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Green spending swallows a fifth of IT budgets

Analysis: Research from AMR Research highlights the growing cost of being environmental investment, but computing could still hold the key to eco-improvements.

Over the last few months, IT has come under increasing scrutiny as one of the largest energy consumers in many businesses. Rising bills for power and cooling, coupled with a series of large-scale power outages on both sides of the Atlantic, have forced not just IT directors but chief executives to look at cutting back on the demands of the data centre.

But data just released by AMR Research suggests that far from being a voracious consumer of energy, IT could take on a far greater role in helping businesses to control energy use. The same technology could help companies to manage or reduce waste, and even to participate in carbon trading schemes.

Some of that technology is already in place. But few companies realise the full cost of compliance with environmental rules, according to AMR's European research director, Nigel Montgomery.

A survey by AMR of 200 companies across the UK, Germany, the Netherlands and Spain found that technology-related spending on environmental initiatives will be more than 21 per cent in 2007.

This figure might come as a surprise to IT departments, as well as to business leaders. The figure was reached, in part, by apportioning personnel, audit and compliance costs for environmental projects. But Montgomery argues that spending on making companies greener can only increase. As many as 60 per cent of the firms surveyed thought they would increase their environmental spending in the next 12 months.

According to Satya Nadella, corporate vice president at Microsoft responsible for the company's business solutions software, much of businesses' current spending on environmental initiatives is reactive, driven by regulatory or legal demands.

Increasingly, however, businesses are setting out to improve their environmental performance as a result of customer pressure, not least the worry that they might loose sales to greener rivals. With more businesses adding an environmental or sustainability element to their purchasing policies, this applies as much to B2B transactions as to sales to consumers.

But, AMR and Microsoft suggest, businesses need to take a more proactive approach to green issues. Production decisions - or even the decision about whether to accept a customer order - should be driven by environmental issues as well as by profit. Companies will also need to pay more heed to the environmental impact of their own purchasing, from how they operates their corporate travel policies to IT itself.

To do this needs tools, however. Few business applications explicitly allow for the measurement of environmental consumption, let alone analysis of the potential environmental impact of decisions that have not yet been taken.

AMR's survey identified supply chain management, ERP and financials as the business applications companies believed would be most useful for managing environmental initiatives. Environmental dashboards were seen as a potentially useful tool by 92 per cent of businesses, the researchers found.

Microsoft plans to integrate support for monitoring a business' environmental activities into its Dynamics software. At the company's Convergence conference in Munich, Nadella demonstrated a roles-based environmental dashboard that an executive could use to keep watch on environmental activities across the business.

Dashboards are one of the ways companies could improve environmental performance through better use of IT, AMR's Nigel Montgomery suggests. For most companies, environmental issues are dealt with at a local level, often by an individual office, factory or store. Just one in five companies successfully implement environmental initiatives globally.

A lack of detailed environmental information makes it hard for companies to improve their green performance - or even to make informed decisions not to so, Montgomery says. And as data is often aggregated at a local office or plant level, senior managers may not have any visibility as to which parts of the business are doing well in environmental terms, and which are underperforming.

"A lot of reporting is done to a compliance level. When the company reaches its performance target, they stop counting," he says. This means that businesses are not able to be proactive in their environmental initiatives.

Companies that take a broader approach to the problem could, on the other hand, use their green credentials as a selling point. They could even start to factor environmental elements into day-to-day business decisions.

But to do this, environmental measurements would need to be available across business applications, in real time, rather than simply calculated and assessed after the event.

"This is about how do you as a manufacturer, a bank, a retailer, look at your own footprint, your own environmental impact, rather than counting it and counting the cost after the event," says Montgomery. Unfortunately, they are doing that without technology. Most of it is collected manually and locally."

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