Green IT changes outsourcing for all

Gov't guidelines bring carbon footprint to the forefront

With the UK government committed to ensuring its IT operations are carbon neutral by 2013, the word on everyone's lips these days is 'green'. The National Outsourcing Association's Martyn Hart explains how environmental concerns are shaping the outsourcing world.

Consumers' and investors' concerns about corporate accountability - and the creation of new government regulations in favour of protecting the environment - have pushed 'green' issues to the top of the boardroom agenda and onto the outsourcing industry's growing list of priorities.

In August this year, the government announced its intention to introduce new rules to ensure departments consider environmental sustainability when making procurement decisions, helping the government to meet its target of cutting emissions, waste and water across facilities.

The guidelines have created a new level of expectations for outsourcing providers, with environmental concerns entering the formal selection process for suppliers.

The Brown-Wilson Group's 2007 Black Book of Outsourcing study indicates that more than 21 per cent of US and European companies that already outsource have added green policies and performance indictors to their outsourcing agreements. Almost every company surveyed plans to add green clauses to outsourcing contracts during renegotiation. More importantly for the industry, a further 36 per cent have plans to move to a greener outsourcer within the next 12 months.

Many outsourcing giants are seizing the green market and investing heavily in reducing their carbon footprint. IBM, for example, has announced its 'Project Big Green' which aims to turn the company carbon neutral.

At the same time technology outsourcing is expected to rise significantly if organisations are to deal with the financial burden of compliance with environmental regulation in-house.

Outsourcing your data centre may be more cost effective because suppliers have access to more efficient data centre technology and can access economies of scale, for instance.

Because of the government's green guidelines, public sector organisations will now need to look beyond price when selecting a supplier if they want green credentials. The main requirement in the public sector is to achieve value for money, which means looking at the total cost and quality of a project. A low cost supplier, after all, may result in high maintenance and operating costs as well as environmental impact.

Managing green requirements from the outset of outsourcing projects is essential for a successful relationship to form.

Here are some points for all organisations to consider before entering into an outsourcing agreement.

• Outsourcers need to be clear about their organisation's strategy for sustainable development, its environmental policies and how far they can be delivered through the project from the outset.
• Outsourcers should always request environmental information from suppliers (or potential suppliers) early on in negotiations, as it forces them to become more accountable. Outsourcers are then able to put more information into a balance scorecard and measure their performance, creating an incentive for them to improve.
• Defining the requirements and managing performance is paramount. Once you have a supplier, the next step is contract negotiation - sitting at the table and hammering out the ground rules. Again, this is an area where many outsourcing partnerships fall flat.
• Unrealistic goal setting can be a problem, from businesses that want to get the most from their money and suppliers who are too eager to please. But if unrealistic SLAs are set and the supplier can't meet them, this can cause bad feeling and could spell the end of the relationship - a waste of time and money. Contractual points have to be clear, concise and adhered to.
• Periodic revision of the contract and how both parties feel about it can help build a harmonious relationship. Similarly with SLAs - these have to be realistic and regularly reviewed. Slotting key performance indicators in to your contract can also help as they provide a benchmark against which you can measure your supplier's performance.
• Managing suppliers' green strategies shouldn't be revolutionary; KPIs and SLAs are systems and processes that are already applied to cover non-green elements of outsourcing contracts. Outsourcers should already undertake a supplier audit to check they are complying with other regulations such as governing workforce diversity and workplace conditions. Organisations can simply bring the same model across to cover environmental standards.

Despite the introduction of green procurement in the public sector and the new focus on green in the business community, we will only see an industry-wide change once the government implements legislation to make going green an obligation, with a green schedule in contracts and a green benchmark clause.

Rumour has it the government has already started down this road and if so, they have the NOA's support. Until then though, suppliers will only see green credentials as a value add rather than as a requirement.

Martyn Hart is chairman of the National Outsourcing Association.