Green room: Carbon diem

After months of speculation, details of the Federal Government’s carbon tax have finally emerged and now industry, consumers, politicians and lobby groups are in the thick of debating its costs and consequences.

While the Federal Opposition and business groups, such as the NSW Business Chamber, are doing their level best to paint the tax as an existential crisis for the Australian economy, the local IT industry far less pessimistic.

To be fair, data centre owners, Cloud services providers, and those with their own in-house server rooms aren’t dancing in the street. But nor are they paralysed by the prospect of serious increases in the cost of power, and its flow on to the cost of keeping the IT lights on.

That’s due, in large part, to the major efficiency and cost-reduction imperatives IT departments — the ‘do more with less’ mantra — have been working under for at least the last two years.

At the same time, the data centre transformation and recycle phase that has gripped public and private sector organisations — partly driven by cost, partly by the move toward virtualisation and the cloud — has also witnessed a push to more energy efficient gear and cooling techniques.

As NextDC chief, Bevan Slattery, puts it, Green IT initiatives have been on the table for sone time already, so a carbon tax will simply provide further impetus for companies to prioritise energy saving measures.

“What [the carbon tax] has done is not just focus people's attention on reducing electricity consumption, but reducing your carbon footprint,” he says. While data centre operators are doing their best to build and upgrade data centres to be as energy efficient as possible, the reality is that electricity prices will increase under a carbon tax and, inevitably, there will be real increases in data centre costs.

Measuring the tax’s effect

Understandably, data centre providers are coy on just how large that increase will be but major players agree customers should be in no doubt they will be noticeable.

One of the few providers to hazard a guess at just how much, NextDC’s Slattery says the carbon tax will likely create an increase of almost 3c/Kwh in its Melbourne facility: Something Slattery sums up as a “substantial increase to pricing.”

Equinix’s managing director, Darren Mann, who wouldn’t be drawn on an exact number, estimated a cross-market increase of at least 10 per cent in prices.

“Given the impact on business and customers I think it will become a user-pays scenario whether they are in-house or outsourced with their data centres,” he says. “IT will only heighten with the rise of electricity prices. The industry will have no choice but to pass on some of the costs.”

Similarly, Vocus has also heavily hinted it will pass on carbon tax-related cost increases, with the data centre operator’s general manager of operations, Adam Gardner, saying in July that it would be “unrealistic to suggest that there will be zero effect to customer pricing”.

In addition to price increases, the carbon tax has had the effect of prompting data centre providers to look at value-added services that can be offered to customers to help manage carbon tax-related reporting issues.

According to ASG Group's Perth-based strategic business services general manager, Gerald Strautins, the data centre provider is now focusing on the “onerous reporting and compliance requirements” arising for customers out of the tax.

“The size of this exercise should not be underestimated and we will utilise our business intelligence [BI] and business consulting capabilities to work with customers to design and implement new systems or extend current systems to deal with this new challenge,” he says.

NextDC’s Slattery also predicts increased business out of the carbon tax as the company seeks to assert its Green and cost-saving credentials via a suite of purpose-built Green data centres.

“Building a Green data centre with lower carbon emissions assists us in demonstrating one of the key values a purpose built Green facility is able to provide,” he says.

“An example of this is in Melbourne we have designed our facility to reduce our energy consumption compared to traditional data centres, but we have also designed the later inclusion of generating our own low-carbon energy through tri-generation plants on site.

“These plants are expected to go live later next year and are able to take 100 per cent of the electrical load for the air cooling system. At these levels we calculate we will reduce our carbon emissions by approximately 30,000 tonnes of carbon each year.”

Over the page: Customer perspectives, Offshoring data

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Customer perspective

Another major consequence of the tax, IDC associate director, Matt Oostveen says, will a push to truly understand electricity use within IT departments through the use of data centre infrastructure management software, consulting services and monitoring applications.

As Oostveen puts it, the issue is that no-one really knows how much electricity they are consuming, because more often than not, IT departments aren’t the ones paying for it.

“If you ask CIOs they will say the electricity budget rests inside facilities,” he says. “Rarely do I meet a CIO who is acutely aware of how much they are spending on electricity.”

“It’s the old consulting adage: You can’t improve what you can’t measure. At the moment we can’t measure what we are consuming in our data centres. We need to get to step one, before we can get to steps three, four and five.”

As a result of the tax, as well as major electricity prices rises occurring independently in many states, people are asking whether they even want to run their own data centres anymore. People are also asking whether the reason to move to the Cloud has finally come.

“In our surveys with CIOs we ask them if they even want to be buying servers and storage in three years from now. There are a lot of people are coming back and saying that that is not a position they want to be in — that their organisation would rather begin utilising Cloud-like technologies to deliver those types of services to the organisation,” Oostveen says.

Offshoring data

Another likely reaction to the carbon tax by both customers and data centre operators with offshore operations will be the drive to store data offshore in order to avoid the tax altogether.

Oostveen, says that while he’s yet to see numbers validating the idea that IT departments will turn to overseas providers to avoid the tax, offshoring infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS)-type solutions will look increasingly attractive to smaller and medium enterprise.

However, current data sovereignty laws and guidelines mean organisations in the government, banking and insurance sectors will be forced to stay within the bounds of Australia and be subject to the tax.

That is, of course, until the laws and guidelines are loosened under increased pressure from business.

“We are monitoring the development of Federal Government data sovereignty guidelines, which would increasingly mandate more aspects of constituent data remain on shore and the impact that the introduction of the carbon tax will have on data centre providers to deliver this efficiently,” ASG Group’s Strautins says.

“Many companies looking to offshore their data centres as a way of avoiding cost increases caused by carbon tax will need to navigate a potentially sensitive trade off between data sovereignty, security issues and rising data centre costs.”

In fact, given the right circumstances, and the wider push for cleaner energy sources, the tax could lead to a major phase of offshoring of data to New Zealand, IDC’s Oostveen adds.

“Some people will say [power generation] isn’t their problem, but if we have New Zealand sitting just off our shores and they have the majority of their electricity produced by renewable methods, and, if our legislation is lifted or changed to allow information to reside in New Zealand — which is the first logical country you would allow this to happen — and, if we increase the data linkages between the two countries, then it makes a lot of sense to start basing your data in New Zealand,” he says.

“I think that is inevitable, but it is a question of when. This is a five-year window and when we get to that point it will dramatically change the data centre landscape in