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BPO Journal

Tuesday, December 05, 2006

Green Outsourcing Cometh

Global warming and shifting weather patterns may take a few decades to wreak their touted havoc - the end of Shishmaref, climatic refugees et al. - but the business opportunities are clearly here. And why not? A report by Germanwatch, a German environmental group, finds that among 56 industrialized nations, the United States ranks third-worst in dealing with climate change. China and Saudi Arabia are rated worse.

California democrat, Sen. Barbara Boxer has said on several occasions that legislation on climate change will be her top priority as chairwoman of the Senate Environment and Public Works Committee. She plans to hold discussions and hearings early next year with scientists, environmentalists and religious leaders who want to address climate change. She also will ask business leaders to testify about their efforts to limit greenhouse gases.

And the business leaders are in agreement. In a recent Business 2.0 article, which asked "25 of the brightest minds in business", how to succeed in 2007, Vinod Khosla urged companies to compel their investors to go green, and Howard Schultz and Laura Scher asked firms to dare to be social entrepreneurs who don't cover up mistakes with growth. Schwartz of Sun Microsystems too, over the past couple of years, has been very vocal on the need to shift to an efficient model of business computing. He, very eloquently, points out that this does not necessarily translate into reduced volume of business:

"...If you double the performance of a machine, customers don't buy half as many, they tend to double their order. Same goes for utilization, if you can double server utilization via Solaris containers or VMWare, people don't buy fewer computers - they buy more. The value of innovation, at least to our core customers, is growing so fast that if the price declines, the overall return (value/price) goes through the roof - encouraging a feedback loop. Moore's Law and free software drive relative pricing down, and customers accelerate their growth..."

And this is very pertinent to the case of outsourcing. Technology is a key enabler of coordination of outsourced tasks between the client and the vendor, including developing shared understanding of process tasks and interdependencies, efficient responses to changes in the process environment, and controlling and monitoring process outputs and performance. Also, modern information intensive business change rapidly in response to changes in the environment and value chain exchanges, rendering the ability to process new information a key source of efficiency and firm competitiveness. Thus, technology and efficient computing is central to process performance.

However, studies show that in leading technology companies, performance per watt has remained roughly flat over time, even after significant efforts to design for power efficiency. In other words, every gain in performance has been accompanied by a proportional inflation in overall platform power consumption. This represents a significant opportunity to service providers. If they nail the recipe for energy scale efficiencies in computing through better products and processes, they buy themselves growth, credibility and an investment in what Al Gore likes (that's gotta be good!).

Not to take away from the process and managerial capabilities that leverage these technological resources to create value. When 70% of the respondents to Deloitte's offshoring survey indicated dissatisfaction with their outsourcing arrangements, it was not efficient computing that was getting in the way. But, make no mistake - I am not selling this issue as the gravy. It is clearly the meat in efficient outsourcing.

Dare to compute green.

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