

software, shake out entire corporate structures and in doing so

rigorously combine the environmental and energy management

portfolios with IT design. Only a company that has addressed the

subject of green IT in an overarching manner, also taking into

account the position of the staff and communicating the measures

internally in proper fashion, can actually tap the huge operational

and strategic potential of green IT.

Until such an ideal situation is anywhere close to materialising,

though, much still has to be done in other areas. For instance, in

tune with other studies, our survey emphasises that with the bulk of

companies the interface between IT and environmental manage-

ment is still not established as a matter of course (see for example

Charts 2, 3 and 4 of our survey). This usually results in not only

strategic disadvantages within the organisation but also an

inadequate level of communication with the staff on the environ-

mental targets.

Like other empirical analyses, our survey also refers to the fact that

the potential to be tapped by means of technology is currently not

being used on account of the lack of insight on the part of the staff

(see for example Charts 10 and 12 of our survey). In many

organisations, for instance, it is common that employees do not shut

down their PCs overnight or over the weekend. For example, Kolbe

et al. (2009)8 measure a ratio of 50% in this context in German

companies. If the energy-saving mode is not activated, workplace

PCs consume up to 100 Wh even when they are idle.

“Green by IT” breaking new ground

Far beyond the aspect of ―green in IT‖, the aspect of ―green by IT‖

opens sizeable scope for economic and ecological action. For

example, ―green by IT‖ enables implementation of new offers and

innovative resource-saving processes in many sectors of the

economy. GeSI et al. (2009) put the potential savings to be achieved

via information and communication technology outside of the actual

ICT sector at close to 200,000 tonnes of CO2e p.a., i.e. eight times

the emissions of the ICT sector as a whole. These huge potential

savings are to be found among the biggest CO2e emitters in

industry, transport and logistics, energy and facility management in

particular.

Besides the potential directly linked with a given sector, as an

overarching technology ―green by IT‖ is already noticeably changing

the economy today. Particularly promising examples under

discussion are (Chart 24):

— Smart agriculture (IT-assisted agriculture);

— Smart buildings, connected living (e.g. climate management

systems, planning tools, equipment control);

— Smart consumption (e.g. shopping navigator, equipment control,

online coaching);

— Smart logistics (e.g. city street tolls, traffic control management,

car electronics/navigation);

— Smart motors (e.g. frequency inverter, system automation,

optimised power plant operation);

8 See Kolbe, Lutz M. et al. (2009), ibid.

0 10 20 30 40

Smart buildings

Smart logistics

Demateri- alisation

Smart motors

Smart grid

Lower estimate Upper estimate

Buildings offer the greatest

potential

Potential IT sector revenues on "green by IT", DE 2020 (EUR bn)

Source: GeSI et al., 2009 24

Green IT: More than a passing fad!

January 13, 2011 17

Saves resources via various levers

Smart grid and smart metering on

everybody's lips

How ecologically relevant

innovations can be implemented in a

market environment

— Smart services (innovative services, e.g. efficiency concepts for

internet shopping);

— Smart closed loop economy (e.g. recycling);

— Dematerialisation (e.g. e-invoicing, e-media, e-paper, telework,

virtual conferencing);

— Smart water supply (IT-assisted water supply and use).

These examples save resources by substantially different potential

amounts via various levers – from saving paper by digitising

documents right through to saving mineral oil deposits by reducing

commuter traffic.

The subjects of smart grids and smart metering are on everybody‘s

lips at present in connection with the politically intense debate on

the future of energy policy. Power consumption has grown by more

than 15% since 1991 and gross power generation has now

increased to over 625 TWh. The nearly 400,000 gigatonnes of CO2e

emissions that arise in the process represent 40% of Germany‘s

total greenhouse gas emissions. A fundamental change in energy

supply is taking place with the increasing decentralisation of the

feed-in of renewable energy sources (wind, solar). This substantially

boosts the complexity of network operations and raises the bar for

the controlling information technology. With demand for electricity

constantly increasing (up 15% in Germany since 1991), green IT

can do much to reduce CO2e emissions in the smart grid and smart

metering segments.

Government can play an instrumental role

As ―green in IT‖ and even more so as ―green by IT‖, green IT offers

clearly positive externalities for the entire economy. However, given

the ecological hype linked with the issue it should not be forgotten

that, in a market environment, ecologically relevant innovations can

only be implemented on a broad scale if they are ultimately also

economically viable for the relevant company. This is where the

government can step in and support the advancement of green IT

projects. Instruments include:

— Direct monetary subsidies (e.g. promotion programmes, stimulus

package II);

— Adjustment for a consistent legal framework (e.g. Germany‘s

energy industry legislation (EnWG));

— Formulation of political objectives (e.g. the German government

declared in November 2008 that it intended to reduce energy

consumption in the federal administration‘s IT operations by 40%

by 2013 from the highest reading before 2009);

— Consolidation, structuring and publication of technological and

market-relevant information on the subject;

— Recommendations for the implementation of such projects at

company level;

— Creation of fora for information exchanges between users and

providers (e.g. EU Code of Conduct for Data Centres);

— Establishment of focal areas for promoting academic research;

— Assumption of pioneer function as user of resource-saving

technologies (e.g. in virtualisation, thin clients9);

9 A thin client is a computer terminal whose hardware is deliberately reduced

compared with a PC and mainly designed for inputting and outputting data.

Source: FttH Council Europe, 2008

80 85 90 95 00 05 10 15

Nielsen’s “law” remains

valid: +50% p.a.

Speed of internet access, UK, Mbit per

second1,000

100

10

1

0.1

0.01

0.001

0.0001

Actual

Estimate by Nielsen‗s ―law‖

25

81

18 January 13, 2011

"Green in IT" and "green by IT"

harbour huge potential

Cross-divisional approach is most

promising

"Green by IT" opens sizeable scope

for action

— Promotion of increased cable and wireless-based network

infrastructure as a technological prerequisite for the rapid

increase in data traffic with the new applications (see Chart 25).

It happens all too often also in the green IT sector that government

support is confined to direct funding. Nonetheless, the examples

show that government promotion can be much more comprehensive

and creative. There is a raft of instruments available to do so,

including infrastructure promotion in related segments (e.g. the

development and expansion of broadband telecommunications10

). At

the end of the day, it applies as much to the promotion of green IT

as to any other cross-sector technologies that the impact should not

be viewed in isolation but rather as to how it is imbedded technically

and functionally in long-term economic relationships.

Conclusion: Green IT is more than just a

passing fad!

IT harbours huge ―green‖ potential. This applies not only to the

saving of resources in IT infrastructure itself (―green in IT‖), but also

to the resources that can ultimately be saved by the use of IT in the

economy as a whole (―green by IT‖). So the difference is starting to

sink in, but it still has potential to spread: 54% of the companies in

our random sample know the difference between the two concepts

―green in IT‖ and ―green by IT‖. The macroeconomic impact of green

by IT is induced via two factors: intelligent IT systems help for one

thing to make existing processes more efficient. For another, the

systems also lead to completely new resource-saving business

models and processes.

But to be able to meet the often ambitious environmental and

resource targets in the first place, the companies have to go beyond

isolated investments in hardware and software and address the

subject of green IT in a cross-divisional approach that integrates the

staff members. There is still much to do before such an ideal state

can be attained. Our survey underscores the fact that at the bulk of

companies the interface between IT and environmental manage-

ment has not yet been established as a matter of course. Some 38% of the companies say that they have appointed an environmental

officer. 32% of the companies have defined an overarching position

for budget responsibility for energy and IT.

Far beyond ―green in IT‖, ―green by IT‖ in particular opens sizeable

scope for economic and ecological action. 26% of the companies

consider themselves compelled by operational requirements to

implement green IT projects. Companies in different sectors hope

that intelligent IT systems can not only help them to counter cost

pressures, but in the best of cases also enable them to offer their

customers new goods and services and their staff members more

flexible job models in the competition for top talent. Promising fields

in the ―green by IT‖ segment include, for example, smart agriculture,

smart buildings, smart grid, smart logistics, smart services and

dematerialisation. These examples save resources by substantially

different potential amounts via various levers – from saving paper by

digitising documents right through to saving mineral oil deposits by

reducing commuter traffic.

10

See Heng, Stefan (2010). Broadband infrastructure: The key factors are the

regulatory framework, market transparency and risk-sharing partnerships.

Deutsche Bank Research. E-conomics No. 77. Frankfurt am Main.

Green IT: More than a passing fad!

January 13, 2011 19

Emphasise best-practice examples in

advisory practice

Economic efficiency is decisive for

realisation

Support the advancement of green IT

projects

The resource-saving potential that can be tapped thanks to green IT

is huge and totals roughly eight times the emissions of the

information and communication industry itself. Practical advisory

experience shows that when green IT is implemented at companies,

promotion programmes should focus more attention on best-practice

examples. Such examples can help in advisory practice to break

down the complexity of proposed projects. Gearing project planning

to positive examples makes it easier for many companies to

estimate the concrete impact of their investment in green IT.

Considering the ecological expectations that often go hand in hand

with the subject of green IT one should not forget that companies

are more likely to implement ecologically relevant innovations if they

also pay off economically. Our survey highlights the general

importance of the economic efficiency of such projects. A number of

companies say the major hurdles thwarting the implementation of

green IT projects lie in investment risk (43% agree strongly or very

strongly), stakeholder consent and the as yet still inadequate degree

of in-house experience with green IT projects (33% each). On this

note, 60% of the companies in our sample see the amortisation

period of green IT projects in a depreciation framework of up to four

years. This also points to the conflict between attaining short-term

returns on investments and installing long-term projects.

Thanks to the positive externalities of green IT, government

promotion is certainly warranted for a limited period. The govern-

ment can support the advancement of green IT projects with a

broadly based set of instruments ranging from direct subsidies and

adjustments to the legal framework alongside the formulation of

political objectives and recommendations, right through to the

establishment of public services and the promotion of

communication infrastructures.

Stefan Heng (Deutsche Bank Research, +49 69 910-31774, [email protected])

Our publications can be accessed, free of charge, on our website www.dbresearch.com

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© Copyright 2011. Deutsche Bank AG, DB Research, D-60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”. The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change without notice. Opinions expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made. In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht. In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange regulated by the Financial Services Authority for the conduct of investment business in the UK. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Limited, Tokyo Branch. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. Printed by: Otto Lembeck GmbH & Co. KG, Frankfurt

ISSN Print: 1619-3245 / Internet ISSN: 1619-3253 / E-Mail: ISSN 1619-4756

ISSN 1619-3245

Innovative capacity in the aftermath of the crisis:

German companies banking on R&D, No. 80 ........................................................................... November 12, 2010

Majority of bank customers in Germany do research online:

Findings of a clickstream analysis, No. 79 .................................................................................... October 14, 2010

Enterprise 2.0: How companies are tapping the benefits of Web 2.0, No. 78 ............................ September 8, 2010

Broadband infrastructure: The regulatory framework,

market transparency and risk-sharing partnerships are the key factors, No. 77 ................................. May 26, 2010

E-invoicing:

Final step of an efficient invoicing process, No. 76 ............................................................................... May 3, 2010

Age-appropriate information technology on the advance:

Putting paid to olden times, No. 74 ............................................................................................ December 29, 2009

Brave new firms:

High-tech entrepreneurship in the United States, No. 75 ............................................................ December 9, 2009

Online advertising in Germany

Ray of light in the crisis, No. 73 ................................................................................................. November 25, 2009