Being green makes for good PR, but businesses need to be commercially successful as well as environmentally responsible. The problem is, most CIOs don’t pay the energy bill in their facilities, and the facilities department doesn’t speak the same language as IT. And while progress is being made in pockets of organizations, it’s typically not being made across those organizations.
While many organizations have undertaken sustainability initiatives such as virtualization or videoconferencing, it can be difficult to manage and quantify benefits across the organization and provide input toward an overall strategic roadmap. That makes it difficult to measure — or optimize — the business value from their IT investments. CIOs have to take a leap of faith that there will be a payoff down the road.
This is one of the reasons behind the development of a global consortium, called the Innovation Value Institute (IVI), co-founded in 2006 by Intel, The Boston Consulting Group and National University of Ireland (NUI) Maynooth. The idea behind IVI is to provide tools and techniques for long-term process improvements by assessing where an organization is at, synthesizing that data and providing feedback. But it’s not a purely techno-centric approach; it’s also about change management with people and processes.
IVI has created an “open innovation” framework, called the IT-CMF (Capability Maturity Framework) to evaluate an organization’s IT maturity level, benchmark with industry peers and best practices, and identify a roadmap for improvement. The consortium is working toward creating a global accreditation standard for IT management, and was recently contracted by the European Commission to develop a European-wide framework for ICT professionalism, with the goal of enhancing ICT practices across Europe, as well as a European Training Programme for ICT managers to drive innovation and competitive advantage.
After three years of research, IVI is now focused on adoption. To date, some 300 IT professionals from 20 countries have interacted with the IT-CMF; patron members include British Petroleum and Chevron. There are currently pilot adoptions in countries such as Australia, Japan and Chile, with many financial services and high-tech firms on board.
“It’s great to do research and write some academic papers, but we’re trying to drive structural change,” said Martin Curley, director of Intel Labs Europe and IVI co-director, at IVI’s North American Summit held in Richmond Hill, Ont., in February. “IT is going to be hugely important for sustainability, so we hope this will launch broader adoption in Canada and beyond.”
According to IVI, sustainable IT (or SICT) has the potential to realize savings of almost US$950 billion for global business by 2020, but left unchecked the rising cost of energy could drive a 20 to 30 per cent increase in IT spend, equivalent to US$450 billion, over the next five years. But this isn’t just about saving money — the idea behind the framework is to help organizations realize opportunities for new product development and new markets that a greener economy can bring.
At the summit, IVI announced the findings of a research study based on IT-CMF, undertaken by six multinational oil and gas companies. The research showed that companies with a higher IT-CMF maturity were 33 per cent more efficient than the peer average in overall IT spend and 44 per cent more efficient in IT infrastructure spend per supported user. In other words, higher IT-CMF maturity is correlated with lower ongoing IT costs and increased business value. As a result, the CIOs who were involved in the research study have decided to continue their benchmarking work.
The objective of the research was to compare both qualitative and quantitative information so that companies could maximize the efficiency of their respective IT services (and was designed in such a way that no legal or competitive issues arose, since anti-trust looms large in the minds of many oil and gas executives).
“Despite initial mutual suspicion, trust was quickly formed and it worked very well,” said Andrew Scott, senior benchmarking project manager for Aupec in Scotland. The CIOs of the six companies developed a list of questions they wanted answered by the framework, such as how much of their investment spend is used for innovation and what sourcing model works best.
“There are real structural differences in how these companies are choosing to run their IT, and there are choices they can make to differentiate themselves competitively,” said Andrew Agerbak, principal with The Boston Consulting Group. “It’s very actionable. If you’re $40 million from the median spend, what are you doing in 2011 that will get you some of the way there?”
Other insights arose from the research. “We found rigorous control in getting money, but weakness in how that money gets tracked in real life — it’s only tracked for larger projects,” said Agerbak, adding there’s often a disconnect between benefits tracked in the lifecycle of projects, in innovation and sourcing.
The IVI believes this collaborative approach could be used in a variety of other industries. Here in Canada, the CIO Association of Canada is looking at the IVI framework and how it could add value to members, particularly those in smaller organizations, according to Dave Kodak, CIO of TD Bank. It’s early days, but there’s interest in the framework, and the association is looking for relevant examples they can highlight to members and to provide more education about what this means in a Canadian context. “The framework is complex, but in a good way,” he said.
While currently the IVI has attracted large multinational firms, such as Microsoft, Intel and SAP, it insists the framework is just as relevant for smaller firms. The idea is that SMBs will also benefit from this approach. One such company is Mainstream Renewable Power, which develops wind and solar plants on land and at sea to help accelerate the transition away from coal, oil and other fossil fuels. The Dublin-based company has a portfolio of 5.5GW across Scotland, England and Germany, and is developing more than 6.5GW of onshore projects across Canada, the U.S., South Africa and Chile — with a staff of about 40 employees.
“It’s not a question of if, but when,” said John Shaw, CIO of Mainstream Renewable Power, of the transition toward renewable power. Issues driving this transition include climate change, rising fossil fuel prices and the ever-increasing demand for energy (China, for example, became the largest market for energy last year).
Energy security is a big driver in Europe, he said, which is heavily dependent on natural gas. While three-quarters of the continent’s natural gas comes from European gas fields, that supply will eventually be gone, and the EU will become dependent on countries like Russia for fuel. A strategy to address that includes wind and solar power.
“We believe by 2050, 80 per cent of electrical energy will come from wind and solar,” said Shaw. To address this projected demand, the company is developing wind projects in the North Sea, and one of the key enabling technologies for this is the super-grid. But super-grid as a technology, vision and process brings huge amounts of change, he said.
And for a company that’s expanding so quickly in so many markets, there’s a lot of pressure on its ICT strategy. “We joined IVI in 2008 as a contributor,” said Shaw. “We were looking for a framework that would help us characterize this journey. About a year after joining, we laid out a roadmap.” This roadmap involved delivering business value through fast replication of learning, efficient workflow, a single version of the truth, faster decision making and increased team productivity. “We saw value in the work being done at IVI, but you get out of it what you put in.”
Since then, a private cloud strategy has helped to minimize energy usage, collaboration technologies have reduced travel, electronic workflows have reduced paper, and managed print has minimized energy usage. But that’s just a start — and Shaw isn’t where he wants to be yet. In the next four to five years, he plans to increase the sustainability of the company’s internal ICT and ensure its wind turbine control systems are highly available.
“Our operations are sustainable and we’ve gone after the obvious quick wins,” said Shaw. “We’re able to use that mandate to create a roadmap and focus on policies, adoption and metrics.” He attributes these successes to having a business-led focus and strong executive buy-in. “There’s no such thing as an IT project — there are business projects led by IT.”
While Mainstream Renewable Power is a small, nimble company that’s able to adapt quickly to change, more traditional players are also using the IVI framework in an attempt to change and improve their business model. The Electricity Supply Board (ESB) is the incumbent supplier in Ireland, which generates, distributes and sells electricity. Over the past 10 years, it’s been hit hard with cost pressures that have resulted from major deregulation and increased competition.
The ESB joined IVI in 2007 as a contributor member and is using the framework to highlight areas for improvement and future direction; as a result, it is focusing on becoming carbon neutral by 2035 and building a renewables business.
Changing business models doesn’t come without risk, but it does carry substantial opportunities, said Tom Geraghty, IT governance and strategy manager with ESB. The organization’s longer-term projects, for example, include smart metering and SICT for e-cars. “We see ourselves winning customers back through these initiatives, as well as price,” he said.
When it comes to sustainability, CIOs have typically been going after those obvious quick wins, such as more efficient data centre design and server virtualization. “But more exciting and challenging is the potential for IT to transform business in this area, everything from e-waste to e-procurement to smart buildings — to make a lasting contribution to the effectiveness of the organization in its entirety,” said Brian Donnellan, IVI co-director and a professor at NUI Maynooth.
The challenge for a company of any size is that there’s a dispersed understanding and implementation of sustainability initiatives around the world. “We need measures and metrics,” said Donnellan. “There’s a lack of knowledge and expertise generally in our discipline for this topic,” and that means there are real challenges facing CIOs today.
“Many companies are struggling with this,” he said. “Many get it in terms of the vision, but they’re having a hard time coming to grips with this. They have the right technologies, but need organization-wide awareness and mindset-shift.”
The hope, according to IVI members, is that the framework will help organizations make that mindset-shift — and CIOs will see that profitability and sustainability can go hand-in-hand.