Sun Servers and PG and E: The Value of Being Green (Aug-06)
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MI Summary
In 2006 PG&E announced a first of its kind energy rebate program; rebates were offered to customers trading in existing servers for Sun’s T1000 and T2000 CoolThread servers. This program offers PG&E customers an opportunity to reduce server power consumption as well as subsidise acquisition costs by up to 35%. IDC believe that customers will welcome rebates that offset surges in utility costs and expect this program to open doors for Sun sales staff.
It is expect for other vendors to respond shortly, but it is clear that Sun has moved this issue to the front lines.
As a result of the increasing emphasis being placed on energy issues IDC believe that IT users need to evaluate and carefully consider the infrastructure investments they make and confirm that power and cooling considerations are clearly understood and evaluated.
Text of Article
By: Susan G. Middleton, Matthew Eastwood
Source: http://www.idc.com/getdoc.jsp?containerId=203299&pageType=PRINTFRIENDLY
This IDC Flash explains the recent rebate program offered by PG&E to its California utility customers who choose to replace older-generation servers with Sun's new T1000 and T2000 servers. This program is targeted at Sun's competition as well as its own installed base.
Situation Overview
Sun Microsystems and PG&E recently announced an innovative program for companies in the state of California. PG&E will offer rebates that average $700 to $1,000 per server for customers that trade in existing servers for Sun's T1000 and T2000 CoolThread servers. A first-of-its-kind energy rebate program, it offers PG&E customers an opportunity to reduce server power consumption as well as subsidizes acquisition costs by as much as 35%. For instance, Sun explains, customers replacing up to three E3500 servers with a single T2000 will reduce annual power and HVAC expenses by $2,200.
This is a deft marketing strategy by Sun because it tackles an issue that is at the forefront for businesses — the fact that higher electrical consumption raises operating expense directly and indirectly by raising cooling costs — and turns it into an opportunity to sell more Niagara servers. The energy issues that companies in California are facing are highlighted in Sun president and CEO Jonathan Schwartz's blog, which can be found at blogs.sun.com/roller/page/jonathan/20060815. He specifically discusses the challenges of companies such as Craigslist to grow capacity while constrained by energy consumption in California.
Although we recognize the marketing aspect of this announcement, Sun is also responding to significant business issues confronting commercial users: the aforementioned tactical aspect of higher consumption driving higher operating costs and the more important underlying strategic issue, which is that many computing datacenters are now limited by their electrical supply infrastructure. The ability to reduce energy consumption creates capacity for additional growth forestalling additional capital investments. IDC believes that end users will welcome rebates that offset surges in utility costs and expect this program to open doors for Sun sales staff. To further entice potential customers, Sun has added a program that allows consumers to try a T2000 server at no cost for 60 days, a powerful combination.
Future Outlook
Although the volume server market grew 6.2% year over year in 2Q06, each of the major suppliers feels the hot breath of competition at its back. Sun has created an interesting value proposition with this offering, rebalancing the competitive landscape in a manner that demands a response from other suppliers. We expect other vendors to craft a competitive response shortly. The next round of partnerships could be IBM and Con Edison or Dell and Austin Energy, but it is clear that Sun has moved this issue to the front lines.
For the end user, power and cooling challenges are rising in profile across the enterprise. In recent years, IDC has seen IT buying patterns evolve as enterprises strive to achieve a consolidated infrastructure designed to support a new set of business objectives for the future. Users are focused on deploying a denser but more flexible computing infrastructure capable of evolving with their business needs. While controlling CAPEX remains an issue for IT buyers, we have seen a clear shift in focus towards OPEX in recent years. Interestingly, this OPEX story also continues to evolve along with the core IT infrastructure.
Over the past few years, enterprises have seen management or system administration costs rise three times faster than their CAPEX costs. At the same time, power and cooling costs — another component of their OPEX — have become one the top concerns for IT and facilities departments alike. In fact, energy costs have become such a big issue for IT users that the cost required to power and cool a server over the server's active life cycle will exceed the capital cost of the server within the next year or two. IDC estimates that approximately each dollar in server hardware spending requires approximately $0.25 in annual power and cooling expense today. As a result, IDC believes that IT users need to evaluate and carefully consider the infrastructure investments they make and confirm that power and cooling considerations are clearly understood and evaluated.
