The term is "economies of scale," and it refers to the cost savings seen when a company scales operations, manufacturing or technology up to the point that the price per widget drops.
After all, what's the advantage of getting bigger if the headaches loom as big as the benefits?
That's why energy consumption is a key concern for the enterprise: with operations on six continents and literally thousands of employees on hand, you simply can't keep an eye on everything all the time. But in an age of escalating energy prices, it really matters to your bottom line.
To feel the pulse of what's going on right now, we called up JouleX chief executive Tom Noonan at his office in Atlanta, Ga. JouleX specializes in providing energy management to enterprise customers.
He shared with us the pain points his customers are seeing, the global drivers of efficiency and the adverse effects of giving energy management to one department and the bill to the other.
Q: What's it look like out there for the biggest companies, Tom?
A: I'm actually not seeing much from my desk, because I haven't been here that much. In the past 45 days, I've been to China, Japan, Korea, Germany, the U.K., France and a number of places in the U.S. Much as I did at Internet Security Systems, I'm a traveling CEO.
What I see, not necessarily in order of importance, is a dramatic dichotomy -- not just one, but multiple -- in where this market is, how people think about energy and carbon, what people are actually doing about it now (or not), whether it's motivated by regulation or economics. It's all different wherever you are. In some cases it's motivated by lack of supply. I think we're serving a very nascent but compelling market opportunity. Twenty years from now, everybody will be doing this. There's absolutely no reason we shouldn't be. It's absurd.
IP is the great enabler. [At JouleX] we're all network security guys, and security wasn't intelligent back then. We just thought, there's got to be a smarter way to detect and prevent things from happening -- weaknesses in our system -- automatically. Because this infrastructure has outscaled us.
[pullquote]The IP-connected world is like billions of leaky buckets. They leak energy around the clock. [/pullquote]
So we're applying the same mentality to energy. The energy being consumed by IP-connected systems is growing very, very dramatically. We have lived through the convergence of data and voice and video and rich media on the IP network, and now we're beginning to look through the convergence of electrical distribution of energy through the same intelligent switch that's pushing packets. You're talking about 60 watts a port now, with 100 watts per port running in labs. With that, I can practically drive a server without any distribution. LED lighting, phones, laptops, monitors, even printers all powered over Ethernet. All of a sudden, you have an intelligent way to not only determine how much power is needed, you have an intelligent way to meter or control that power so that the energy being consumed is the right amount.
Another fascinating thing to me that I saw our customers in Japan doing across the board...necessity is the mother of invention. These laptops and desktops we use as personal productivity devices, each one has more processing power than the power we needed to get the first mission to the moon and back. And yet we're web browsing with it. We're using 5 to 10 percent of the capability of that machine. When Dell competes with HP, they're competing on price-performance. So performance has to keep going up. I've got a Ferrari sitting in rush hour traffic, all day every day. The ability to performance-level these systems at scale. It's automatic, and the employees don't know it. We're backing the clock speeds down and saving energy.
The IP-connected world is like billions of leaky buckets. They leak energy around the clock. When you think about the fact that there are over five billion interconnected devices -- those are just the ICT devices, not LED or building management -- we're talking about a world of 10 billion leaking buckets out there. When you extract that waste, it's enormous. We've never had the ability to get at it, but the network gives us that ability. The network is the great homogenizer.
Q: What's driving companies to address the problem? After all, you wouldn't have to pitch any customers if there weren't things standing in the way of progress.
A: Our sales cycles are really interesting, to say the least.
First of all, nobody believes we can do what we do. Most people, they think about it from a technology perspective and say, "It can't be done! There are no protocols on the Internet to support this." You end up being in a very technical discussion very quickly because what they realize is that you touch every part of the infrastructure. The saving grace for this company is that it takes one hour, maximum, to install this on a network, and it starts showing them energy utilization and consumption, and the delta between those curves could logically be construed as waste -- or opportunity.
The challenges here are many and varied. The CIO who owns the network has never seen a power bill; the CIO has to take all the risk, but someone else gets the benefit. It's prevalent wherever you are.
The other aspect that's very difficult: no one has budgeted for this. You have to literally break into the stream to make your project more important than the top five that are already budgeted, or you wait another year until it's budgeted. For years, I've operated under a very simple business-making theory: is it real? Is it worth it? Can I win? If I can't answer those things, I usually don't do it.
The "is it worth it?" is what you're constantly out there trying to prove. Forty million dollars in savings goes straight to the bottom line, but not the CIO's bottom line.
We have very little RFP -- request for proposal -- activity in the United States. We have a hell of a lot more in China, Japan, Korea, western Europe, increasingly in the Arabian peninsula. We get very few American companies. This could be the very first technology market that is not led by the United States. It will be completely offshore.
That doesn't mean U.S. companies aren't receptive to it; they are. But first, the cost of energy: I think Thailand is the only country around that has cheaper energy than the U.S. Second, the cultural maturity of sustainability is very strong in western Europe: small cars, recycling, tariffs and regulations -- that's just the way they live. And third, the supply and demand situation. In developing countries like China, demand exceeds supply. Everyone's competing for energy off that grid. The government is pushing for efficiency.
You've got drivers in certain areas. We in the U.S. think we have an antiquated grid -- and it is -- but it's very reliable. Energy is cheap and reasonably abundant.
I talk to CIOs all the time, having run ISS for 15 years. A lot of 'em just say that so many green projects have been pitched to them, but they can't find any that make economic sense.
Let's face it: there is no spare capacity sitting around in U.S. industry today. Payrolls have been thinned, companies are operating at the brink of capacity right now. It's not like, "Oh, let's take those eight guys and put them on this."
In 20 or 25 years, we'll look back on this and think, I can't believe we ran our IT infrastructure on WFO for all those years and it's so easy.
Q: Are there certain industries that are more receptive to this than others?
A: We're seeing a pretty broad brush of industries. Financial services, which have huge IT infrastructures: it's not uncommon for a trader to have three HDMI monitors at 40 to 50 watts apiece. We've seen stronger uptake in the telecom, financial services, government and transportation sectors. Transportation is serious about energy because it's an operating cost. Energy is energy to them, whether it's natural gas or solar or electricity. And governments -- if your business model is 70 to 80 percent dependent on the price you pay for energy, and you're living in a world where oil is now $100 a barrel, you've got to manage energy aggressively.
The [U.S.] Department of Energy has been a great reference for us. They practice what they preach. The U.S. government is the largest consumer of energy in the world. Energy and security go together in terms of policy and operations. Governments will continue to be a good source of opportunity.
The only thing I would add is that, there are many, many parallels to the early [computer] security industry and what we're doing here. When you're optimizing a very large-scale problem, you can't optimize it at the individual node level. You've got to optimize it as a system. We're finding the exact same thing happening here -- Cisco, Dell, Intel. Once it all hits the customer's network, they've got 300 vendors, thousands of employees, how do you get a handle around that?
This interview originally appeared on SmartPlanet's Smart Takes blog.