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There’s been no shortage of announcements by global IT service providers about their sustainability projects in recent years —from run-of-the-mill energy consumption reduction goals and LEED (Leadership in Energy and Environmental Design) certified buildings to more fascinating waste conversion to manure efforts and personal carbon calculators for employees.
But for the most part, IT outsourcing buyers still don’t care. “For most commercial clients, it is not top of mind,” says Todd Hintze, managing partner at outsourcing consultancy Everest Group. “Clients will select the sustainable and environmentally friendly provider where it is shown to also meet the client’s other—and generally higher prioritized—objectives of cost, quality, and performance. Rarely is it an explicit request.”
Sustainability Scores a Zero
When outsourcing analyst firm HfS Research recently asked 50 experienced service buyers from Fortune 1000 companies to vote on sustainability as a topic for future meetings, “the topic got exactly zero votes,” says Esteban Herrera, COO of outsourcing analyst firm HfS Research. “Consumers and some stakeholders—like regulatory agencies want to see corporations drive sustainability initiatives. RFPs often contain requirements to disclose sustainability initiatives. But we’ve never seen it count for more than a handful of percentage points [in provider selection]. At best, it is a last-string tie breaker.”
There are exceptions. IT leaders working in the energy industry or for government organizations often have specific requirements for energy consumption or environmental practices. But providers who serve those verticals have had processes in place to meet those needs for some time. “Sustainability is a topic that is only brought up by the largest, most sophisticated companies that have an interest in the topic from a public relations perspective,” says Shawn Helms, partner in the outsourcing practice of law firm K&L Gates. “I have only seen it raised as a criteria in the down selection of an IT or outsourcing vendor one time in the past few years.
The real driver behind the apparent greening of the big IT outsourcing providers is cost containment. “Our research indicates that IT outsourcing providers—both the major Tier Ones and the large Indian offshore providers-are seeing continual compression of their margins. As such, they are being compelled to find a way to deliver enhanced services at much lower costs,” says Hintze.
“Significantly reducing energy consumption for a large, leveraged data center can create much needed financial relief.” If what benefits the bottom line is also good for the planet—and for corporate PR—so much the better for the providers.
Most of the environmental improvements have centered on the “low hanging fruit,” says Herrera, such as paperless environments and increased data center efficiency. Most of the major players have also built lines of business consulting on energy efficiency.
“Customers often want energy efficient IT when they are outgrowing their data centers and face increased real estate costs for adding a new center,” says William Tanenbaum, partner in the outsourcing practice of law firm Kaye Scholer and chair of its green tech and sustainability group. “They can avoid these increased costs if they can get more IT horse power out of existing data centers, and they can reduce to costs of running the existing facilities… by using virtualization, internal smart grids and other advanced technologies.”
Sustainability Is Blowing in the Wind
Projects like HP’s data center in England—cooled entirely by North Sea winds—are more rare. “Only the companies with the deepest pockets can afford to use solar, wind, or geothermal to partially support the power requirements of a data center,” says Mark Ruckman, outsourcing consultant with Sanda Partners. And even the most advanced new data centers exist in a much larger ecosystem of legacy infrastructure environments.
“A provider might have a single new data center, and they publish a sustainability goal in their marketing materials that could only apply to this one data center that is almost impossible at all of their other data centers that are 10 to 20 years old,” Ruckman adds. “I suspect [many of] these providers are paying an increased power rate to buy green credits from their power providers.”
“Clients don’t see this as a big thing,” says Venu Ayyagari, director at outsourcing consultancy ISG (formerly TPI). “They worry about process improvements and cost savings.”
That should change. “With the rising cost of electricity, many companies are looking for innovative ways to cut power costs, [which is what is] making the ROI on sustainability investments [for providers] most achievable. “This is a topic that will get much more attention over the next 5 years.”
15 Sustainability Questions to Ask
For those IT service buyers who want to be ahead of the curve, outsourcing industry observers offer up these questions to help determine the actual value of a provider’s sustainability practices: