RackSpace’s customers ‘won’t pay a premium’ for Green products?

Photo Credit ignescent_infidel

Jon Brodkin wrote a piece in ComputerWorld UK about a survey of RackSpace‘s customers which seems to suggest that they ‘won’t pay a premium’ for Green products. John goes on to extrapolate that they:

found some results suggesting businesses are losing interest in green technology.

There are a number of problems with this assumption. First off you have to realise that Rackspace don’t do co-lo. Rackspace only do managed hosting. So, if I am an IT manager I can’t put my equipment, no matter how energy-efficient, in a RackSpace Data Center, I have to use their equipment. What is not clear from the piece John wrote is what was the ‘premium’ the RackSpace customers were being asked to pay.

Again, if I am an IT manager, I can choose to buy, for example Dell’s PowerEdge™ Energy Smart 2950 III (SV22952), which is cheaper but slightly less powerful than their standard PowerEdge™ 2950 (SV22951). Realistically, the only reason I am going to do this is if it is going to save me money.

As James said previously – the wrong people are paying the electricity bill in companies currently (no pun):

IT doesn’t pay for its electricity. No, seriously, go to your FM manager or IT manager and ask who pays to power your IT properties. The vast majority of IT systems get a free ride on electricity bills, which is one reason its taken so long to fully consider IT carbon costs.

When that changes (and it will) watch IT managers suddenly become extremely interested in the energy ratings of their servers.

Going back to the RackSpace survey, fundamentally I think Rackspace are taking the wrong approach. What they should be doing is increasing prices to their customers across the board to reflect their own increased energy bill – except for those customers who chose to be hosted on energy efficient servers. If RackSpace took that route, suddenly you’d see a an about-face in the number of their customers who are apparently losing interest in green technology!!!

[Disclosure: I am co-founder a director of Cork Internet eXchange (CIX) an energy efficient data center based in Cork, Ireland. CIX charges all customers separately for their electricity usage.]


  1. says

    Saying; “What they should be doing is increasing prices to their customers across the board to reflect their own increased energy bill – except for those customers who chose to be hosted on energy efficient servers.” does not take into account the potential for losing customers, the cost of replacing existing equipment with more energy efficient units, etc. You can’t just “throw the switch”. In a real commercial venture, the bottom line dictates action. As you correctly point out, if IT departments had to address their power usage, they would take that into consideration as they replaced old equipment. So, the rise in rates would be driven by (1) the cost of electricity and (2) any additional cost in hardware. Assuming hardware get replaced anyway, then the only reason for a different rate for “green” customers vs “non-green_ customers would be an significant premium for green hardware. Now you move the attention from the hosting provider to the hardware provider. If you apply label a hardware vendor with energy efficient products as “green” and those with energy sucking hardware as “non-green”, then the pressure is on their bottom line and what premium they place on green technology. Odds are good, most vendors will not create both a “green” line of hardware and a “non-green” line. Rather, they will incrementally improve their “green” message and technology with each generation.

    Take light bulbs as an example. As long as the premium price for CF lights was high, people still bought incandescent. As the premium gap was reduced, then people bought CF. The same will happen with LED and other technologies. the supplier of incandescent lights is not going to sell them for more than CF because he wants to be “green” – he would be cutting off his customer base. Rather, the CF supplier keeps lowering his prices as his costs go down, thereby attracting more customers.