Software: Lean and Green

Software vendors are competing for shrinking IT budgets by touting products that can save energy, save money, and save the environment

By Aaron Ricadela

When it comes to green technology, for years it's been computer makers and chip manufacturers that dominated headlines with announcements of purportedly eco-friendly products. Now software vendors including Microsoft (MSFT), Oracle (ORCL), and IBM (IBM) want their day in the sun.

As IT spending slumps, software vendors are stepping up emphasis on features they say help customers trim power usage, meet regulatory requirements, and design more efficient buildings. The new capabilities are arriving as companies keep a closer eye on climbing electricity budgets from their data centers and other operations. The products are also a way for software makers—and their customers—to position themselves as environmentally friendly at a time when being green makes good PR sense.

Analyzing Energy and Emissions Data

Microsoft is the latest software company to throw its hat into the ring. On Feb. 9 the company released a free "environmental dashboard" for its Dynamics AX business applications, which help midsize companies track financial data, orders, and manufacturing schedules. The new software aggregates information from meter readings and energy bills to give companies reports on their fuel and power consumption, and it provides them with estimates of their carbon dioxide emissions. About 2% of carbon emissions come from the computers, cell phones, and telecom equipment used by consumers and businesses, according to Rob Bernard, Microsoft's chief environmental strategist. "We spend a lot of time thinking about how software can affect the other 98%," he says.

Software is a relatively new entrant in the rush to sell technology products designed to reduce environmental damage and help companies slice energy costs. For several years computer makers and chip companies including Dell (DELL), Hewlett-Packard (HPQ), and Intel (INTC) have emphasized the power-sipping nature of their products.

Software makers say their products, too, can help cut energy usage and keep electricity grids healthy by analyzing consumption and underpinning incentives to draw power during off-peak times. "Carbon auditing is a hot spot in the software and services market at the moment," says Stephen Stokes, an analyst at tech-industry consultant AMR Research. AMR estimates that the market for software and consulting services that let companies collect and report data about carbon emissions has already reached $3.6 billion.

Competing for Scarce IT Dollars

That could be good news for the software industry at a time when businesses have curtailed technology spending. Forrester Research (FORR) expects worldwide software spending by businesses and governments to be flat in 2009, at $388 billion. Overall IT spending is expected to decline 3%.

Companies in such heavily regulated segments as oil and gas production and electrical utilities may be the biggest buyers of such products. But even businesses that don't need to meet government requirements or engage in emissions credit-trading programs may find that marketing their eco-credentials can give them a competitive edge, AMR's Stokes says.