Software: Lean and Green

When it comes to green technology, for years it's been computer makers and chip manufacturers that dominated headlines with announcements of purportedly eco-friendly products. Now software vendors including Microsoft (MSFT), Oracle (ORCL), and IBM (IBM) want their day in the sun.

As IT spending slumps, software vendors are stepping up emphasis on features they say help customers trim power usage, meet regulatory requirements, and design more efficient buildings. The new capabilities are arriving as companies keep a closer eye on climbing electricity budgets from their data centers and other operations. The products are also a way for software makers—and their customers—to position themselves as environmentally friendly at a time when being green makes good PR sense.

Analyzing Energy and Emissions Data

Microsoft is the latest software company to throw its hat into the ring. On Feb. 9 the company released a free "environmental dashboard" for its Dynamics AX business applications, which help midsize companies track financial data, orders, and manufacturing schedules. The new software aggregates information from meter readings and energy bills to give companies reports on their fuel and power consumption, and it provides them with estimates of their carbon dioxide emissions. About 2% of carbon emissions come from the computers, cell phones, and telecom equipment used by consumers and businesses, according to Rob Bernard, Microsoft's chief environmental strategist. "We spend a lot of time thinking about how software can affect the other 98%," he says.

Software is a relatively new entrant in the rush to sell technology products designed to reduce environmental damage and help companies slice energy costs. For several years computer makers and chip companies including Dell (DELL), Hewlett-Packard (HPQ), and Intel (INTC) have emphasized the power-sipping nature of their products.

Software makers say their products, too, can help cut energy usage and keep electricity grids healthy by analyzing consumption and underpinning incentives to draw power during off-peak times. "Carbon auditing is a hot spot in the software and services market at the moment," says Stephen Stokes, an analyst at tech-industry consultant AMR Research. AMR estimates that the market for software and consulting services that let companies collect and report data about carbon emissions has already reached $3.6 billion.

Competing for Scarce IT Dollars

That could be good news for the software industry at a time when businesses have curtailed technology spending. Forrester Research (FORR) expects worldwide software spending by businesses and governments to be flat in 2009, at $388 billion. Overall IT spending is expected to decline 3%.

Companies in such heavily regulated segments as oil and gas production and electrical utilities may be the biggest buyers of such products. But even businesses that don't need to meet government requirements or engage in emissions credit-trading programs may find that marketing their eco-credentials can give them a competitive edge, AMR's Stokes says.

Microsoft is also tuning Windows 7—the version of its flagship operating system due later this year—to conserve PC power by reducing the amount of system software running in the background, adjusting a processor's performance to meet the user's computing requirements at any given time.

Green Building Design

In the past year, engineering and design software maker Autodesk (ADSK) has acquired three software companies whose programs help architects design eco-friendly buildings. Autodesk's Green Building Studio software can analyze a planned building's energy and water usage and carbon emissions. Its Ecotect tool lets architects and engineers see how sunlight, shade, and airflow will effect energy consumption by a building's occupants. And Autodesk bought Carmel Software, whose product computes cooling and heating requirements to help design efficient heating and air-conditioning systems. Autodesk is betting the new products will continue to drive growth of its 3D design tools, even though "some people think sustainable design is a fad," CEO Carl Bass said in an interview last year.

Other software vendors are looking at ways to make energy supplies more efficient. German business applications maker SAP (SAP) sells software called Advanced Metering Infrastructure, which lets utilities keep customers up to date on their meter readings and charge variable rates to move loads to off-peak hours. SAP is consulting with European utilities on such "smart metering" projects, and is said to be developing an application—due out this year—to help companies better track energy usage across their operations. The company's chief competitor, Oracle (ORCL), is also touting its applications' ability to help companies cut waste from their purchasing and shipping operations.

IBMis taking a different approach, emphasizing how governments and businesses can invest together in powerful computer systems and data analysis software to address problems like climate change and food supply safety. Big Blue has several projects underway in the U.S., Europe, and Asia as part of its "smarter planet" initiative, which it announced in November. In Stockholm, IBM software and computers predicted traffic flows and rewrote the city's bus schedule to cut traffic by one-fifth and reduce carbon emissions from vehicles by 12%, according to IBM. "It's a big bet, controlling the traffic for the entire city," says vice-president Bob Sutor. "But this is what IBM does well."

It's not just business software that's getting the green treatment. Google (GOOG) on Feb. 2 released a new version of its Google Earth visualization software, emphasizing features that let scientists add their own data to the virtual globe, for instance by displaying the effect of climate change on temperatures. "It's not just a fun demo," CEO Eric Schmidt said at a San Francisco press conference announcing the product. "It really is a platform for science."

A raft of software companies are hoping customers take their new green products as seriously.

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