The world was built on cheap energy--software included–-so it's no surprise we take cheap energy for granted, and even less of a surprise that we don't factor it into our software purchasing decisions. Those who continue to do so, however, will likely find their hands tied and future budgets squeezed, because energy prices will remain high, and they’re going to take your MDM and cloud bill along for the ride.
Electricity prices are soaring
Computers, data centers and networks consume 10% of the world's electricity, which is a problem for software because energy is going to be really expensive for a really long time. Electricity prices in all key markets have hit record highs this year with the average US household paying 47% more for electricity than a year ago. France's PM warned of a fivefold increase in the price of French electricity in 2023, and there’s already a movement in the UK where people are simply boycotting their electricity bills. The simple matter is that energy prices will remain really high into the indefinite future. Wars, extreme weather, Europe's energy crisis and a runaway futures market will see to that.
Nothing is working
The European Central Bank has plowed hundreds of billions of euros into tax cuts, handouts and subsidies to tackle the energy crisis – all to little effect. In addition, nuclear, hydropower and coal capacities are not enough to offset the effects of diminishing Russian gas supplies. The same goes for supplies of pipeline gas from Norway, Algeria and Azerbaijan.
Pricing risk is really hard
Perhaps the most troubling of all is the insane risk premiums running roughshod on energy markets. Chinese lockdowns, the ongoing war in Russia and other geopolitical tensions add to risk and price inflation. Counter-party risk was so high at one point that the margin calls on the energy firms were outpacing valuations of the energy firms themselves. That's like a bank asking you for a $500k home deposit for a $400K mortgage, which is unprecedented. At any rate, it's really hard to price risk right now, and the situations in China and Ukraine are just exacerbating the uncertainty.
Cloud costs historically outpace electricity
Sadly cloud costs are likely to rise faster than the energy needed to run it. It's something that's been going on for years, and it makes perfect sense why. Demand for computing power is outpacing electricity generation, and more demand for the same amount of electricity means rising electricity prices and your cloud bill alongside it. It's a well established trend that's been validated for years and shows no sign of abating.
Reduce your footprint
While there's probably little you can do about rising energy costs, there are ways to reduce your usage for your MDM and broader cloud spend. First, you can reduce your server footprint by using a modern DevOps platform and virtualization technologies (such as multi-tenancy) instead of bare metal servers to build out new services and applications.
A modern MDM runs in containers, not virtual machines, which means it’s using a fraction of the memory and bandwidth to accomplish the same task. It makes managing devices and applications at scale far more efficient and economical.
Modernize your stack
You can also reduce your costs by modernizing your technology stack because modern tech is lighter and more efficient to run. As cloud computing matures, it's no longer enough to just have a few servers running some legacy applications in a data center. If you want to remain competitive in today's business environment, you need architecture that's efficient, responsive, scaleable and ready for AI.
Legacy software will have a hard time competing here. Old software can cost 3x to 10x more to run. It's built on old and inefficient codebases, often hindered by single tenant architecture and hacks designed to get the solution to perform in a modern way. Worst of all, it won’t run AI the way you'll need to compete.
Put the Edge first
Finally, you can lean towards the Edge. Services that are optimized for edge operations will help you keep your costs down without sacrificing your business goals. Storing your data on the cloud, for example, uses exponentially more energy than storing it on the device itself. The studies vary, but place the energy cost of data transfer and storage between 3 and 7 kWh per gigabyte. Compare that to a local hard disk, which requires about 0.000005 kWh per gigabyte to save and present your data.
By way of illustration, Springmatic’s database storage is built on a distributed compute platform, and both the S3 object storage and the optional on-premise "hybrid cloud" help to minimize costs for data storage and, more importantly, data transfer. Leveraging on-premise LAN networks also increases bandwidth and reduces latency since LAN is likely Gigabit, while broadband is at best 100 Mb.
It turns out there's a significant cost in pushing packets across borders and oceans. Edge oriented platforms become relatively more valuable as energy prices rise because they require less data transfer and bandwidth and fewer cycles to run. Of course most of this has so far gone unnoticed, buried in cheap energy and QE, but the cloud is far from green and reality is asserting itself.
Take energy seriously
It's easy to underestimate the impact of energy costs on your technology spend. After all, it's never really been a factor in the modern age. But that's changing--fast. Manchester-based cloud services provider M247 hiked prices in November 2021 a staggering 161%, citing “unprecedented times in the European energy markets.” France's OVHcloud and Germany's Hetzner recently announced that they would raise prices by 10% to combat soaring energy costs and inflation. In fact, fifty-eight percent of those in the U.K. said that energy bills have had a “significant impact” on their company’s margins, and it's only going to get worse.
So take the rising price of energy seriously. Ditch VMs for services and push what you can to the Edge through hybrid cloud solutions, because where cheap energy saves us from bad decisions, expensive energy makes us pay. This time is different. This time, cheap energy won't be there to bail us out of our recency bias and indifference to legacy code. Remember: If it looks like a dinosaur and performs like a dinosaur, it probably is one. And you know how that plays out.
 Wikipedia, “IT Energy Management”, Wikipedia, (Oct. 1, 2022), https://en.wikipedia.org/wiki/IT_energy_management
 Nicola Jones, “How to stop data centers from gobbling up the world’s electricity”, Nature, (Sept. 13, 2018), https://www.nature.com/articles/d41586-018-06610-y
 Mish, “The Average US Household Pays 47 Percent More for Electricity Than a Year Ago”, Mish Talk (Aug. 21, 2022), https://mishtalk.com/economics/the-average-us-household-pays-47-percent-more-for-electricity-than-a-year-ago
 Updates, “European electricity prices forecast to skyrocket”, The Press United, (Sept. 16, 2022) https://thepressunited.com/updates/european-electricity-prices-forecast-to-skyrocket/
 Lottie Limb, “Don’t Pay UK: Why are Brits boycotting energy payments and what are the consequences?”, Euronews, Sep. 9, 2022), https://www.euronews.com/green/2022/09/14/dont-pay-why-are-brits-boycotting-energy-payments-and-what-are-the-consequences
 Richard J. Anderson, “Europe's Dependence on Russian Natural Gas: Perspectives and Recommendations for a Long-term Strategy”, Marshall Center For Security Studies, (Sep. 2008) https://www.marshallcenter.org/de/node/1276
 Energy Connects, “German Energy Giant Uniper Gets $11 Billion for Margin Calls”, Bloomberg, (Jan. 4, 2022), https://www.energyconnects.com/news/utilities/2022/january/german-energy-giant-uniper-gets-11-billion-for-margin-calls/
 Justin Adamson, “Carbon and the Cloud: Hard facts about data storage”, Stanford Magazine, (Jun. 2017) https://stanfordmag.org/contents/carbon-and-the-cloud
 Kyle Wiggers, “Rising energy costs are making the cloud more expensive”, TechCrunch, (Oct. 31, 2022), https://techcrunch.com/2022/10/31/rising-energy-costs-are-making-the-cloud-more-expensive