1) Corporation tax. I greatly welcome the reduction in corporation taxes; 22% to 20% for the profits under £300k, 28% down by 1% per year to 24% in 4 years. The stated intent was to boost the attractiveness of business in the UK. Also, speaking for myself, less tax will enable us to invest more in Memset, growing the business faster and creating more jobs. However, these reductions in corporation tax will largely be offset by changes to capital allowances.

2) Depreciation & capital allowances (AIA). The limit on deprecation for tax purposes has been changed from 20% to 18% (5 years to 5.5 years). Given that IT equipment depreciates at more like >33% in real terms this is a bit of blow since capital-intensive IT companies will end have to pay more tax up front, which will further reduce our growth rates.

Therefore, while a little esoteric, this is certainly bad news for British managed hosting and cloud computing providers like Memset. It will also makes it harder for us to compete on the world stage, especially when the weak pound and the fact that all computer hardware is imported is taken into account. Our international competitors are allowed to depreciate their equipment at realistic rates and pay less for it. Unfortunately, IT seen as a service sector by government, and they do not appreciate that we are an industry with plant machinery that has a very limited shelf life.

Also, the Annual Investment Allowance (AIA) on investment in equipment has been slashed from £100k to just £25k which will especially hurt small IT and manufacturing companies. It was only increased from £50k to £100k in April, however, so in reality it is only a halving of what was already a pretty small allowance. From my perspective as an Infrastructure as a Service (IaaS) provider, this will probably discourage people from owning their own hardware so not necessarily bad news for us!

3) Loans for small businesses. The Enterprise Finance Guarantee scheme (EFG), which guarantees small business loans to mitigate the risk to banks, is being extended from £200m to £700m. However, the EFG as it stands is broken. It was supposed to help banks lend to entrepreneurs without requiring large personal guarantees, but the banks are not honouring that and still will not share any of the risk. The EFG needs fixing before it gets extended, but there may be a silver lining in the form of a vague promise to lean on banks to lend more to smaller companies.

The newly announced “Growth Capital Fund”, also supposedly intended to fill the growth capital gap, seems far too small a measure to be generally useful at only £25m.

4) Entrepreneur’s relief. As you would expect, I am pleased that the £2m entrepreneur relief being extended to £5m gains over a lifetime. Entrepreneur’s relief is a Capital Gains Tax (CGT) concession, limiting it to 10% when selling a company, up to a certain value over a lifetime, which replaced the old CGT taper relief scheme. Since CGT is being raised from 18% to 28% this is especially pertinent.

Although I’m not looking for an exit any time soon, this scheme is important to encourage new entrepreneurs and investors. To attract bright, talented people away from more normal, safe careers the allowance needed to be in that higher range – the old taper relief scheme was one of my motivators for starting Memset. It is worth noting that entrepreneur’s relief only applies where you own more than 5% of the business.

5) VAT. On a more personal note, I also welcome the VAT increase to 20%. Taxation at the point of spending is one of the fairest taxing methods since people can choose. Most essentials (food, rent, kid’s clothes) are already VAT free, and it is only 5% on gas and electricity. Essentially it is a tax on buying luxuries, and if you want to be a saver you don’t have to pay it.

Also, as we saw with the VAT reduction, a change of 2.5% in the headline price of consumer goods has little impact on consumer spending. It will not affect most businesses significantly either since we can pass is straight through. As for the admin burden of a change, having done it twice recently means we are well-practiced so it should not be an issue.

6) Government carbon commitment. Finally, snuck into the document is a commitment to cut government’s CO2 emissions by 10% between May 2010 and May 2011. I think this is great news; it is about time our government started leading by example. Also, I believe this could be a great opportunity for the IT sector as we enable many carbon-saving technologies (eg. teleworking for car transport avoidance).

Overall, I am pleased with this budget. It was tough enough to hopefully get us out of our enormous national debt, does not dramatically cut back on the public services from which we all (as opposed to just those supported by the state) benefit. It also supports businesses small and large, giving us a real chance to be the engine that will lift us out of financial troubles.

The diagram shows what we agreed we mean by Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (right hand side) and the areas encompassed by the individual terms infrastructure / platform / software on the left. A better term than “software” might be “application” since the platform part is also really just software, but SaaS has already gained wide acceptance.

It is assumed that “as a service” means all services within the definition are fully integrated up to and including the respective level, thus incorporating any sub-levels. Therefore, SaaS providers could either sub-contract to a PaaS provider, or would incorporate the PaaS themselves and provide it as part of the SaaS “stack”. In turn the IaaS could be sub-contracted or incorporated. The customer would see an integrated service.

It is also worth explaining the overlap between ‘platform’ and ‘software’; that is because some advanced platforms are built on complex software solutions which go well beyond just operating systems and a bit of infrastructure software.

For example, one could consider bare operating system as the platform, with the bespoke software application incorporating its own software infrastructure elements (eg. a bespoke CRM solution). One might also consider a Linux-Apache-MySQL-PHP stack as the platform in its entirety, with only the PHP code itself being the software/application layer. The key differentiator between ‘platform’ and ‘software’ is that a platform is standardised and to an extent commoditised, with the software being the bespoke / custom element. A platform would also often, but not always, be highly scalable across multiple servers.

Standardised / commoditised software (hosted application) services, as opposed to bespoke / custom deployments, would most likely be considered to be SaaS.

Virtual differences

Until this point many experienced readers might be saying, “Yes, that that is just hardware, middleware and software renamed!”. To a large extent you would be right, with one small exception being subtle differences between modern platform/middleware, but there is an important difference between the old concept of “hardware” and ours of “infrastructure”: virtualisation.

It was agreed among the G-Cloud team that the virtualisation should now be considered as part of the hardware layer since it has become such an integral method of dividing and provisioning hardware resources. It is important to note that we drew the line precisely between the virtualisation layer (ie. the hypervisor) and operating system, viewing a bare-bones virtual machine without operating system or kernel as the unit(s) of hardware.

Of course, virtualisation is not ubiquitous. Indeed for many systems including highly scalable ones upon which PaaS and SaaS stacks are built do not use any virtualisation (Google App Engine does not, for example). In such cases one would simply view the stack without the virtualisation layer with the boundary between infrastructure and platform being between the physical hardware and operating system layers.

Network

Another critique of this model could be that the “interconnecting network” appears to link directly from the software layer through to the client device. In reality, of course, all network traffic has to sink back down through the layers from the software to via the networking & firewalling layer, then on to the client device. To keep the stack looking like a stack, however (which is correct from a logical perspective), it is better to stick the client device on top rather than off to one side. In the full postulated functional of the G-Cloud logical architecture the connections are more explicitly shown in a 2D rather than linear model. Hopefully that will be in the public domain soon!

1) Pushing RBS and Lloyds to lend to small businesses. Despite a healthy, profitable and growing business, we have not been able to get borrowing from any banks under the EFG without providing personal director’s guarantees. We need banks to be willing to share at least a tiny portion of the risk, otherwise we may as well just extend our mortgages even more. As a cloud computing provider we are very capital intensive – our growth rate is limited by cash availability more than anything else. Without borrowing our growth rate is capped at what we, the directors, can afford to leave in the business.

2) Tax breaks for entrepreneurs. I’m pleased to see the increase in tax allowances, however the only significant of those is the freeze on capital gains (we feared it would return to 40%). Doubling the entrepreneur’s allowance to £2m is pretty feeble (Labour capped the old taper relief scheme at £1m, and it was one of the main reasons I started a business – it was a way to avoid 40% tax). The investment allowance doubling to £100k is also only really going to help micro-businesses. The increase in R&D enhanced allowance from 150% to 175% is also helpful, but pretty minor. However, overall the set of allowances means it financial sense for me to keep investing most of my personal wealth back into my business to help it grow as fast as possible rather than sticking it in BASIC countries.

3) More STEM places. I’m pleased to see that they are hearing our (high-tech sector’s) desperate need for science & maths graduates, but that must not come at the expense of university-based “blue sky” research! At present the budget states an intention to create 20,000 new STEM (science, tech, engineering & maths) places, but it looks like most of the money for that will have to come from further cuts to already-overstretched university budgets.

4) Tax breaks for the games industry. It is fantastic to see support for our computer games industry. I have long been frustrated with how much of our top computer programmer and design talent gets poached by foreign companies operating in friendlier environments. Online entertainment is undoubtedly one of the big industries of the future, and among a number of high-tech areas of growth like those identified in Intellect’s Making Britain GreaIT Again publication. It is vital that we support this technical-creative hybrid sector.

5) £6/yeay levy on phones towards superfast broadband. Nice concept, but no where near enough. Only 70% of British homes have broadband at present, and to get high-speed broadband to the majority of homes will cost in the region of £15-25bn pounds according to the likes of BT and the broadband stakeholder group. A fast digital infrastructure is vital to enable turn Britain into a innovation haven, supporting out high-tech industry

6) 15% increase in government contracts to SMEs. This is good news, especially since government contracts all too often are dominated by a small number of very large providers who deliver debatable value for money! However, government procurement processes are vastly over complex and often prohibitively expensive for smaller companies, which is often why the public sector end up paying a premium to the usual suspects. A change to this, at least in the ICT world, is the G-Cloud programme. It should enable smaller, more agile companies to interface with government and provide their services without the usual massive sales-admin burdens (I hope!).

In short, I was fearing that the baby would be thrown out with the bath water in this budget, with a drive to increase taxes and cut costs accidentally crushing the one area on which we are likely to depend for innovating our way out of national debt (high-tech SMEs). Given the likelihood of a hung parliament that was all the more important, so overall I think we can breath something of a sigh of relief.

Working on the project has given me a very clear insight into what the benefits of Cloud Computing to government and business really are, and also what a government Cloud would need to look like. That was essentially what we were describing (in broad terms) in our technical architecture strategy paper, which will be published soon. Therefore, I’m updating my definition of Cloud Computing in line with that work, and also incorporating the NIST definition, which has recently become something of a de-facto standard (although I don’t entirely agree with it).

Cloud != Utility

First off I wish to be clear: Cloud Computing is not the same thing as Utility Computing (aka. Infrastructure as a Service). Nor is Cloud the same thing as Grid Computing. Both terms are well-defined and there is no need to invent a new name for these decades-old concepts (my Dad was providing Utility Computing services from his computer bureau service before I was born!):

• Grid Computing: The combination of computer resources from multiple administrative domains applied to a common task.
• Utility Computing: The packaging of computing resources (computation, storage etc.) as a metered service similar to a traditional public utility.

Cloud is often confused with Platform or Software as a Service too, but they are just extensions of the Utility Computing concept, and again are nothing terribly new. I see Cloud Computing as the combination of those old concepts of utility and grid:

Cloud Computing = Grid Computing + (Utility Computing * N)
…or…
Cloud Computing is a Grid of Compute Utilities

I shall explain. The real power of the Cloud Computing concept comes about when one views it as the mass-market for Utility Computing resources, and that is what the G-Cloud programme essentially asked the technical work stream to come up with; an architecture that would allow a number of different, but standardised, Infrastructure as a Service (IaaS), Platform-aaS (PaaS) and Software-aaS (SaaS) services to be make available in one central competitive market place (the App Store).

The clear desire was also for those services to be interoperable, especially at the infrastructure level. Additionally, and this is where the “Cloudiness” comes in, the desire was such that one could request computing resources to a specified service level agreement (SLA) and at a specific security impact level, and have a pre-certified range of options which could then be chosen based on price, or other factor.

That fits with what I believe most people mean when they say “host it in the Cloud” – referencing an amorphous, distributed collection of compute resource used in a way that you don’t really care where your application resides, so long as your requirements are met.

Therefore, I maintain that when we refer to “Cloud Computing” we should be talking about an open market for computing resources, created when you combine multiple interoperable compute utilities into one massive grid, hence Grid + (Utility * N).

NIST definition

I really like the new Cloud Computing definition from the US’s National Institute of Standards and Technology (NIST) for the most part. They define three service models, five essential characteristics, and four deployment models. I have represented their model on a cube, as below:

A well-managed data centre is not “a Cloud”!

The only part I take issue with is their “private Cloud” concept; something being conveyed with gay abandon by technology analysts the world over unfortunately. In most usage, “private Cloud” just refers to a partitioned off chunk of infrastructure within one utility computing provider in most cases, or worse-still just a well managed data centre with a bit of virtualisation if you ask some people!

The UK government, for example, wants a private Cloud for some higher-security requirements, but that would be a pool of resources from a number of utility computing facilities (probably partitioned off super-secure areas of providers’ data centres); an open market again, albeit one with specific requirements. As it stands, the “essential characteristic” of resource pooling is at-odds with the analyst-speak concept of a private Cloud; if it is private and dedicated to one organisation, you will only be pooling the resources of one organisation.

There are very few organisations that will have a sufficiently diverse usage profile to gain additional benefit from such an approach, however there are several with similar requirements that could club together as one private community, like UK government. Also, only NIST’s “Hybrid Cloud” encapsulates the full vision of what I believe Cloud Computing is about (interoperability etc). Therefore I would change the NIST deployment models as follows:

• Private Compute Utility: An infrastructure physically dedicated to one organisation.
• Private Community Cloud: An infrastructure spanning multiple administrative domains that is physically dedicated to a specific community with shared concerns.
• Public Cloud: An infrastructure spanning multiple administrative domains that is made available to the general public / businesses, without physical partitioning of resource allocations. (There is arguably only one public Cloud – hence the phrase “host it in The Cloud”.)
• Hybrid Cloud: A combination of public public and private compute utilities in order to allow “cloud bursting” for some requirements, or to allow a private compute utility owner to sell their spare capacity into The Cloud.

It’s all Amazon’s fault; misnaming their Plastic Compute Utility

The origin of the term “Cloud” comes from the diagrams we used to draw of the Internet back in the ’90′s; typically the automatically-routed internetwork was depicted by a big fluffy cloud in the middle of a network map, and it was just accepted that it would route things sensibly between the data centre and client (or other end points). The term then gained further traction with people using phrases like, “I’ll just host it in the Cloud”, now referring to the generally available computing / hosting resources connected to the ‘net.

Then, along came Amazon with their “Elastic Compute Cloud” (EC2), applying the term to something that (when considered on its own) is really just a massive plastic compute utility. ‘Plastic’ since you have to request more or less instances (resources do not elastically shrink) – the elasticity is a function of how you write your application to interface with their API. A ‘Compute Utility’ because it is really just one very large compute grid being sold as a utility service; why apply a new term when we have a perfectly good one?

I see Cloud Computing as the result of having multiple utility computing providers at your behest, with standardised APIs to allow provisioning from competing suppliers. That is pretty much here now, although the grid middleware to allow smooth interoperability is not quite industrial-strength.

IaaS vs. PaaS vs. SaaS

One of the nicely encapsulated outputs from the G-Cloud project to-date has been an agreement on what we actually mean by infrastructure, platform and software, and how they do differ a little from the old terms hardware, middleware and application, but that can wait for my next posting (here).

An impressive amount for a technology startup with no clear means of generating revenue, so I thought I would do some calculations of my own:

Twitter has about 18-20 million users in the US, according to Mashable

Earnings, earnings, earnings

There are 300m people in the US and 750m in Europe. Let’s assume that the ratios are the same for Twitter users. Therefore, the total number of Western Twitter users (ie. people who would potentially pay for anything) in 2010 is:

(20m / 300 ) * (750 + 300) = 70m users

To justify a $1bn (£625m) valuation they need to be able to realistically generate at least 5% of that as profit (20x earnings multiple, which is basically unheard of outside blue chip corporates) ie. at least $50m/year.

Therefore, in round numbers, they need to be able to realistically expect (in future) to generate earnings (profits) of $0.70/year from each user.

So far, perhaps not unreasonable; once micro-payment systems start working properly one could imagine users paying a notional $0.10/month to use Twitter, or advertisers paying that per user, at least so long as Twitter is the only one of its kind.

Twitter ain’t so special

That is where we realise the valuation’s big flaw: Twitter is not doing anything special. To build another system that replicates their functionality would, in my opinion, take 2 good coders, 2 good system administrators and one good web designer 6 months, tops. Add in some management and marketing capability for operational running and if you are a generous employer your wage bill might be £500k/year ($800k).

What about hosting costs? Well what it boils down to is a large and very active database:

Assuming 100m users
100 reads & 10 writes per user per day
= 10 billion reads & 1 billion writes per day

Squeeze into 16 active hours (just looking at the West)
= 120,000 read & 12,000 write transactions per second

To host a system which is capable of those transaction levels you would need at most 100 1U quad-core machines loaded with RAM (eg 24GB), costing £200/month each, or £240k/year ($385k).

So, I reckon that Twitter’s operational costs should be under $1m/year. But what do I know, right? I’ve only been designing, building and hosting massively automated online business systems for a decade, not to mention being one of the UK’s leading tech entrepreneurs.

A more rational valuation

So why are Twitter’s investors valuing such an easily-and-cheaply replicable business so highly? I suppose that they are banking on a land-grab effect and user stickiness, but we have seen what is happening to MySpace’s diluted popularity faced by new competitors.

When faced with such valuations I fall back on common sense and base the valuation on a cost-plus revenue model, ie. “what would it cost to provide the service, plus a modest profit margin”? All businesses and markets eventually commoditise down to that price point after all, and such commoditisation can happen very rapidly in the online world.

Viewed from that perspective I estimate that Twitter’s services are probably worth about 1.4 cents per user per year at present (estimated $1m/y running costs divided by 70m users). Lets be really generous and assume that they are able to generate 50% profits on that (first-mover advantage etc), so we get $500k/year profit, which at our mentalistic 20x valuation ration would give a valuation of a whopping $10m (£6.25). Hmm.

But that can’t be right?

I admit, I am taking an extremist point of view, and commoditisation of this very new and innovative sort of service is almost certainly several years away. However, defaulting to a cost-plus business model does demonstrate the likely value of such services when the competition have all caught up, and in Twitter’s case it is not a terribly exciting outlook.

Further, the valuation is being extrapolated from a $50 million purchase for a minority share holding. That investment was possibly more about getting a seat on the board than about a real valuation of the company.

Finally, and call me a cynic, but most investors are in the business of making a large return on a high-risk investment with a short time-horizon. One of the ways that happens all-too-often in the technology sector is less about yields and more about a business’s price getting hyped as high as possible before the savvy investors get out. Some some poor sap is then left holding the baby when commoditisation or better-competition comes to bite, exposing the lack of substance behind the valuation and causing the valuation to tumble.

Eye of Google

That is Twitter’s fundamental problem, to repeat myself: It is nothing special. Google (for example) deserves its outrageous share capitalisations because they have a unique technology which gives them an indomitable lead in the market place. Twitter is little more than a non-realtime Web-based chat room, and its technology would be trivial to replicate. Expectedly, the behemoth that is Google has indeed turned its lidless eye on chat-like status-updates in the form of Buzz.

To my eyes, their strangle-hold on the consumer Web-services market remains unchallenged by the likes of Twitter. The only interesting thing I’ve seen, however, is that their master-plan to crush Microsoft by making the browser the new platform was perhaps hiccoughed by Twitter in the form of software like TweetDeck – an example of Web services reverting to local software clients. Perhaps the browser is not quite ready for everything we want to do just yet after all, but I doubt that will save Twitter from eventual relegation to the Web-stars twilight world along with the likes of friends reunited.

Part of the solution, not part of the problem

The ICT sector is regularly harangued about the “2%” figure – the amount of global carbon emissions attributable to ICT according to a Gartner report. That figure is oft-quoted alongside real dirty polluters such as the airline industry (who dump CO2 straight into the upper-atmosphere, bypassing many of the natural ground-level sequestration mechanisms), but what is often forgotten is that in exchange for our emissions (2-3% of total in the UK) we are contributing roughly 10% of UK GDP and 15% of national trade.

Further, we (the ICT sector) have our own house well in order and have committed to reducing our own emissions as I will describe shortly. However, of much greater important is what the intelligent use of ICT can do to reduce emissions in other sectors, as highlighted by several groups including GeSI:

“ICT can reduce annual global emissions by 15 per cent by 2020 and deliver energy efficiency savings to global businesses of over EUR 500 billion”
– Global e‐Sustainability Initiative (GeSI), SMART 2020: Enabling the Low Carbon Economy in the Information Age, June 2008

Even the panda-people (the World Wildlife Fund) have got in on the act; their report with Gartner titled “Saving the 1st billion tonnes” puts the intelligent application of ICT in 10 key areas (eg. smart grid, intelligent buildings and transport avoidance) as being key to reducing our collective carbon emissions:

“‘Green IT’ is an oxymoron, until you consider use of IT to ‘green’ business and society.”
- Simon Mingay, Gartner10

Example: Transport avoidance

Perhaps the most obvious way that ICT can help is in transport avoidance. As David MacKay illustrates in his excellent (and free!) book Without Hot Air, personal transport in the form of driving cars and flying in jet aeroplanes are two of the worst things we do as a nation, together contributing to over 40% of our total energy consumption.

Cars are the worst offender, consuming a whopping 40 kilo Watt-hours (kWh) per day per person (to put that in perspective, we use about 4 kWh/d each on lighting). Even with electric cars we still have to get the energy to run them from somewhere, and there are simply not going to be enough renewables to go around at current usage levels. The only way to significantly reduce the energy consumption attributable to cars & planes is to use them less, and that is where ICT comes in; for example by enabling home working (tele-working), even if just one day a week, and reducing travel to meetings with telepresence technologies.

Keeping our own house in order

Although we can help reduce carbon emissions elsewhere, we absolutely must do so in a sustainable manner, which is why we in the ICT industry are putting lots of effort into keeping our own house in order. Last year, Intellect UK (Britain’s high-tech trade association) release their High-Tech: Low-Carbon report , which articulates an action plan on how the UK technology sector is going to reduce its emissions.

Further, Digital Europe (formerly EICTA) has committed to reduce Europe’s ICT-related carbon emissions by 20% by 2020. Many of us think that target is achievable by 2015, but how can I be so sure of dramatic carbon savings when our collective use of ICT is increasing constantly?

A lot of the existing inefficiencies of the sector lie in the data centre, and that is also where I expect to see the largest efficiency gains. The UK, in particular the BCS Data Centre Specialist Group, has taken a global lead in advancing the field of energy efficiency within the data centre, and was instrumental in developing the European Union’s Code of Conduct for data centres, which stipulates a range of best practices for every layer of the IT service delivery stack (from mechanical & electrical to software selection).

Memset recently become the first British Web hosting provider become a participant to the Code of Conduct, and we encourage others to follow suit (which many already are). The Code is free, is not hard to do (I did ours in a day) and the best practices contained in it are designed to to improve efficiency which means saving money, so it is just good business sense.

Moore transistors please!

However, there is a much bigger effect that incremental improvements to data centre design, and that is the combination of Moore’s Law with virtualisation technology. The work done per Watt by servers has been increasingly roughly in line with Moore’s Law, ie. doubling every 18 months, and is expected to continue to do so. Now that virtualisation has reached the main stream it is being deployed en-masse, allowing legacy servers to be shut down and replaced with vastly more efficient virtual systems, usually consolidating physical machines by a factor of more than 10 to 1.

Take us as an example; this year we have deployed roughly 1,000 virtual servers. Each virtual machine (VM) would otherwise have been a physical server (or in many cases used to be before it was migrated to us), and in fact many people are still using cheap old tower PCs for cheap hosting, but thankfully that practice is dying out. A normal server or PC uses around 90-120 Watts continuously, whereas one of our Xen-based Miniserver VMs uses 5-10Watts, but does the same work. Taking into account cooling and other data centre inefficiencies lets just call it 100Watts saving in round numbers:

1,000 VMs x 100 Watts = 100,000 Watts
x 30.4 days x 24 hours = 73,000 kWh / month
x 430g / kWh = 31,400 kg CO2 / month

So just from what we have done in our little corner of the ICT sector, just with new customers and in just one year, we have helped avoid over 30 tonnes per month, or 360 tonnes per year, of carbon dioxide emissions. To put that in context, each British citizen is responsible for about 9 tonnes of CO2 emissions per year. Not bad for 18 people in Guildford!

Being green is just good business sense

When it comes to ICT services, especially in the data centre, the two things that cost you the most money also cause the most carbon emissions; manufacturing the hardware (the servers / computers) and electricity to run them. In short:

Green = Efficient = Lower costs

There really is no excuse for us as an industry not to improve our energy-and-carbon efficiency, and companies that don’t will end up with higher cost bases and ultimately will be driven out of business by their more efficient competitors.

Conclusion: Let ICT do its job

The Intellect Work Programme has estimated that the knowledge economy now employs 41% of the UK workforce, and that it will account for roughly 50% of GBP by 2010. Data centres are ever-more becoming the backbone of UK PLC, and a healthy ICT industry is vital for both cutting our carbon emissions (as described above) and for driving our economic growth in the next decade.

Further, the ICT sector already has its house well in-order, so it is important that any policy measures do not interfere with the industry’s growth. Unfortunately, well-intended but poorly-conceived legislation such as the Carbon Reduction Commitment, which in the next few months is being rushed through with little-to-no consultation with industry, threatens ICT’s ability to deliver on its promise of supporting a prosperous, more sustainable society. Hopefully the next government will just let us do our job.

Decoding the academic paper

First I started with what appears to be the only paper on the subject; “Energy Intensity of Computer Manufacturing: Hybrid Assessment Combining Process and Economic Input-Output Methods” by Eric Williams of the United Nations University in Japan, and published in Environmental Science & Technology in 2004.

Unfortunately the paper bundles CRT (old-style monitor) production in with the figures which really muddies the waters, especially given that they are redundant technology) However, there seems to be one very nice bit of information embedded in the paper – a table listing the electricity, fossil, and total energy use in computer production. A quick bit of analysis: The total estimated cost of production is 6,400MJ, and if we remove the CRT-specific bits, we take off:

• CRT manufacture/assembly: 255MJ
• bulk materials – CRT 800MJ
• printed circuit boards: 20MJ (est)
• electronic chemicals: 200MJ (est)
• other processes: 400MJ (est)
• Total: 1,675MJ

So, from the paper a PC’s production is about 4,700MJ, which is 1,300kWh. At a green IT conference at Oxford University last year, Fujitsu gave a great presentation on their new super-green PC fabrication plant, and asserted that their range of green PCs took 730kWh to make (materials, production & distrubution). If his numbers are right that is an impressive improvement in 4 years, but Fujitsu have been working hard in the area. Of course, that does also depend on my estimates of what proportion are down the the CRT – I shouldn’t think I’m far off though (I’m good with numbers ).

As an aside, this is very interesting from a recycling point of view. Most PC manufacturers, be it Fujitsu, Dell or IBM will proudly telling us about less than 2% goes to landfill, but if you think about it surely the only energy that can be “reclaimed” from manufacture would be the bulk materials; all the energy of making chips, assembly, PCBs, transport etc is entirely lost. Therefore, in reality one could at most hope to recover perhaps 800-1,000MJ of the original energy-cost (ie. about 20%).

A server is just a PC with a slightly different set of components (an extra disk & more RAM, but less additional cards like graphics & audio), so I think it is reasonable to assume they are similar. Therefore, I pick a figure half way between what I have deduced from the paper (1,300 kWh) and the only convincing figure I have had from a vendor (730 kWh) and have gone for 1,000 kWh in my estimations.

Sweat the desktops

So what about the fabrication energy vs. utilisation? Well, I think the paper’s 81% fab, 19% use lifetime cost is probably no longer very accurate. First, he assumes 3 hours per day, which is far too low given the number of office PCs out there and the often intensive use of family PCs. Second, I think a 3 year lifetime is too low – most people I know use their PCs much longer (they get passed down / re-used rather than thrown away) – I believe the Fujitsu figure of 6.6 years for home users at least.

I would not, however, disagree totally with his figure of 128W for PC+screen – the gains we have made in LCD screen efficiency have been outweighed by power-hungry CPU-intensive machines in recent years, although that trend is reversing. Fujitsu’s figure was 80W for their “green” PC in full power mode, and an average LCD screen uses about 20W (about half a similar CRT).

So, a quick updated estimate (based on an average of PC & home use):

120W * 5 hours/day * 365 * 5 years ~= 1,100 kWh

If we assume LCD screens are as energy intensive as CRTs and go with Eric’s figure of 1,700 kWh for production then the ratio is 61% fab : 39% use.

If we assume that Fujitsu are telling the truth though then it is 730kWh in fabrication, plus ~300kWh for a screen (a guestimate – it is about 465 kWh for a CRT), giving about 1,000kWh fabrication then the embedded vs. use energies are almost equal.

If one then does the calculation based on an office PC usage pattern and a 6.6 year lifetime, then even with more energy efficient PCs the ratio is more like 35% fab : 65% use.

Therefore, I think that we can conclude that the ratio of production energy to usage energy for a PC (with or without screen – the proportions seem about the same) range widely from something like (35% fab : 65% use) to (70% fab : 30% use), and that the main determining factor is the usage pattern of the PC, which is also the one bit of data that we probably have the worst grasp on. Either way, though, you will use less energy overall if you sweat the desktop PCs, as we discussed in the recent BCS Green IT debate.

Replace the servers

The situation is very different for a server, however. A typical modern 1U pizza-box server will use 80W when idle and 140W when working hard. Most of the time they are not straining, so call it 100W:

100W * 24 hours/day * 365 * 1.25 PUE ~= 1,100 kWh per year

In other words, a server uses about the same amount of energy as was required to create it every single year, and the same amount that a PC with a fairly average usage pattern uses in 5 years.

Because of this it is worth while to replace servers with more efficient models on a fairly regular basis. Moore’s Law (that transistor density doubles every 18 months) means that server work capacity per Watt is increasing by a factor of 4 every 3 years. This means, that provided you are using the servers properly (virtualisation etc) and consolidating onto a smaller number of newer machines, if you replace a 3 year old server its 1,000 kWh embedded energy cost will be saved by the 3 you are turning off (4:1 consolidation) in only 4 months.

Men and women have complementary strengths and weaknesses; we have evolved this way to avoid over-design and make best use of our resources. We are designed to work well in the smallest family units, and in the work place. Numerous studies have shown that corporations with gender-balanced teams at all levels of the organisation perform significantly better. Today’s technology industry is in dire need of the “softer” skills often associated with women.

An example is the multi-talented Sophie Johnston. Top of her year in Computer Information Systems at Liverpool University, she is now working as a junior ScrumMaster using the agile programming methodology. A ScrumMaster is an agile project manager who emphasizes facilitation, leadership and communication over traditional command-and-control activities, skills that women tend to bring to a team.

Earlier this year Sophie also helped dent the “IT Crowd” image of IT professionals, stereotypically seen as sandal-wearing blokes lacking social skills. She won the most votes in the Miss Universe GB competition, showing that brains and beauty can indeed come in one package, but that is still a surprise to many people in the industry. This achievement alone is not going to change the public perception but it’s a start.

The perception that “girls are not good with tech” is perhaps the toughest battle of all. As someone who has had the extremely unusual experience of seeing life from both sides of the gender divide I can assure readers that sexism is alive and well in our industry today, and the perpetrators are not always men. Where this attitude is doing the most harm is in our schools, with girls even today being discouraged from taking computing and ICT. It’s an alarming fact that the number of young women taking A-Level computing has fallen from 13% to 9% in the last 5 years. Ironically this is despite girls performing better than boys in GCSE and A-Level Computing and ICT.

When growing up my sister and I (as a boy, remember) were encouraged towards different topics – humanities and arts versus science and maths. Speaking with teenagers today I fear that the same stereotyping which encouraged my sister and me to take different paths two decades ago is still prevalent. I am confident that if my female brain had been born into a normal female body, rather than a male one, I would not be the successful technology entrepreneur that I am today since I would not have been encouraged in that direction.

My favourite geek-girl, Sophie, is the exception, not the rule to the rule; only 5% of her course was female. We desperately need to encourage more young teenage girls towards maths, science and technology, and that is something that each and every one of us can and should do something about. Leaving the gender issue aside, we need the girls simply to bolster the ICT professional workforce. In my capacity as an employer I am disturbed by how hard it is to find good ICT graduates of any gender and I can’t afford for it to be a constraint on the growth of my business. Above all persuading more Sophies to enter the industry is fundamental to the success of the UK technology sector and indeed UKplc. The wider industry needs to take up the cudgels.

Instead, purchase your software from one provider, but have a direct relationship with the host. Some of our customers are starting to do this with us and Zimbra. Zimbra is sort-of like Google docs, but open source, and they host it with us, and backup to a third-party host (which is cheap to do).

Good for resellers too

Managing the backup and hosting process might be a new way that resellers can differentiate their offering or add value to the supply chain as more and more businesses look to protect their data as they move to a Cloud Computing model. Ensuring ease of data migration between cloud providers is paramount for businesses moving forward.

By not being tied to one provider, a business could easily migrate to another host, or if Zimbra becomes unsupported, for example, they would not lose their data, and we would carry on hosting while they work with us to find a new software solution. If we fail, they still have their data and Zimbra can help them get set up again. We (the managed hosting provider in this example) would not own their data even if we did fail, but no harm in belt-and-braces.

Hosting commoditisation is here

Software providers cannot realistically compete in today’s commoditised hosting market place, and instead should stick to their strengths. This also applies to migrations – when moving customers between hosts there are now companies that specialise in the migration itself but have no interest in selling software nor hosting. One such company is SEM Solutions, with whom we have recently started working.

Another big win from supply chain disintegration is that you gain total price transparency; no more getting stitched up by one provider who is just whacking a huge mark-up on a commodity service like hosting (yes, I’m talking to you, local government CIOs .

Not only does it show you which bits cost what, thus allowing you to compare with the market rates, but disintegrating the supply chain also makes migration to a new Cloud / managed hosting provider easy since you just need to work with the software supplier to migrate to the new host, and are not tied in to one provider. Equally, since you own the data on the service (because you are buying the hosting direct), moving to a new software provider is greatly simplified.

Eating my own dog food

So, do I take my own advice? Yes; Memset is one of the fastest growing technology SMEs in the country, and all our business critical information and systems are hosted in the Cloud (or at least our little bit of it) and accessed over the Web. None of my staff have Microsoft Office, we do not pay for any software, and we do not need servers in our office for administration applications. Everyone has a laptop, and since all our systems and documents (we use a Wiki for the latter) are hosted online everyone can work from home without the complications of a VPN. We do not use any paper for internal communications either, thus minimising “the printer has broken” type problems.

We also use Trac project management and documentation management system for all our internal documentation, task and project management. It is free and simple to host yourself with any managed hosting provider. Simple, scalable systems like Trac have also made it easy for us to obtain and maintain our quality, security and environmental management systems (ISO9001, ISO27001 & ISO14001 accreditations).

The panel session was lively, and I raised a few eyebrows with my predictions that the Big Corps in software & broadcast were under major threat. I was particularly pleased when I managed to astound Mr. Paxman with some stats on women in technology – here is an excerpt from the Intellect blog on the conference:

In the final panel session, Jeremy Paxman (probably for the first time in his career) was stuck for words when Kate Craig-Wood, MD of Memset, indicated that there was a 23% gender pay gap in the IT industry. Paxman expressed a little scepticism over the statistic, but rest assured the figure is one oft quoted by Intellect and comes from an equalities and human rights commission report.