An addendum for France & the UK to Cloud Computing the IT Solution for the 21 st Century

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1 Carbon Disclosure Project Study 2011 An addendum for France & the UK to Cloud Computing the IT Solution for the 21 st Century Study produced for Carbon Disclosure Project by: 1

2 Introduction This report details the results and analysis of a study into the business and environmental benefits of cloud computing in France and the UK. This is the second in a series of these reports and should be read alongside the comprehensive US specific study titled Cloud Computing The IT Solution for the 21 st Century. As sustainability moves up the corporate agenda, firms are recognizing that the Information and Communications Technology (ICT) component of their business can assist them in achieving their sustainability goals. The EU published its Code of Conduct on Data Centers Energy Efficiency 1 in 2008 where it stated that data centers accounted for 1.5% of European electricity consumption and it forecast this would double to 3% by In the UK specifically, the Parliamentary Office of Science and Technology believes data centers could already be consuming up to 3% of total electricity 2. Reducing energy demand saves on energy costs for businesses. As well as this, firms in Europe are being driven to achieve greater levels of energy efficiency through an emerging legislative program. In France, the Grenelle II laws create a clear focus on carbon by mandating all firms of over 500 employees to calculate their annual CO 2 emissions. In the UK, the Carbon Reduction Commitment (CRC) requires firms to purchase carbon allowances to match their emissions, effectively serving as a tax of between 9% and 11% on electricity bills 3. The adoption of cloud computing offers firms the potential to achieve their sustainability goals while reducing costs. Executives see an opportunity to transition to a lower carbon business model while maintaining or even enhancing the competitiveness of their organization. Methodology The purpose of this study is to quantify the potential financial and environmental benefits that can be attained through the use of cloud computing in France and the UK. For energy and climate change policy-makers, the analysis explains how cloud computing can assist countries to reduce CO 2 emissions. The research is based on: 1. In depth interviews with 11 multi-national corporations, across a broad spectrum of industries, who have invested in cloud computing Carbon reduction models for France and the UK built to calculate carbon reductions from cloud computing based on a series of parameters including the size of the firm, the number of servers, server utilization rates, data center PUEs, data transmission and embedded energy. 3. Economic models for France and the UK, based on financial data for 457 UK firms and 215 firms in France, each of which generates at least $1 billion ( 690 million, 610 million) 5 of annual revenue in that country. The models forecast economy-wide financial and environmental benefits from cloud computing up until The methodology used in this report aligns with the assessment methodology established by businesses-with-carbon-tax/- 4 See Cloud Computing The IT Solution for the 21 st Century for the list of interviewees 5 Exchange rates used: $1 = 0.69 / 0.61 from effective 23 rd August

3 the Global e-sustainability Initiative (GeSI) 6 a global not for profit association which brings together leading ICT companies and non-governmental organizations committed to achieving sustainability objectives through innovative technology. For the purposes of this study, we will analyze cloud computing in terms of public and private cloud since that is how firms allocate spending (hybrid cloud merely describes a combination of these two approaches). We will also include a dedicated IT deployment model which can be defined as the traditional IT deployment approach. It is a non-cloud based model without virtualized servers and without any of the key characteristics associated with cloud computing. Key Findings This study, produced by independent analyst firm Verdantix, demonstrates how projected cloud computing adoption would drive economy-wide business benefits from a financial and carbon reduction perspective in France and the UK. France and the UK can save over 10 million metric tons of CO 2 in 2020 From an economy-wide standpoint, France can cut CO2 emissions by 1.2 million metric tons annually (Figure 1) by 2020 as a result of spending 66% of infrastructure, platform and software budgets on cloud services (Figure 2). This is equivalent to the annual emissions from 630,000 passenger vehicles in France 7,8. The UK can cut CO 2 emissions by 9.2 million metric tons annually (Figure 3) by 2020 as a result of spending 68% of infrastructure, platform and software budgets on cloud services (Figure 4). This is equivalent to the annual emissions from 4 million passenger vehicles 8 in the UK. With the forecast move to the cloud, large businesses in France and the UK can reduce CO2 emissions from their IT estate by 50% compared to a scenario where there was no cloud computing. There is a notable disparity between the CO2 savings achieved by France and the UK given the percentage spend on cloud services is closely aligned and the GDP of France is only 10% larger than the UK. The variation can be attributed to the energy mix of the two countries. France generates more than 75% of its electricity from nuclear and a further 13% from renewables 9 whereas in the UK, only 23% of electricity is generated from the same low carbon sources 10. Full transparency from providers on energy mix is an important step in providing further insight to users into CO 2 reductions achieved. Cloud computing can bring US $ billions in financial savings Through the forecast penetration of cloud computing, businesses in France with revenues of more than $1 billion ( 690 million) can achieve economy-wide energy savings of $1.2 billion ( 830 million) annually by 2020 (Figure 5). In the UK, the forecast energy savings from cloud computing are in excess of $2 billion ( 1.2 billion) annually by (Figure 6). In terms of the difference between the two countries, while electricity prices are on the rise in France, they remain approximately 35% lower than in the UK. Additionally, the market structure in France is different with a smaller proportion of $1 billion ( 690 million) revenue firms

4 Cloud computing can bring business efficiency savings Significant non-monetary benefits can also be achieved with cloud computing including business process efficiency and increased organizational flexibility. Firms also remarked on the necessity to balance increases in efficiency with appropriate levels of cloud security and service reliability, as well as avoiding becoming dependent on a single cloud provider. Conclusions Cloud computing offers firms the potential to combine financial savings with environmental benefits. In both France and the UK, cloud computing can bring billions of dollars in financial savings and reduce CO 2 emissions by millions of metric tons annually by Some firms express concerns related to security, service reliability and vendor lock-in when considering adopting a cloud model but these are set against reduced time to market, cost savings and automation benefits. 4

5 Figures Figure 1. Model derived net CO 2 savings for France (tons)* 1,400,000 1,200,000 1,000,000 Tons of CO2 800, , , ,000 0 * Annual CO 2 savings measured against a scenario where there is no cloud computing. Figure 2. Model derived percentage spend of multi billion dollar revenue firms in France on IT deployment solutions % 90% 80% 70% 60% 50% 40% Dedicated IT Private Public 30% 20% 10% 0% 5

6 Figure 3. Model derived net CO 2 savings for the UK (tons)* 10,000,000 9,000,000 8,000,000 7,000,000 Tons of CO2 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 * Annual CO 2 savings measured against a scenario where there is no cloud computing. Figure 4. Model derived percentage spend of UK multi billion dollar revenue firms on IT deployment solutions % 90% 80% 70% 60% 50% 40% Dedicated IT Private Public 30% 20% 10% 0% 6

7 Figure 5. Model derived net energy savings for France*, ** $1,400 $1,200 $1,000 $ millions $800 $600 $400 $200 $0 * Annual energy savings measured against a scenario where there is no cloud computing. ** Presented in US Dollars for comparability to the UK and US markets. Figure 6. Model derived net energy savings for the UK*, ** $2,500 $2,000 $ millions $1,500 $1,000 $500 $0 * Annual energy savings measured against a scenario where there is no cloud computing. **Presented in US Dollars for comparability to the French and US markets. 7

8 Key assumptions in the carbon emissions model Data Centre PUEs (Source: Study interviews) Public Cloud Private Cloud Dedicated IT Power usage effectiveness (PUE) is a data center efficiency measure and calculates the ratio of total power consumed by a data center against the total power consumed by the IT equipment. Server Utilisation Rates (Source: Study interviews) - Public cloud: 65% - Private cloud: 40% - Dedicated IT: 15% Metric Tons of CO 2 / kwh (Source: UK Department of Enviornment, Food and Rural Affairs 11 ) - France: tonnes of CO 2 / kwh - UK: tonnes of CO 2 / kwh Electricty price (Source: UK Department of Energy and Climate Change 12 ) - France: $0.086 / kwh or / kwh - UK: $0.115 / kwh or / kwh Contacts Rosie Reeve CDP Stuart Neumann Verdantix This study was supported by AT&T For more information on AT&T Cloud Solutions go to ype=4&minwidth=true#basket 8

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