The Lateen Sail changed the course of Mediterranean navigation. It was a flexible triangular sail that allowed ships to harness the power of natural resources, specifically headwinds. Previously, fixed square-sailed ships could only sail with the wind; their direction was bound by their design. The Lateen Sail changed all that — it enabled whole new worlds of agility, opportunity and commerce. No longer at the mercy of the prevailing winds, sailors could now shape trading routes from port to port, as well as venture out onto the open ocean in order to explore new territories.
Hearing about the development of the lateen sail on a recent history podcast reminded me of what’s going on in cloud-based subscriptions. This might sound like a stretch, but hear me out! Twenty years ago, the advent of cloud-enabled SaaS services ushered in a whole new age of exploration and innovation. No longer bound by the weight of “fixed sail”on-premise software and in-house servers, businesses were free to explore all sorts of new territories. And of course, the cloud gave us the agility and flexibility to keep moving forward over the past couple of years. Lots of businesses were able to harness the power of headwinds.
And since it’s Earth Day this week, I’m also thinking about digital subscriptions and corporate sustainability. In 2011, only 20% of the S&P 500 published sustainability reports; today almost all of them do. Blackrock, for example, which manages over $8 trillion dollars in assets, has dedicated itself to sustainable investing.
“As more and more investors choose to tilt their investments towards sustainability-focused companies, the tectonic shift we are seeing will accelerate further,” said Larry Fink, the CEO of Blackrock, in a investor letter to CEOs. “And because this will have such a dramatic impact on how capital is allocated, every management team and board will need to consider how this will impact their company’s stock.”
ESG (environmental, social and governance) principles aren’t just important for our investors, of course. They’re also important for our employees, our customers, our kids, our fellow living animals, and ourselves. Clearly, sustainability is not a “nice to have” anymore. It’s a fundamental corporate priority. According to Microsoft, today more than 1,500 companies with a combined revenue of more than $11.4 trillion have published net zero commitments, but we clearly still have a long way to go.
Fortunately, however, you may have a big ESG lever that’s right under your nose: cloud computing. Why? Because more and more of today’s public cloud computing server farms are wind-powered! (Or solar-powered, or hydro-powered, or run on some form of renewable energy). That’s right — just like those lateen sails, cloud computing is actually helping you create more commercial opportunities by harnessing the power of natural resources.
Why is this happening? Well, as I’ve written previously, there’s a very important structural reason for why cloud-based subscription services are inherently efficient and sustainable: because the manufacturers own the assets, not the consumer. Cloud companies are financially incentivized to minimize energy consumption, maximize the recycling of their hardware, and embrace sustainability.
That’s why this isn’t just good PR, but it’s also smart business. It’s why Google has pledged to run all of its data centers on carbon-free electricity by 2030, and Apple is now completely powered by renewable energy. Amazon is promising net-zero emissions by 2040, and Microsoft is actually planning to be carbon negative by 2030, meaning it will remove more carbon dioxide from the air than it produces.
In short, if you’re working with a Big Four cloud provider today, you’re helping to save the planet. But it’s not as simple as just signing up for an account; you don’t get to earn your ESG bona fides that easily.
Given all the options available, what’s the best way for companies to embrace the cloud in an environmentally impactful way? My colleague Jennifer Dransfeldt is a Director of Technology Industry Strategy at Zuora. She’s previously worked at Intel and Ernst & Young, and at Zuora she’s focused on Tech industry trends that are helping drive adoption of subscription and consumption models. Here’s her advice:
If you haven’t already made the shift, by all means do it.
Cloud providers focus on resource utilization and efficiency in a way that on-premise data centers are simply unable to do independently. According to 451 Research, roughly 20% of racked servers are completely unused and abandoned by application administrators! AWS’s infrastructure, for example, is 3.6 times more energy-efficient than the median of U.S. enterprise data centers. Every major cloud provider has made sustainability a core tenet of their forward strategy.
Focus on utilization as a driver of greener supply chains.
Buying what you need, when you need it, doesn’t just make business sense — it also enables circular supply chains. By scaling your compute and IT demands as you need them, you create only the carbon footprint required for an optimal business outcome. There’s no need to build or buy for excess capacity when you run on scalable cloud environments. Additionally, as you are deciding which cloud provider is right for your technical needs, also consider their progress on their net-zero commitments or how they utilize sustainable practices across their offerings.
Take advantage of new carbon footprint data and analytics tools.
You can’t change what you don’t measure. The ability to accurately measure and account for carbon emissions is still relatively nascent, but today almost every major service provider now provides analytics tools to help companies understand how their cloud utilization impacts their carbon footprint. With the help of these tools, you can really start to impact the size of your carbon footprint. As it turns out, doing good for the environment can also materially improve your top-line expenses.
Always be right-sizing.
To put it simply, right-sizing is finding the optimal cloud configuration to maximize your performance at the lowest cost. This isn’t just a question of scaling volume up or down; as AWS notes, right-sizing also entails avoiding instances that are over-provisioned or poorly matched to your workload. Instance types consist of varying combinations of CPU, memory, storage, and networking capacity. There are qualitative as well as quantitative concerns to address. While you don’t need to be monitoring constantly, it’s important to schedule regular right-size check-ins. When utilizing an optimized configuration, you will likely not only save in overall costs, you will also be bringing down your overall carbon footprint.
Sustainability isn’t just about systems — it’s about people and talent as well.
It’s important to align your organization as well as your systems to sustainability. Many of the people you hire to help in your ESG efforts will probably have job titles that didn’t exist five years ago; chief sustainability officers are the new chief transformation officers! While these roles are relatively new, they are often positioned with a direct line to the CEO. In a recent survey of CSOs by Deloitte, it was reported that 32% of CSOs are reporting directly to the CEO, signaling the organization and the market that sustainability is a critical business objective. While everyone has a role to play in lowering your carbon footprint, you may need to look at new kinds of talent.
And finally, remember that if you do this correctly, you’ll find that this is a rare win-win situation. As Jennifer notes, “As you consider your cloud strategy, choosing sustainable options and monitoring and optimizing their configuration not only saves you expense, it also is good for the environment.”
Good luck, and happy sailing!
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Disclosure: These opinions expressed are mine, not those of the company. The companies mentioned in this newsletter are not necessarily Zuora customers.