Oil, Real Estate and the Computer Industry

We’ve all been reading the headlines about energy prices, and the real estate bubble. They’re both global phenomena. Most consumers are accustomed to thinking about the impact of high oil prices on industry – airlines are punished by high fuel prices, so they make less money and hike ticket prices. Retail gas prices go up, so we tend toward more energy efficient cars, etc. But few folks, until recently, have thought about their impact on the computer industry.

$70/barrel for oil, given that a very substantial portion of our energy is generated by burning fossil fuels, implies seriously expensive electricity. It also implies a financial drag on companies with energy inefficient datacenter facilities – a drag that gets more noticeable by the day. I was with a search company a few weeks ago that told me electricity is their single biggest operating expense. Power matters.

Datacenter rents in cities across the globe are skyrocketing, too – but who in their right mind would build a datacenter in center city London (one of the world’s most expensive places to do so)? Any financial institution whose competitive advantage is influenced by proximity to exchanges, or the speed of light (just go talk to a proprietary trading shop – yes, latency matters). Talk to a CIO, you’ll hear them say (as I do, almost daily), “my biggest problem is that I’m out of space and power, and I can’t exhaust the heat from my existing facilities – I’m finding myself allocating more floorspace to aisles than computers!

We’ve had EnergyStar for desktops for quite a while – we’re beginning to work with legislators to create similar standards for the datacenter. Which will expose the companies that have been focused on your living room, instead of your datacenter, for what they are. Environmentally irresponsible.

Because at $70/barrel and $10,000 per square meter/yr, believe me, innovation matters – and not just in theatrics around price of acquisition, but practical operation – all in, all up. Hardware, software, power, real estate, management talent – all in.

Just ask the fine folks at the University of Buffalo, who chose to build a grid based on parts from a company that deliberately took the word “Computer” out of their name. (btw, Marc’s analysis is pretty stunning – I encourage you to read it, and to watch our September 12 launch event to see our solution to their pain – help is on the way, folks!).

Is it a coincidence Dell’s located nearby to so many energy companies?

Hey, I’m just asking.

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