Information technology is quickly becoming a new front in the war on waste, with companies looking to turn their technology green in the face of rising energy costs.
Activists have pushed environmental sustainability as a core part of the social responsibility of businesses for more than a decade. But as resource prices skyrocket and cost-cutting rules the day, it is financial, not social considerations that are driving the uptake of energy-efficient technology.
Even in the GCC, known internationally for its abundance of energy, rising costs and breakneck growth are bringing efficiency to the front of the corporate agenda. And for services businesses, that means squeezing more out of their power-hungry information systems.
"Space costs are going up. Rental costs are rising. Power costs are going up, and sometimes you don't even get as much power as you need," said Chandan Mehta, a product marketing manager at Fujitsu Siemens, a technology company. "Making IT more energy-efficient is something companies here are very interested in."
For a medium-sized enterprise in the service sector, personal computers, laptops and monitors represent one of the major sources of energy use in the business. Businesses that operate data centres, complete with large-scale storage and cooling systems, are hit twice as hard.
Reducing the energy use of information systems can mean anything from simple operational policies that ensure machines are switched off or powered down when not in use, all the way to upgrading servers and data centres to work in more efficient ways.
Organisations like the National Bank of Abu Dhabi, the Dubai-based property developer Tatweer and the Dubai police force have already implemented energy-efficient IT systems in their offices.
At the Green IT forum - an environmental technology showcase event yesterday at the Rotana Beach Hotel organised by Fujitsu Siemens and the systems integrator Itqan - representatives of more than 25 local companies discussed their interest in cutting energy costs through smarter systems.
"Very few companies are doing it to be more environmentally friendly," said Mr Mehta. "They are doing it mainly because they are being pushed into the corner. They are running out of space and they are not getting powerful new systems - but their company is hiring hundreds of new people every quarter. So they still need to deploy new services; they have to do more, with less or the same. So they are being pushed to look for leaner technologies."
The IT research group Gartner has identified green systems as one of 10 strategic technologies that chief technology officers cannot afford to ignore in 2008. "IT is at once a contributor to environmental problems and part of many solutions," said Andrea Di Maio, a vice president at the US company.
Google, which operates one of the world's most complicated networks of data centres and server farms, is becoming increasingly focused on cutting its energy costs through a combination of more efficient computing technology and major investments in alternative energy. On Tuesday, the company announced that its philanthropic wing, Google.org, was investing US$10 million (Dh36.7m) in a new, experimental form of geothermal energy, which creates power through the naturally occurring heat found in the earth's crust.
The company has already activated one of the largest solar power installations in the world on the rooftops of its headquarters in Mountainview, California. Last year, in collaboration with the microchip-maker Intel, it launched the Climate Savers Computing Initiative, which aims to "slow climate change, one computer at a time".
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Another way to earn air miles
In addition to the Emirates and Etihad programmes, there is the Air Miles Middle East card, which offers members the ability to choose any airline, has no black-out dates and no restrictions on seat availability. Air Miles is linked up to HSBC credit cards and can also be earned through retail partners such as Spinneys, Sharaf DG and The Toy Store.
An Emirates Dubai-London round-trip ticket costs 180,000 miles on the Air Miles website. But customers earn these ‘miles’ at a much faster rate than airline miles. Adidas offers two air miles per Dh1 spent. Air Miles has partnerships with websites as well, so booking.com and agoda.com offer three miles per Dh1 spent.
“If you use your HSBC credit card when shopping at our partners, you are able to earn Air Miles twice which will mean you can get that flight reward faster and for less spend,” says Paul Lacey, the managing director for Europe, Middle East and India for Aimia, which owns and operates Air Miles Middle East.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”