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Insurers Seek Energy Efficiency Through Virtualization

In the face of reduced energy availability, cost challenges and consumer pressure to be good corporate citizens, insurers are greening their data centers through server virtualization.

Up to three years ago, we never really worried about power," says Mark Wood, director of infrastructure for Pittsburgh-based Highmark. "It was simply never part of the data center's life. Facilities handled it -- the bill came in, and it was paid."

Like Wood, most of his industry colleagues never gave energy consumption a second thought -- until the past few years. The state of the ecological environment is a concern of our age, and acting in the interest of minimizing human impact on that environment has become a business imperative. Resource conservation and the reduction of waste have become high priorities for insurers, as well as companies in other industries, and for a variety of reasons. Chief among the eco-friendly drivers for insurers are skyrocketing energy costs and the fact that their brand value is affected by customer perception of carriers' commitment to good corporate citizenship.

Financial services companies, however, collect more data than they did only a few years ago, and they increasingly sell more complex products that require up to 12 times the processing power of more traditional products, according to Inci Kaya, a Needham, Mass.-based analyst with TowerGroup. "Electricity usage [in the U.S.] is seeing a compounded annual growth of 13 percent," she observes, noting that as demand increases, so do prices -- and so do carbon emissions, given that electric energy is primarily produced through the combustion of coal. "If electricity use was 75 billion kilowatts in 2006, it will double by 2011," Kaya adds.

Energy Hog

The carbon footprint of financial services companies is tied to a variety of activities, including paper use, heating and waste management. But IT is the single greatest consumer of electrical energy, and the data center is the focus of energy consumption, according to Kaya. "Seventy-five percent of your carbon footprint comes from the data center," she says.

Worldwide, IT creates a greater carbon footprint than the aviation industry, notes Pete McCaffrey, director, enterprise systems for Armonk, N.Y.-based IBM. And within insurance carriers, CIOs are increasingly burdened with the costs associated with energy consumption. "Insurance IT organizations are being asked to take out X percent of cost year over year while also having to support the business agenda -- which is typically a growth agenda," McCaffrey comments. "That combination is driving our customers to rethink their data center model."

Roughly 30 percent to 40 percent of insurers' IT costs are driven by actual computing systems -- the hard drives, servers and storage appliances -- according to McCaffrey. The rest is tied up in more general power concerns and cooling infrastructure. That being the case, there's only so much to be achieved by focusing on the computing systems in isolation, he says. "To really make an impact, you have to go after the facility design," McCaffrey argues.

Additionally, carriers should look to more prudent management of energy, McCaffrey recommends. He notes that IBM's Active Energy Management products, for example, allow users to automate energy usage policies.

Highmark ($11 billion in revenue) signaled a broader approach to environmentally friendly corporate policies in 2005 when it opened a new data center near Hershey, Pa. Owing to its use of green construction methods and materials, the facility was certified under the LEED (Leadership in Energy and Environmental Design) program of the nonprofit U.S. Green Building Council. And this spring the carrier announced that it would implement sustainable, eco-friendly and green (SEG) business practices enterprisewide.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

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