The Real Question In Green Clouds

Apr.20.12 | About: Alphabet Inc. (GOOG)

Greenpeace has launched an environmental attack against major public clouds by pointing out how much of the electricity they use may come from dirty sources like coal-fired power plants.

Their "report card" was especially brutal toward Amazon.Com (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL), both of which were dinged for secrecy in not disclosing their power sources. Microsoft (NASDAQ:MSFT) also got failing grades. Hewlett-Packard (NYSE:HPQ) was dinged for using a lot of coal-based power in its cloud centers.

So far most of the pushback I've seen has involved PR. The whole thing risks becoming very political.

That should not happen. Because there's one thing all cloud users should agree on and work to correct.

Clouds use energy. Energy costs money.

As I have written here before, we are presently in a "gold rush" stage of the cloud market. Every large tech company wants to build clouds, and be seen as having a cloud strategy.

But all markets saturate in time. My guess is, given the importance of cloud - which offers natural efficiencies over other enterprise computing approaches in terms of software and scale - that saturation point may come sooner than anyone expects. Especially since we're still lacking the tools to move most traditional enterprise applications to clouds, and software is the one product I know that must still be built by hand, and by expensive, trained hands at that.

When the cloud shake-out comes, cost will prove an important factor. Amazon, in particular, has been very aggressive on pricing, hoping to gain and hold cloud share and scale its systems so as to assure itself a place after the shake-out.

Energy is a cost. Once a data center is up and operating, energy is a big variable in cloud costs. Clouds that use a lot of energy are wasting money, compared with clouds that use less.

The "greenest" cloud, according to the Greenpeace rankings, is that of Google. (NASDAQ:GOOG) But Google isn't green just because its management is environmentally aware (although it is). It's green because energy costs money, and Google got into clouds with the right motivation - to save money.

Google pioneered the simple technique of opening windows to cool data centers naturally, rather than keeping them shut and running air conditioners. It does this for the same reason it goes with low-end PC hardware rather than more-expensive servers. To save money. And it does this for the same reason it moved toward cloud virtualization and distributed computing techniques. Again, to save money.

Greenpeace, in other words, is focused on the wrong green. And those who criticize the Greenpeace report are ignoring the real green issue here.

The green that should be focused on is the long green, the kind you spend. The company that can scale its clouds for the least amount of money is going to win this game as clouds saturate the market. It's this laser-like focus on this other green that will make Google a cloud winner.

Disclosure: I am long GOOG, AMZN, MSFT, AAPL.