Transcript: How IBM Went from Blue to Green & Stayed Out of the Red

THE CNA CORPORATION

HOW IBM WENT FROM BLUE TO GREEN &
STAYED OUT OF THE RED

WELCOME AND MODERATOR:
MITZI WERTHEIM,
CO-DIRECTOR,
THE ENERGY CONVERSATION

SPEAKER:
TODD RAMSEY,
MANAGING DIRECTOR, IBM CORPORATION

JIM LOVING,
BUSINESS MANAGING DIRECTOR, IBM CORPORATION

MONDAY, DECEMBER 8, 2008


Transcript by
Federal News Service
Washington, D.C.

MITZI WERTHEIM:  Pat, are you going to come and sit down?  (Chuckles.) 

Well, I’m glad to see so many people here just before Christmas.  For those of you who don’t know me, I’m Mitzi Wertheim.  I’m one of the co-directors of this program called “The Energy Conversation.”  And I have a few announcements to make before we get into the program. 

First of all, this is the last time we’re going to be meeting here at the Doubletree.  On January 12th, our first meeting in the New Year is going to be at the L’Enfant Plaza Hotel.  (Chuckles.)  That is one subway stop away from the Pentagon and it opens it up to make it easier for other departments and agencies to come, and they’re charging less.  So that seemed like a really good idea.

We have on the tables the résumés for Todd Ramsey, who is the IBM managing director at the U.S. Federal, I guess.  And I knew Todd when I was working at IBM and I’m going to create a context for you and it’s the reason why Todd’s here tonight. 

I went to work at IBM in 1981 after I left the Navy, and IBM was a corporation that was so convinced it was – well, in fact, when I went there, everyone said it was the best-run corporation in the world and I got there and thought there are really some problems here.  But in 1986, I went up to meet with the head of IBM manufacturing, corporate head, to talk to him about a particular group that was being formed of folks from aerospace industries getting together to talk about pre-competition stuff.  And it was really about how we might change the way we do stuff to improve our performance, and I went up to IBM to talk to the head of manufacturing and asked him if – I needed to get his permission – we could join this group.  And his comment to me was, “Mitzi, why would we want to do that?  We never learn anything from anybody else.  They only learn from us.” 

Anyway, having said that, I left IBM back in ’94 – oh, the other thing I wanted to say about Todd – there’s another program I’m involved with called MIT Seminar 21 Foreign Politics in the National Interest and Todd was in that program, what, in ’92?  Yes, ’92-’93.  And we have a number of participants in this program who are part of the program this year.  I’ve known Todd a long time. 

But a few months ago, I was at the Army Environment Policy Institute and Todd was giving a presentation, and what the presentation was about was basically how IBM was going green in order to keep out of the red.  And I was so impressed with this because through my four years of working with energy, the thing that has become very clear to me is if you care about implementation, the issues are process reengineering because the technologies are just springing forth.  You cannot keep engineers down who are really interested in creating something. 

My father was an inventor at Bell Labs and he spent all his waking hours, when he was at home, down in his workshop inventing new stuff.  So all of that stuff is going to come roaring forth.  The question is, will we have both the leadership and the vision and the energy on the part of people, because I think of it as – it’s all about how people think, feel, and behave and we’re going to have – that’s where we’re going to have to make some real efforts.  And in many ways, that’s lots harder than inventing the new technologies, but they’ve been doing it at IBM.  I was really impressed by that, considering where they were coming from.  And now Todd is going to tell us how they did it.  Todd, the floor is yours. 

(Applause.) 

TODD RAMSEY:  (Off mike.)  Try it again and I’ll do a little better that time.  Must have moved the wrong switch there.  Sorry about that. 

I gave the most important part of my talk already, so – but when I told my wife this morning that I was going to come – I wasn’t going to be home for dinner.  I always forget to tell her this weeks in advance, so I told her I wasn’t going to be home for dinner.  She asked what I was going to be doing.  I said, “I’ll be speaking to an audience.”  She said, “Why in the world anybody want to come to a dinner to listen to you speak?” 

So I want to warn you in advance here.  I don’t have a lot of jokes or whatever.  I’m just going to kind of tell you the stories of what we’re doing in IBM and with our clients. 

I have our resident expert, Jim Loving, with us here.  I’m not an expert in too many things.  I know a lot about – a little about a lot of things.  But Jim is much more knowledgeable on some of the things we’re doing, specifically with clients in some of these areas.  So if you ask too many tough questions, I’ll probably ask Jim to participate in the answer to this.  But I’ll give you my three major points upfront and hope to reinforce them with what I say with the charts here. 

The charts, by the way, are a little busier than I would normally do, but I’ve found this audience probably doesn’t need this, it’s turned out from the conversations I’ve already had here.  You’re a very passionate group about all this, but I find if I leave a little more detail on the charts, when people ask for copies of the charts, then they can actually use them later on and understand some of the points.  So I’m not going to cover all the points on these charts.  Some of you in the back may not be able to see them, but since they’re going to post these, I decided to use the form that would have a little bit more detail on it. 

But my three points are pretty simple.  One is that this is about reducing our energy use and I would also say reducing our water utilization and it’s something we all, as individuals, and more importantly, as leaders of our organization, need to be serious about.  This is an urgent problem.  It affects stability.  I think it’s probably the ultimate challenge that we’re going to have to deal with this and we need to take this seriously enough to make sure our organizations are doing something about it. 

The good news is point two, is that all these stars really align very nicely.  At the end of the day, for IBM, this is about improving our business processes, whether you want to call it transforming, reengineering, whatever word you want to put about that.  And the focus on energy reduction, water reduction, carbon, if you want to use that, all these things give us a metric or focus to help us figure out how to optimize those processes better and ultimately, make us more competitive. 

So this is not about some altruistic decision you’ve got to make if you want to invest over here in environmentally concerned things, if you want to invest in your business.  The good news is these things align very perfectly and I hope that comes out loud and clear. 

The third one, and this is a very strong IBM point of view, is that the way to go about doing this is to make our systems, our grids, our water supplies – smarter is the term we use – put intelligence in it.  There is a lot of very low-cost intelligent capability that we could put into these systems that give us measurements and tools to figure out what we’re going to do and that’s really what IBM is trying to do. 

You might say, “Well, this is self-serving,” but IBM doesn’t manufacture or even sell a lot of these sensors and tools we’re talking about here, but we do try to help our customers figure out how, by putting intelligence in the system and using it wisely, you can significantly improve your business processes and in the process, reduce your energy, water, and carbon usage over time. 

So those are the three major issues.  I’m going to start with a little bit more of a broad statement of the environment.  In my résumé, if you ever want to look at it, I was the general manager for global government industry for about nine years in IBM.  I’ve traveled to 53 different countries.  I was telling somebody, I’ve been to China, I think, 40 times or whatever over the last 15 years, so I’ve got to watch a lot of these countries develop. 

But as I met with government leaders – government is my territory – they kept asking us to say, “Tell me what the government needs to look like in the year 2020.”  And I’m not going to give you that whole study here, but one of the first things we did is kind of say what are the issues or the forces that the government’s going to have to deal with? 

We started with a list of about 50, I would say, probably conservatively.  We narrowed it down to these six major – driving forces, we call them, and I think this is important in the context of discussing energy, which is what I’m going to discuss on the rest of this chart here.  But the unique aspects of these things are that these driving forces, or mega-trends, if you want to use that term, affect every single country in the world and no one country can control them. 

And although they are somewhat independent, if you will, they are a driving force on their own.  They do combine with each other and have a compounding effect.  So the sum is – the whole is greater than the sum of the parts, if you will, and that can be for positives or for negatives.  And I’ll try to kind of highlight some of that as we go on. 

The third aspect is that the politicians in general like to avoid dealing with these problems.  They are like the third rail of Social Security or whatever.  They’re not fun to deal with, if you will, and if they can defer until their term is over, they prefer to do that.  And so you have what I call a kind of a perfect storm analogy here in that these things have been developing for a long time.  Everybody knows they’re coming.  There’s a lot of things written on it. 

But it’s kind of like before a perfect storm, you look out and the weather looks fine.  It’s hard to believe this massive storm is going to come hit you, but if you wait until it hits you, it’s too late to react, and if you have two or three of these hitting together, it can be a real problem if you haven’t put something in place to have to deal with them.  So these driving forces are going to force governments, in particular, and certainly, companies and the citizens who are within these countries to react much more rapidly than they ever have in the past. 

Governments like to evolve and kind of take their time, so they’re sure they’re doing the right thing.  This doesn’t mean you’re going to stop – thinking about stopping.  It does mean you’re going to force it and certainly, the financial crisis that’s just occurred here in the last few months is a good example that some of this will occur. 

So with those, let me just kind of give you these things because the importance here is that these relate to the environmental concerns as accelerators and decelerators and they also affect the fifth one down there of threats to social stability.  That’s the only one of these that I don’t think has a lot of positive upside, but is the one that can destroy our politics, our political environment, our economics or whatever. 

The changing demographics is aging populations for most of the Western world.  In China, it’s actually a younger population coming up, so in every country, it may have a slightly different variation of this thing, but on our side, the aging population, while it’s creating huge problems with our social services system and our healthcare system, as people live longer, the cost of maintaining that is a problem. 

It’s also really an opportunity for governments, in particular, because ultimately, governments need to downsize in some form or other and as this aging population gets to retirement – now, retirement has been pushed out five or 10 years in the last couple of months for a lot of people, I have to say, but as they get to retirement, this is an opportunity to downsize in sort of a natural fashion.  So even this one can have some positive effect – people coming into the workforce. 

The second one is accelerating globalization.  The Tom Friedman book, I think, chronicles this pretty well and he talked in there about kind of the all boats rising as the economic interdependence improves.  There’s a kind of a tendency for countries that are trading together to be peaceful.  There are some very positive sides of that. 

On the downside, certainly, is what happened with the financial crisis.  When a contagion hits one place, it can very rapidly spread around the world, and it’s forcing a lot of cooperation and collaboration in there. 

From a government standpoint, where I see probably the biggest manifestation of this, is that because companies like IBM and others are now in what we often call a globally integrated enterprise, so you have to optimize your operations and locate things around the world, not just for labor arbitrage in terms of low labor costs, but better value, if you will. 

And because of the way process has been divided up, you can take a call center, for instance, and put it in Ireland this month, and four months later, move it to India and then move it to Brazil and then move it to Malaysia, without really missing too much of a beat in terms of your operations. 

And so what that means for governments is that the more successful you are sometimes in an industry, as a country, you soon kind of price yourself value-wise out of that marketplace.  And so those jobs will tend to migrate to other places that can do that and provide the same value or more value at lower costs as they operate. 

So governments tend to want to hold on to all those jobs and really, what there is, is an opportunity, as the economic development in these countries grows, there’s a business opportunity and the countries – and the companies in those countries that can rapidly reconfigure their skills and capabilities to go after that, has a real upside opportunity as a part of doing it.  So it’s a very interesting analysis. 

The rising environmental concerns – we’re going to talk mostly about that, but in my mind, it’s about using less energy, using less water and ultimately, reducing your profiles of carbon or whatever. 

The evolving social relationships is one about how businesses and governments in collaboration – there’s a lot of changes going on in that – again, a lot of positive aspects as a part of doing it.  The negative side for governments is that most people feel like their government is not nearly as responsive to their needs and user-friendly in dealing with things as the private industry is. 

Now, a lot of you here are in government.  I’m not criticizing.  I’m just trying to give you – most people don’t like to stand in line to get their driver’s license and a bunch of other things that occur on this part.  So there’s a tremendous opportunity for government to be much more responsive to their clients, and I suspect we’ll see the Obama administration kind of resurrect the client-centric theme that was there when Mark Forman was here early in the Bush administration. 

But the downside of this one too is that when I watch my kids, they have a very different way of interacting with each other and with the systems, and I frankly don’t think they’re going to tolerate the way most governments interact with them over a period of time.  I don’t know if that means they’re going to move somewhere else where government’s little less intrusive, a little easier to deal with, but it’s a real challenge for governments to figure out how to deal with the next generation. 

I was encouraged by the fact that some of the young people participated in the political process because in most western democracies that don’t require you to vote one way or another, the participation has been dropping over time. 

The growing threats to stability, you immediately think of terrorism and that, but there’s also huge conflicts around the world.  Many countries have immigration issues like we have here in the U.S.  There are regional conflicts; there are ethnic conflicts.  There’s even conflicts, particularly in China and India, between the rural populations and the urban populations.  A lot of urbans are getting the economic development; the rurals are not getting it.  So whenever you have these inequities or whatever, it’s going to create a threat to stability. 

The last one is the one that I think has primarily upside associated with it in terms of technology, and the characteristic here is that there are so many new technologies coming out.  So there’s plenty of opportunities for people to take these technologies, apply them to their problem, and move forward, and if you think about that from a country level, you don’t have to pick every one.  You just have to pick the ones that are right for your environment on how to move forward. 

Secondly, the younger generation, in particular, is so adapt – or adept at adapting to these new technologies.  This is just amazing to me to watch them pick up something that they’ve never seen before – my kids – and figure out how to – they never read an instruction book.  They just kind of experiment.  They figure it out.  You give them a game, no rules.  They figure all this stuff out.  The ability to use this technology scares me to death when I sit there and try to figure out how I would ever compete with them if I were 15 or 16 years old again. 

So there’s a tremendous opportunity in this, but there’s also the threat for countries that don’t do something about this technology that the others will leapfrog, and that’s happening all the time in countries.  And as I was in my global job, I used to be very interested to watch kind of the leapfrog that was going on.  The Nordics would do something in advance; the Australians and Canadians were very quick to do innovation and look for doing things new because they felt they had to compete against the United States and some of the Western Europe powers.  Some smaller countries are trying this. 

So there’s a lot of, if you will, people trying to do this.  So there is a lot going on in the technology area, but the key here is that the rising environmental concerns, which we’re going to talk about, is very important, but they’re not operating in a vacuum.  And as these things begin to pile on to each other, it can have a very positive and accelerating effect or a very negative decelerating threat.  And usually, the threat results in that threat to social order because if you get things too far out of sync, there’s going to be stability issues you have to deal with, and that’s going to be a problem because of globalization for just about everybody in the world. 

So that’s a whole presentation on 2020 and a couple of minutes there to kind of give you a kind of a background there. 

I’m not going to spend a lot of time on this chart because I’ve already learned that you folks know probably more than I do about some of these topics here.  We pulled some kind of factoids – I call them – out of a couple of studies here, but the basic issue here is that we’ve got to get better at energy, reducing our energy, reducing our water, or we’re going to have some major political and therefore, economic issues to deal with and I think this audience knows that well. 

And it’s not necessarily the cost of oil.  Oil – I had to change this chart because at one time, I think it said seven times, the oil price went up or something like that.  So just because the cost of oil went down, it doesn’t mean we don’t want to reduce our energy consumption because it’s important for us to get more efficient from the private sector and I think that’s true of the DOD and its operations and civilian agencies over time. 

So there is a huge issue here that – the good news to me is that three years ago, when I used to travel around all these countries, you almost never heard environmental, energy management, really talked about a lot in the countries.  If you read the press – I always listen to the taxi drivers going to and from the airports to kind of get the latest on what the real issues are, and the environmental concerns were not on the list of things. 

The U.K. was one of the first countries I saw get concerned about it and they got concerned primarily because they ran out of power in the center of London.  You couldn’t put a data center in the center of London because – and that was a problem for us – because there was no power.  And so all of a sudden, that kind of started things churning, so people realized they needed to get serious about energy reduction. 

They are concerned about climate change and some other things, but the energy was the thing that really kind of drove them to get serious.  And once the U.K. did it – I was amazed – within probably a year-and-a-half, no matter what country you went to, it was a major topic of discussion in the countries. 

Now, the problem is discussion to action is taking a little bit longer than it should in this case, but the agenda very rapidly moved to we need to be concerned about our energy.  And I don’t hear the water quite as much at this point, but it’s certainly on the agenda of most countries. 

Now, I’m going to talk first of all about kind of the story of IBM here, and again, what I want to kind of reemphasize is this is about doing the right things for our business that we did, that just happened to be the right things for a green agenda.  So you can argue the chicken-and-egg of this thing, but we found that as we focused on these issues, we made our business operations much better, if you will.  And to me, that’s the most important story of this, is that this makes good sense for just about anybody to do, to make their organizations operate. 

A very busy chart, so don’t worry about all the details on it.  I’ll give you a few highlights here.  We started way back in 1971 and the issue there was basically toxic chemicals because when you make silicon wafers, you’ve got chemicals you need to dispose of.  And we made a very focused effort to figure out how to deal with that problem. 

Now, there was some altruism.  IBM is a company that works in the communities.  We care about things or whatever, but the bottom line was we knew if we didn’t take care of the problem now, it was going to be a huge problem later, and we intended to be in business for a very long time.  So it’s better to fix the problem early than have to deal with it after the fact, if you will. 

So we had a very, very focused program back there on how to deal with the chemicals that we were using in process, how to kind of change the chemicals, how do deal with them and neutralize them as they were going out.  We spent a lot of time in the ’70s kind of talking to people about being a little more environmentally sensitive. 

And somewhere around the mid ’80s or so, we had a tremendous success in the early ’80s of creating the IBM PC and selling the PC, and somewhere around 1986, ’87, people started wanting to upgrade their original systems and it dawned on us that we had a huge problem with all these systems.  What are you going to do with them?  Are you going to throw them into the dump somewhere?  That doesn’t make a lot of sense to start throwing all these PCs away, number one, because there’s information.  There’s some toxic waste you have to deal with and there’s also some pretty valuable metals, although there are little minute parts of them. 

So we started in the mid ’80s a program to kind of recycle, if you will, our PCs as people started using them, and you can see the green stripe there at the bottom with the 95 percent.  We have reduced the number of our PCs going to the waste dump, if you will, by 95 percent.  So 95 percent of the systems we put out there, get recycled and we’re able to make a business case of getting the metals and things back to make that make sense. 

In the early 1990s – and this is what Mitzi was probably alluding to – we were a little bit slow to recognize the change in the marketplace.  We made most of our money on large systems and doing things for central banks and all this, and we invented this thing called a workstation, which became very popular, but we didn’t know what to do with it because if you did something with it, you suddenly cannibalized the profits you’re making on the large systems.  Didn’t seem to make a lot of sense to go do this workstation where you didn’t know how you’re going to make money and cannibalize the stuff on a large system.  So we were a little slow to figure out how to do that. 

In the meantime, we almost went out of the business because the market decided they liked that workstation, and we didn’t have a cost-performance profile on our large system.  So at that time, we decided we needed to really work on our costs.  I don’t think we were quite as bad as what GM is today, but we were running out of cash and worried whether we were going to be able to make paychecks for a while. 

And so there was a huge focus on getting the costs down.  And one of the things we discovered is in this whole manufacturing process here, is that we could take a lot of cost out and by using this carbon emissions, if you will, as a metric, it was a good way to get people focused on:  Here’s where we are.  Here’s where we need to get to.  This is going to help to take cost out of the system.  So people weren’t so focused on the fact they were constantly cutting, cutting and cutting if you will.  So it became a positive motivator to say, let’s see how we can improve this, as opposed to, now we’re going to take more money away from you.  So since 1990, we’ve reduced our footprint in that by about 44 percent. 

Another couple of points on here that I think are significant is that because we saw the carbon footprint, we started building very energy-efficient products.  Again, you could say it’s a little selfish in that we knew we needed more energy-efficient products and we thought our clients would probably need those.  So it put us a little bit more in tune to the marketplace because we had our internal problems.  So we were one of the first to get an energy star.  We put a global – what do we call that, Jim, global – no, the global management system for –

JIM LOVING:  (Inaudible, off mike.)

MR. RAMSEY:  Environmental management system.  And as we saw a success in that, we put a formal program in place in 1997, again, because it was helping us reduce our costs, transform our business processes.  We got some international awards for that. 

And in 2006 – I think this is very significant – we have this technology we call a JAM.  I found out somewhere that the origin of the term JAM is for jazz after midnight.  So – in New York City someone brought that up in the audience where I was speaking once upon a time, so I’ll always remember that little factoid.  But this JAM technology is kind of a – I call it thread of discussion and we have 350,000 employees.  I think we’ve had half of them participate in several of our JAMs.  We have like one each year where we did values. 

This one is around where should IBM invest in innovation that will be good for your clients and good for society, if you will.  And the number one thing that came out was on this whole environmental piece here in terms of we can really help the world reduce its costs on that.  And that came out of our employees’ discussion, and so we actually invested in the top four or five things that came out of that.  We put a couple of million dollars into doing some things here, $20 million or so and I’ll talk about some of the things that came out of that. 

And in this last year, we announced this Project Green, which was again, to kind of continue the direction we were going.  Again, I’ll tell you a little bit of the story behind the story here on this, but as you can see, one of the things up here – if you look down at the bottom, is that we’re going to double the size, double the capacity, of our data centers, and not change the energy profile at all. 

Our CIO – or CFO discovered that we were spending $500 billion a year on energy for our data centers in IBM.  Now, we’ve gone from 155 data centers down to – I think we’re down to five or six or something like that that we have for redundancy or whatever.  He called up the CIO and said, were you aware of this?  And the CIO said, I had no idea that this – spending this thing.  He said, well, I’m going to fix that problem.  So from now on, you’re going to be measured on how well you’re reducing your energy profile on this thing.

And so we made a commitment that we’re going to have to figure out a way to do this, and we also recognized that there was a lot of our research technologies that we could apply internally and apply to our customers in this area.  And so we committed to spending almost a billion dollars, if you will, trying to bring some of these technologies forward to help in energy reduction, water reduction.  And I’ll show you what some of those things are happening over time. 

So this is a major program.  We went public because we wanted to know people that we’re accountable for it.  We’ve got measurements that we have in place.  We’re going to try to take those carbon emissions, which are a cost surrogate, down another 12 percent and really focus on building better products. 

The product we just came out with here earlier this year is eight times more energy efficient than its predecessor, just to give you a sense for how that’s been kind of inculcated, if you will, into IBM. 

So let me now go into some more examples of things that are going on.  The most obvious thing for IBM, as I just said with the CFO example, to focus on is the IT technology and I’ll tell you, there’s lots of opportunity to optimize that differently than we have today from an energy profile perspective. 

What’s interesting is that if you did kind of a carbon footprint kind of analysis, only 2 percent of the carbon footprint around the world is with IT technology.  Ninety-eight percent is on other things, and those are primarily buildings or the built environment.  I’ve heard several of you talk about that.  It’s in transportation systems, the fleet, and people commuting and it’s in the manufacturing process.  So that’s where the majority of the rest of the 98 percent is there. 

The best news about this, though, is that we think – and this is the smarter theme I talked about earlier – is we can embed intelligence in these processes to gather information, give you a profile, let you see what you’re doing and better manage that to significantly improve those processes, both from an energy, water, and a carbon profile.  So that’s the term smarter planet that our chairman and others have been talking about. 

So I’m going to now going to go into a little bit more of what that’s all about.  When you step back for a second and take a look at kind of as-is state around the world, it is amazingly interconnected.  There are 2 billion people attached to – that are on the Internet today.  There are 4 billion mobile phones out there.  There’s almost a trillion devices that are connected.  So we are incredibly already interconnected, if you will.  So we can, at least in theory, share information. 

The instrumentation – I think by the year 2010 – I saw a statistic the other day – there will be one billion transistors for every human being on earth and they cost something like 1/10,000th of a cent to produce or whatever.  So there’s a lot of low-cost technology out there. 

There’s 30 billion RFID tags going to be produced just in 2008 and 2009 that provide information for tracking what’s going on.  So there’s a lot – and those of you in the military and the intelligence community, there’s all sorts of sensor capability that you’re aware of it out there that I don’t have any statistics on off the top of my head. 

And these are intelligent in the sense that we now have computer models that can ingest large amounts of this data, in many cases, do near real-time analysis of that data and tell you what to do tactically about that, but we can also go back and collect that history, analyze that history, figure out trends with it.  So there’s a lot that can be done from the computer capability to take advantage of all this information that’s out there.  And why do we want to do it? 

Well, we want to do it because with all this low-cost technology, why wouldn’t you want to take advantage of it?  Think of the things that we can improve.  Certainly, if I just take the financial crisis, right, if we’d just had a little bit more information about these mortgages, we could handle or manage this process a whole lot better.  It’s amazing to me that with all the computerization that we have in the banking and industry, that people can’t even tell you what a lot of these mortgages are worth, or who owns them or whatever, without doing an awful lot of research.  So if we had some intelligence of that, that would work. 

Think about what intelligence would do to our healthcare system.  If we had an electronic medical record, it would certainly save you filling out all the forms every time you go see the doctor, but wouldn’t it be nice if you were in an accident, people could come in with devices that could give you doctor’s video pictures?  You have the medical record of people that would be available.  They could actually treat you on site, as opposed to put you in an ambulance and take you where you’re going. 

The retail industry, I think I’m told that they waste $40 billion a year, almost 3.5 percent of their inventories in supply chain inefficiencies.  Things get lost; things get stolen.  They don’t get arrived on time.  They have to be recycled for what’s there.  I could go on and on. 

The energy – the oil fields leave 20 to 30 percent of the capacity in the ground because they don’t know what’s happening to it, aren’t monitoring.  So a little bit of intelligence in any of these things could make a huge difference in terms of our ability to get more value out of it. 

So what I’m going to do – and this is my busiest chart here – I like to put bullets on my charts.  Jim likes to do pictures.  So he combined both my ideas and his ideas in this chart that even I can’t read out here.  But this is really the agenda for the rest of the presentation here.  We’re going to talk about the IT infrastructure.  We’re going to talk about mobility, intelligent utility, intelligent water, transportation systems, a few other things as we go forward here. 

But let me start here on the green data centers.  This is an area of what I call low-hanging fruit in almost any organization.  I can certainly tell you, there’s plenty of this opportunity in the U.S. government here, the Department of Defense, and civilian agencies, and in most corporations, for that matter. 

If you take a look at the profile of a typical data center, first of all, you would find thousands – in many cases, 10,000 – servers that are out there that are typically utilized somewhere between 20 and 30 percent at the most.  Attached to them are millions of PCs, if you add them all up, in the U.S. government and not necessarily millions in every corporation, but a lot of them that way, that are used maybe one-and-a-half to 2 percent of the time.  So you’ve got a lot of power-on things and you certainly have a lot of capacity that’s not being utilized. 

We got there because people thought technology was cheap, right?  You just put in a new computer.  You’ve got a new application, you put it on its own little server.  It’s makes life easy.  Just put it out there and you keep replicating it.  Suddenly, you get 10,000 of them, and it gets a little bit harder to manage over time. 

So there’s a tremendous opportunity to consolidate, save energy, use your capacity better, and so like everything else, you can kind of jump into it or you can take a step back and do a little bit more thoughtful process.  And that’s what you see in this wheel up here that we try to help our customers through and what we’ve done internal for IBM here.  That it assessing where you are.  So where is your power being used?  What’s your profile looks like in terms of utilization?  So get a picture of where you are.  Again, a lot of data centers don’t even have a very good, accurate picture of what they’re doing. 

The second one is that even in the data center, you’ve got different hot spots, cool spots.  Most people have no idea what’s happening.  If something seems a little hot, they put an extra fan there.  Most of the time, when you walk in these data centers, you can almost – you can’t hear anything because of all the fans and the motion they’re trying to do through there to keep things cool.  So understanding kind of what’s happening in your environment, and then beginning designing and implementing a little bit more comprehensive and logical way to implement this stuff. 

Almost everybody will end up consolidating, which is kind of taking a bunch of things and putting them on a fewer number of servers, which if they’re utilized 20 to 30 percent, you can certainly do that, and virtualize, which says you want to share the capacity – computing capacity of those machines, so that you don’t need nearly as many servers over time in order to do the workload. 

And then ultimately, you look at your facilities and operation though.  It’s interesting that many of our clients are going back to water-cooled environments because it’s much more energy efficient than what they had before, and designing facilities so you can get access to the stuff.  It used to be called a raised floor, but it was only raised about a foot-and-a-half and pretty hard to get to and if you look at some of those, it’s pretty scary to look at them.  And if you put them up several feet, somebody can walk down there.  You can see what’s going on.  You can do upgrades and things over time. 

So it’s a very logical process.  It doesn’t take a lifetime to go through this, but this is one where – we’ve probably done several hundred of these things in IBM just in the last two or three years.  We did it on ourselves first.  We’re taking 3,900 servers and moving them down to 15 or 20.  We’re going to save several billion dollars as a result of doing that, just in terms of our operational cost, even before we get to the energy cost associated with it.

The average savings in energy from the result of doing these studies that I’ve just – the five steps in the wheel – is about 40 percent.  In the State of Victoria, where I was involved in, I think they got 68 percent out of it.  There was a city in Australia that – just outside Canberra; it’s called Stirling – that saved a couple of million dollars in this small city by just optimizing the small data center that they had. 

It takes less than two years to get the payback on your investment.  The single biggest obstacle that people have – and this is an IBM problem I just described earlier – is that generally what you have to do is you have to invest in the technology, if you will, to have larger servers, consolidate, do things differently.  The savings comes over in the energy budget.  Well, the energy budget flows up through facilities, in a lot of cases, in GSA or some other facility.  The CIO never sees that budget and never sees the reward. 

I was very encouraged to hear, I think, the Air Force has put an edict out and they’re going to share savings.  So if you reduce your energy costs, you get to get keep half of that.  That is a great incentive and a way to move forward. 

The utilization rates, this means that people are able to double or quadruple the capacity of compute power they had without changing it, just by taking and using the virtualization.  And probably the biggest number on this chart here is that for every dollar you save in energy, you save another $6 to $8 in operational costs.  So this is operators; this is maintenance; this is updating your machines, software, all the types of things that are part of that. 

And it works whether it’s a small data center or a very large data center.  So this is a huge opportunity to cut your energy within your corporations and we have a very good test case internally and lots of others we can provide for this. 

The second one is what I call mobility and this is a huge opportunity here for the U.S. government.  It’s an interesting series of discussions I’ve had on this topic.  IBM, I think I said earlier, is 350,000 employees.  Globally, 40 percent of them are mobile, have no offices.  I would tell you, in my federal organization, that number’s almost 90 percent. 

And the – so this means that what we have are office locations that have kind of a walk-in workstation.  You can come in.  You can fix the phone to be your phone extension if you have such a thing.  So you can kind of customize the open space, if you will, to your environment if you want to come in.  You can do that anywhere.  We’ve got, I don’t know, five or six locations in the Washington area, all of them very small. 

In our major location in Bethesda, we went from roughly 10 floors a space to two floors a space and we’re probably going to take that to one soon because people are finding out they can operate just fine mobile. 

We’ve been able to overcome all the management issues of how do you make sure the people aren’t off on vacation for six weeks when you don’t see them in the office.  A lot of people think you need to do video conferencing, so you can see people or whatever.  We’ve been doing this for the better part of 15 years.  We’ve got collaboration tools.  We’ve got the same time to connect with people.  We’ve got a lot of management techniques to make sure – I manage people in 26 different countries that I did manage to see at least once a year sort of, but we were able to function just quite well across the world, if you will, using the tools we had. 

You can go on our system and look up anybody.  You can find out who they report to.  You can query skills.  You can have these same-time instant message chats with anybody who happens to be connected to the system around the world.  That’s a great time-saver.  You can do webinars.  There’s just a whole range of collaboration tools to do it. 

And why do you want to do that?  You can see some statistics up here, and again, I don’t know what the cost of gas was when they did this thing.  I think somewhere, there’s $72 billion of lost time in the American workforce, just America alone, from people sitting in traffic jams, primarily in the major cities.  That’s a huge number; $3 billion worth of gas is wasted while they’re stuck in these traffic jams or whatever.  So there’s a huge opportunity here to reduce our energy reduction by letting people be mobile. 

And the good news is, it can be a very big plus, not just in savings, but you can – people can work from home.  So if you’ve got family issues or whatever, you can work around that.  If you want skills from other places of the world, you can bring them in.  You can have kind of a – if there’s some sort of a problem, you’ve got people spread out that you can call in and help if there’s some sort of a natural or a terrorist disaster that you have to deal with. 

There’s a lot of very positive things that are possible to do this and our people respond very, very favorably to this because we have a culture of having – using conference calls and other things.  There’s a whole kind of – I would guess – a protocol around that that we’re very comfortable with.  I was on a call this morning at 6:00 a.m. with people around the world and we’ve got an awful lot done without having to travel to be in a face-to-face meeting for doing it. 

What I find when I talk to government organizations is it’s just – it’s almost – from a culture standpoint, they just can’t imagine not having people in the office and being able to see them every day and having face-to-face meetings and you do need face-to-face meetings once in a while.  It’s not like you can never have them, but you don’t need them as much as what we do. 

So this is another area.  I will give you an example here.  They don’t want to be named on this, but we do have an organization here, not too far from where we are right now actually, that’s working on implementing a mobile strategy.  Their motivation is to reduce their facility costs, to also make it a lot more attractive for people to work for their organization, and to be able to outreach and get a lot of new skills. 

We’ve completed, I guess, two phases, the kind of the original study phase and then kind of the proposal plan phase that has been approved, but they’re awaiting some funding and some other things on contingencies they have to deal with before they can move forward.  But I suspect not too far into 2010, there’ll be a very visible reference in terms of how to take advantage of that. 

The next one is around smart traffic.  I’ve already given you a little bit of a factoid here about the amount of time people waste sitting in traffic.  Probably the best example in the world of implementing what’s called road-user charging, if you will, to help remove congestion is in Stockholm. 

Now, Stockholm, if you’ve ever been there, is not the first city that would come to mind that has traffic jams, but the Swedish have an interesting culture.  They were very concerned, both about the environment and wanting to kind of move more people to public transportation.  So they did literally a pilot.  Now, this is a fairly expensive pilot here and Stockholm has 18 points.  It’s on a little bit of an island.  I think it’s an island.  There’s a lot of water surrounding this, but there’s 18 points you get into. 

And so they basically put cameras that could read license plates.  Remember, in Sweden you have to worry about license plates coming from a whole bunch of different countries in Europe.  So it’s not like you can do the Easy Pass as well as we do here, as a part of doing it.  That will enable you to – it’ll capture it.  You could play it on the Internet.  You can have your account set up.  You can go into local stores and do it.  There’s a lot of different ways of doing this. 

And what they did is they took that money and they put it into the public transportation system.  So they improved the buses, the subway schedules, or whatever and after about a six-month experiment, they had taken 25 percent of the cars off the road.  Now, they only had 500,000 to start with.  So New York City has somewhere around 3 million.  I’ll tell that story in just a second. 

They quadrupled their ridership on their subway system, if you will, and they were able to add cars and things because they had money to do it.  And they significantly reduced, I think, 12 or 13 percent, the pollution, if you will, that was being emitted by these vehicles.  And then, believe it or not, they put this to the vote of the citizens, whether they wanted to continue this or not. 

Now, you can imagine that the idea that we’re used to not to have pay anything to go into the city, you’re now going to have to pay several dollars to go into the city, was probably not the most popular thing when it was first proposed.  But after people saw the results, they saw the fact that they were able to get in and out the city a lot easier.  Public transportation was easier.  They voted 53 percent to, whatever, 47 percent to keep this.  There was a change in governments from their Republicans to the Democrats, or vice versa, and they decided to reconsider this again, so they had kind of a second vote of this thing and it was overwhelmingly proved that time that people wanted to continue doing this. 

And the issue on commuting is not only that people hate waiting in traffic, but they also hate the variability of the commute.  Now, Jim and I had to plan an hour to come down here tonight because the last time we came down here, it took us that long to get down to Crystal City.  It took us 20 minutes probably at most to get down here and we had one wrong turn in the middle of that. 

So what people hate is the fact that if you have a meeting, you have to plan for the worst case.  So even if you don’t have traffic, which would normally be a cause for celebration, you still arrive an hour early for your meeting.  So they like to know what’s happening. 

This same type system, London is using this; Singapore is using it; Tokyo is using it.  Mayor Bloomberg did a very courageous thing in terms of proposing this for New York City about a year or so ago.  He got everybody lined up, going to charge $8 to come in by car, $21 if you were a commercial vehicle on this thing.  And people started screaming, why would I have to pay $8 on this thing? 

And when he explained we’re going to use that to improve the public transportation system, people said, well, if I could depend on the bus getting me in, in two hours, I’d take the bus, or a half hour, I’d take the bus.  It’s certainly better and I’d save a lot more than the $8 for doing that piece of it.  Even the commercial people said, well, if I can really get into town efficiently because I’m paying this $21, I can do another two or three jobs during the day and I’m going to make a lot more than that $21 and my life’s going to be a lot easier because I’m not going to have to do it.

One person in the New York State legislature, the speaker of the House, stopped this.  They had federal funding.  He had everybody in New York lined up.  He wouldn’t allow it to come out of committee, so the whole plan died.  Now, knowing Mayor Bloomberg, he’s going to probably figure out a way to resurrect this over time. 

But this is spreading across cities of the world and the U.S. is a little slow because, again, it’s not politically popular to propose paying for something that appears to be free today, although New York City does have charges across the bridge.

Where this is headed is a much more integrated transportation system and I think Singapore is a good example of this.  I lived in Singapore for two years and they actually put in my car a transponder with a card.  They paid to put it in my car and they put up gantries all over the place to control traffic.  And it was amazing to watch how they could change the behavior of drivers by just changing the tolls, the time of the start to tolls, or the amount of the tolls.  They could significantly adjust the flow of traffic by just changing the tolls a little bit.  Consumers are very conscious of every dollar that they have to spend doing something, particularly if they do it several days a month going in.  So they were able to do it. 

Now, they’ve got this card and that card works in most of the garages now.  So you have kind of like you do when you get out of the Smart Pass, when you get out of the metro station, so you don’t have to have attendants there.  You don’t have to wait in line for people to pay bills or whatever.  You can use it to charge things; you can use it on their rail system; you can use it on their subway system; you can do it on the bus system.  You can actually, I think in some cases, actually pay taxi drivers, although that’s certainly not universal at this point in time. 

So they were able to make it much more convenient for the citizens to do all this and all this stuff gets a lot more efficient when you do it that way, getting people on and off, if you will.  And now, privacy experts – got to be careful here – but now what they’re going to do is take all that data and they’re going to build a model that says, I now have a pretty good picture of where people are going and how long it takes them to get there.  And so I’m going to try to model a better public transportation system to meet the needs of my citizens. 

Now, they take names and addresses off, so they’re not tracking where you’re going or what you’re doing, but they have traffic patterns with data that they can begin putting in a model.  And so they’re going to be able to optimize what’s happening and there’s this idea of cameras that you’re using for the road charging, also can give you traffic, so you can change the light sequence.  There’s a lot of possibilities in this area of putting intelligence into the system, if you will, that will dramatically improve the road congestion and getting people to and from work and making it a lot easier for people to go, when they travel, get to where they’re going to go. 

And if you add this to the mobility thing I talked about earlier, it could significantly change the congestion you have in almost every major city I’ve been in around the world. 

The next one is a smart utility grid.  I think we have about 4,000 of these power companies around the world, although probably the top 100 contribute maybe 80 percent or so of the power there, and it’s fairly inefficient.  In some countries, they quote numbers as high as 40 to 60 percent of the power generation is lost in transmission and just kind of poor power generation capabilities.  The U.S., they talk about six to 8 percent, but that’s almost $100 billion a year of cost that gets sent out. 

The problem we have in the U.S. is twofold.  One is that we have no information, no intelligence, really in the system today.  You have a meter in your house that tells you how much you’re using a month, but you don’t know when you use it or how you’re using it at all.  And even when you use a mobile phone, they tell you whether you did it in peak hours or whatever.  We don’t have any of that kind of stuff in the utility grid. 

And the second is that they have to build, if you will, for peak capacity.  So all the generation is around what the peak load is going to be, and so you have lots of time when there’s a lot – excesses capacity that’s not being used.  If you could level that off, if you will, you could do this stuff a lot more efficiently and effectively over time. 

So the solution to this is to begin putting intelligent sensors in the system to tell you what’s going to happen.  Certainly, if I put a meter in your house that said that I’m going to charge you more during the peak hours of the day, you would probably change your behavior as a part of doing it, and certainly, businesses would begin changing their behavior if they thought they could get lower rates over time. 

If you put it in some of the utilities that you have – or I mean, the appliances you have, refrigerators, dryers, washing machines, those types of things, your heating and cooling in your house, and that device were to understand when the lower cost times for buying the power would be, you could significantly change what you’re doing and your cost profile. 

And that’s essentially what we did with the Department of Energy and some number of energy companies, and a number of other companies.  We created this grid-wise NGO to kind of begin developing standards, tools, techniques, capabilities, that power companies could use.  And we actually put an experiment in place in the Olympic Peninsula up in the State of Washington where we had appliance manufacturers put intelligence in their various devices. 

We put them in the houses and we created what I call a market, if you will, so that in five-minute intervals, you could go ask, well, how much does power cost now?  And you could actually program in that when the power cost got below a certain amount, that you wanted to start the dishwasher, or you wanted to start the dryer or the washing machine, you wanted to – you know, the heating and cooling could all adjust to that part of doing it. 

What that ended up doing is reducing not the total amount of power they used, but the electricity bills were reduced by almost 10 percent as a result of doing that, and it was all happening electronically behind the scenes.  On average, they took the peak down 15 percent, but for 50 percent of the time, it was almost half of what it was before. 

So it began giving the energy utility a lot better ability to generate.  So they didn’t need to put on a lot of new capacity.  They could use that capacity and spread it over their users in a different way as possible, so tremendous opportunity in this area to make our power grid much more efficient. 

And this is a huge problem.  I mentioned London.  We had three situations here in September where we had equipment that we shipped to clients that they didn’t have the ability to plug it in the wall and turn it on.  One of them was halfway between D.C. and Baltimore, which is hard for me to believe that there wasn’t power available for that organization to do whatever they wanted to do. 

So we’re finding more and more that people, they have to take things down in order to plug things in.  This is a huge capacity problem across the U.S. today and we need to start doing things like this to at least moderate the use and give people some insight into what’s happening. 

The next thing I’ll talk about here is kind of an enterprise approach to this, a kind of energy reduction, water reduction, carbon reduction, whatever you want to call it.  As we began – this actually started in the U.K. as a result of the efforts that I had talked about earlier in the sense that they wanted to make a kind of a nationwide attempt, if you will, to start attacking the problem. 

Well, the first thing you come up with is, I don’t even know where I am today, so how do I know how I’m going to improve?  So we had to come up with some techniques for kind of measuring what is your energy utilization, what is your water utilization today?  And ultimately, this is about cost and process change, if you will. 

And you can see kind of some areas here – I’ve talked about some of these – the IT at the bottom in terms of how you can save it, the commuting cost, trying to kind of put a price, if you will, on the commuting and if you can improve the – or reduce the number of people commuting, put mobile solutions in, how will that save you.  Reducing travel in companies – I’m going to show you a chart at the end – that 44 percent of the kind of carbon footprint, if you will, of the typical American citizen is up in driving and flying. 

The information, which I’ll mention just briefly at the end – the proliferation of information that you have to store and keep for reporting purposes and whatever, it’s going up exponentially every day.  I think I heard somewhere that we’re adding a petabyte of data every day, if you will, which is larger than the entire Library of Congress.  I don’t know that I have my facts exactly right on that, but it’s a huge amount of data – and so, figuring out ways to compress and manage that. 

Your business operations, this is around supply chain, what you’re doing, how you can make your business operations more efficient – so these give you a set of tools, if you will, for going in and assessing where you are.  It really doesn’t matter how you measure that.  You can measure it in cost, you can measure it in – (inaudible) – or you measure it in carbon.  Whatever you do, it gives you a profile and then what you want to do is figure out how to make it better, and as you make it better, if forces you to get into your business processes and see how you can take advantage of them. 

And probably the area of greatest gain, if you will, is in supply chain management, and I had a conversation earlier tonight with some people that said exactly the same for – that the military has found this out.  And by using this kind of a cost or energy profile, you can begin kind of figuring out different ways of doing things. 

Certainly transportation fleets, it’s obvious how you could manage some of that, and I’ll tell you about the U.S. Postal Service here in a second.  But where you locate your warehouses, how you do assemblies – and by the way, these variables can change over time as energy costs change or whatever, but if you have the models, you can figure out how to do it. 

And we found in dealing with most of our commercial customers, if you worry about suppliers who are focused on this the same way, you’re going to get yourself a lower cost offering.  You’re going to find much better processes to deal with, and it gives you the flexibility of being able to figure out optimum ways of doing things, having their designs incorporated, where you do your preassemblies, how you bring things together.  All that is possible in smarter supply chains. 

We have been working with a number of the customs organizations around the world, shippers like Maersk and others, and some of the suppliers on what’s called secure trade lanes, so that you actually put an intelligent, tamper-proof processor on the container at its source, where it comes out of the manufacturing organization, if you will, that can be read as it goes through the supply chain so you can tell where it is at any given time. 

That sensor will tell you what the environmentals and everything, so if you’re on a ship and you get flooded or you go through heat or cold, it will keep track of all that.  It can keep track of the inventory.  It can tell you what’s tamper-proof inside.  If you’re a retailer and you want to know where your goods are in the logistic system, supply chain system, you can query the system and find out what that’s all about.  So we’ve designed a system using all these different partners in how all of this would work. 

The problem is getting all the stakeholders aligned on how this is going to be paid.  Everybody gets a benefit, but everybody else, particularly today, wants somebody else to pay for it.  It doesn’t cost a lot to do some of this stuff, but it does cost a little bit.  So it’s a way to really optimize the shipping across the world and the supply chain. 

Let me give you a quick example here at the USPS and the transportation fleet.  There are 600,000 – I think actually, 633,000 vehicles.  I’m not talking about airplanes, ships and tanks.  I’m talking about trucks and cars for the U.S. government today.  It’s split almost evenly a third to postal, a third, the Department of Defense and a third to civilian agencies, if you will.  I forget, did we have a number in terms of the amount of fuel that they spend on those?  I don’t think I know that off the top of my head. 

MR. LOVING:  The fuel costs are the – (inaudible). 

MR. RAMSEY:  Okay, so 17 billion (dollars), right, 17 billion (dollars) to operate those vehicles across.  And the postal service in the U.S., and a lot of the posts around the world, have been very aggressive about trying to manage their transportation system, if you will.  And the reason is because most people now encode the mail and the packages and the magazines and things that come through.  So they know in advance what their volume is going to be and where it’s going to go. 

And with that modeling information, if you will, input to your modeling information, you can project not only what you need to do between your major hubs, but also what you’re going to need to do on the routes.  And they’re beginning to optimize the routes that people go so you don’t just give it out and say, go do it.  They figure out ways to make this much more optimal. 

At the bottom of the chart, you can see in the Chicago area, which is kind of outlined in a little map on the right there, and then the Pacific area, they saved 1.3 million (dollars), in one case, 3.7 million (dollars), just by optimizing the way they do their transportation a little bit.  They haven’t even begun to do this full scale at this point in time.  They’ve just begun this process. 

So there’s tremendous savings here just in fuel prices in terms of what they’re doing, and certainly, operating costs of the vehicles, there’s another factor of probably four or five in terms of operating the vehicles.  And ultimately, I think, they’ll be able to get down to having fewer vehicles that are maintained better and a lot more efficient routes as a part of doing it.

The next to last category I’m going to tell you is about water management.  This has a lot of similarities to the energy grid in that we have no idea what’s happening in our water systems, other than what you get charged on a kind of a quarterly basis, I guess, the same way the bill comes to me for your water usage over time. 

Just a couple of little factoids there – 53,000 water utilities across the U.S., most of these locally owned; now, you can imagine that not all of these are your best practices in terms of how you do this process if there are 53,000 of them.  So there’s a lot of opportunity here in this area. 

And by the way, as concerned as we are about energy and political stability, water could be an even bigger problem, because in energy, maybe you can figure out a way to operate without as much energy if you need to.  Water, you can’t.  You need it to live on a day-to-day basis.  And I think I’ve seen statistics that say that by the year 2020 or 2025, we’re going to run out of quality water for almost half the world’s population and that’s a formula for disaster.  The water utilization per person has been going up twice as fast as the population for the last 20 or 30 years and we can’t continue to do that over time. 

New York City – just another little factoid – New York City in the 1940s dug way down and created a water system down – I guess there’s – around the rivers there, there’s a little land that you can go down almost as far as you want to get things done.  They lose somewhere between 20 and 30 million gallons of water a day in New York City and they don’t know where the leak is because they can’t get down there and figure it out.  There’s no sensors or anything about doing it. 

I saw a thing on WSSC, who supplies my water in Maryland, and they know they have leaks, but they don’t where they are until they bubble up in the street somewhere and then they can go fix them.  So I mean, it’s amazing how inefficient we are on just supplying the water that we have. 

The other part of the equation is, where does that water come from and how can we better manage and take care of it?  There’s also a water purity issue associated with doing that.  So we have remarkably little information about what we’re doing in this whole water area. 

So not unlike the utility grid, we are working with a consortium here to begin trying to put some best practices, disciplines, figure out ways to put some intelligence in the system.  We’re doing weather forecasting with NOA and a lot of the weather agencies around the world to the point where you can tell what the weather is going to be at a venue, a sports venue, with fairly high degree of accuracy. 

In IBM itself, we have made water utilization reduction as important as energy reduction.  You can see the example up here, that we have a kind of a best practices site within IBM that reduced our water utilization by 27 percent while we were increasing our manufacturing output about 30 percent or so.  So again, if you take measurements, you can manage people and motivate people to do it better. 

And we’re working in the Netherlands, which has a very strong culture there in terms of managing the water, since they’re all below sea level – at least a large part of the country is below sea level – a center of excellence there for improving practices. 

The example I’ll give you here is one that we’re doing up in the Hudson Valley, and it basically involves putting a bunch of sensors in that whole system, if you will, to measure quality of the water, the animal life, I guess, or the fish life, plant life in the water, how it’s being utilized, where it’s going, quality of the water upstream, downstream, so they can figure out what’s going on.  This has just started, so it’s too early to have a lot of results, but we’re going to try to create a database that helps us understand what’s going on and gives us some ways that we can manage it better over time.

And last, but not least here, is what we’re doing in our research division, and I think I mentioned this very early on.  Now that we see the importance of the energy and water reduction in our corporation, we’re finding that a lot of the research technologies that we’ve used in our products also has cross-purposes in terms of putting intelligence in the system and being used. 

One of those is this nanotechnology which you heard of, which is being able to operate almost at the molecular level, very small ways that you can now kind of build Lego-like capabilities out of it.  We’ve got a whole kind of a city, if you will, up in Albany that has a bunch of people working on that and IBM is one of the founders of doing that. 

The thin film technology that we use in our wafers – one of the problems with solar energy is that the energy coming in, the current technologies only give you 10 to 15 percent of that energy out, if you will, of the system and we found when we use thin film, we can double that output and there are some other things we can do about it.

And we’re trying to figure out how we might be able to use some of our technologies for desalination, which may be the way we’re going to need to get water sooner rather than later, and really putting some of our research engineers – this is a part of this $1 billion investment I talked about earlier, where we’re putting that problem on the top of our researchers. 

We have – I think we spend close to $6 billion a year in just research, and probably applied research is probably a good term to throw in there with that.  It’s just amazing to me when I go around and talk to customers, and I go back to our research division and try to figure out where anybody is working on it.  If you give these researchers the problem, they can figure out how to apply many of these technologies to that particular problem.  And we do a lot of that in government around the world.  So this is kind of a national treasure that fortunately, our leaders in IBM have been very careful to protect as we’ve gone through various and sundry behavior. 

This is what I alluded to earlier here in terms of our personal responsibility, which you can see here is the kind of profile of our energy usage, if you will, as individuals.  This is kind of the average behavior, if you will, but a tremendous amount of our energy usage is in flying and driving.  So that’s why the road-charging things I was talking about, using mobility, not really forcing face-to-face meetings is a part of doing it. 

And we, as Americans – and if you use the carbon emissions as a measure – and you can argue whether that’s the right measure or not – but we’re five times more users per person than the rest of the world, and we definitely have to get better at that. 

Organizationally, as we lead our organization, we believe the three key things here are getting better insight.  Where are you today?  What’s happening out there that will then give you the ability to be able to create a vision of where you want to go and force change? 

I spent a lot of time talking about implementing change in government and governments are slow to change, but so is every organization out there, particularly if they don’t know where they’re going with the change.  So this is about articulating a vision and showing people milestones, what you can do, and if you do that, you can really make an impact on your efficiency. 

So, ultimately, this is about transforming your business processes and using these metrics helps you realize how you can do things better from a business perspective.  You can make yourself more competitive, more cost effective, and do things better. 

And we spend a lot of time as a company in these three areas, if you will, and you can kind of think about this as technology, so not only creating some technology, but helping people understand the technology. 

This is the culture change at the top here.  That’s the single biggest limiting factor in terms of governments and most organizations is getting the culture to change and see where you’re going, and there’s a whole separate presentation.  In fact, I wrote parts of a book on that particular topic in government and this is about process change over here on the right. 

I’ll leave with you five or six things that you can do here as kind of steps forward and the first is kind of starting with the strategy and a plan.  So really understanding where you are today and you can use whatever measure you want.  The idea is to document where you are and use that as a way to figure out how you want to move forward and we’ve already talked about a lot of things in this area. 

Corporations, I think, increasingly, the government, I think the new Obama administration, they’re going to want to know what sort of progress you’re making.  So if you have a base line, and you can show how you’re going to try to improve on that base line, you’re going to prepared to deal with a lot of the queries that are likely to be coming your way. 

The low-hanging fruit is the IT area.  I wouldn’t say it’s easy to do, but it’s certainly straightforward to do.  You need to do this assessment and think about it more holistically.  You can’t just jump in and start consolidating servers, but there’s a lot of opportunity here. 

Remember, 40 percent of your energy costs can be saved.  You can double or triple of quadruple the capacity you have by doing some things smartly in this area.  So there’s a lot of advantages here, and for every dollar in energy savings, $6 to $8 in additional cost.  So this is a very nice force multiplier, if you will, in the DOD vernacular. 

Property and assets – building are a huge user of our energy, and so kind of getting a profile of what’s in your buildings, thinking about ways to manage that better.  I don’t think I gave this example earlier, but someone had mentioned it to me earlier.  There’s a – I heard this at the ACT/IAC conference a few weeks ago. 

There’s a CIO in the U.K., a large financial institution, so I don’t know whether that’s the Bank of England or not, but he looked in his building and he noticed all these screensavers on his PCs.  And they kept their PCs on at night because that’s when they did their updates, the software and everything else, and checking all this thing, so that was their policy. 

He said, well, I want to know how much power I’m wasting.  So he put in software to shut them down when they weren’t used for a period of time.  He saved £20 billion.  That’s $40 million in one quarter just by shutting down his screensavers.  Now, I haven’t seen that written down anywhere, but I heard it from a person that’s pretty credible from the stage, so I assume it certainly has some truth to it.  So much of the energy and maintenance of a building can reduced if you just focus on it. 

Streamlining business operations – this is the supply chain thing I talked about, your transportation systems in particular.  If you look at those processes, start modeling them and understand where the costs are associated with them, you can make some fairly dramatic improvements.  And as you put new technologies in, putting it in a sort of smarter way within this process is a way that you can cascade, or compound, these savings for future years. 

And environmental impact to the people, this is the mobility thing I talked about.  I do think this is a huge opportunity in the U.S. federal government that has not been totally addressed and I think it is manageable.  There’s a lot of companies.  IBM is certainly not the only out there that have been doing it for a long time. 

It does take some work; it does take some thought.  You just don’t kind of declare on a Monday and one month later, implement this, but it is possible, and there’s a lot role models and best practices that you can find and a lot of ways to avoid the travel for doing it. 

And finally, I mentioned briefly this managing the information growth.  If you look in your data centers, you’re going to find probably the fastest growing part of it is the storage devices that are trying to hold these volumes of information that, in many cases, are required by government regulations and other things to be kept in there.  There are ways of managing that much more efficiently and effectively today that will cut your energy costs and will cut your storage costs and will cut your operational costs about doing it. 

So that’s five or six things that I think you could go back and take as actions for going forward.  So that ends my presentation for this evening, I guess, and we’ll open it up for questions, if anybody has any.

MS. WERTHEIM:  (Inaudible.)  State your name and organization, please.

Q:  Okay.  Andy Bochman (sp), DOD Energy Blog.

MR. RAMSEY:  Hi, Andy.

Q:  Hello.  Great presentation.  Thank you.  Two questions.  One is, there seems to be a million good examples of bad examples of inefficiently run data centers.  Can you point us to – I doesn’t have to be the stats right now, but can you point us to a data center, whether it’s IBM or other, that you sort of hold up as a model for one that’s run really, really right, has been optimized as far as you care to optimize it?

MR. RAMSEY:  Well, first of all, I don’t think this is ever an end game, right?  It’s a continuing process.  In terms of large scale, what we’re doing in our internal data center is probably a good example because we have – let’s say we probably have 15,000, 20,000 servers that we try to optimize.  We did the analyses on them and found that 4,000 of them were easy to migrate early on, so we’ve done a reduction of that. 

The examples I put up on the chart earlier – I’m not going to go back to it – there’s probably another 15 or 20.  I don’t know, do any of them jump out in terms of the – I mean, I think it kind of depends on your – what we tend to do is take what is your size and whatever, and then try to line you up with a reference or something that’s about the same size of what people have gone through in the same industry.  So I don’t know if there’s any one that stands out unless Jim has some.

MR. LOVING:  Well, in terms of our own internal operations, I think Boulder Dam – (inaudible).  We’re getting there.  The public – (inaudible) – service is, I think, another good – (inaudible) – our Raleigh data center.  The other thing that Todd had mentioned, we were the co-founder of an organization called the GreenGrid.org.  It’s 170-plus IT companies and the whole purpose of the organization is to look at best practices on energy efficiency in the data center.  It’s an NGO that can solve the problem, working with DOE and – (inaudible) – on that.  There’s a lot of good examples out on GreenGrid.org, white papers and working – (inaudible).

MR. RAMSEY:  Boulder would be a very good example for you because of the security issues you have to deal with in defense, and they’ve built a kind of a modern data center with a super-raised floor, so you can see kind of the future works going on as a part of doing it, and we can get you some other examples.  Do you have a second question?

Q:  Yes.  Mitzi, do I have permission to ask a second question?

MS. WERTHEIM:  Sure.  Jim, do you have a mike on, so if you answer –

MR. LOVING:  I don’t, but I’ll step over here.

MS. WERTHEIM:  Why don’t you stand up here? 

MR. RAMSEY:  Yes, you might as well stand up.

Q:  Okay.  The setup is far afield from data centers.  There are some new cab or car companies that I know, town-car type companies, that will be usually based on a Prius or some other type of hybrid platform.  And in addition to letting folks, business folks, ride around in hybrid vehicles and save on fuel, they also usually print out for them, as part of their receipt, an itemized report on how much they saved on different things like CO2 which then can be filed back at the headquarters to show that they’re from a corporate social – like you said, a lot of these things line up one way or the other, but some of it gets filed as corporate social responsibility. 

I assume some federal customers and commercial customers use IBM data centers to do some of their data processing.  Is there a way for them to sort of show that they are crunching their numbers on machines that have been made much more efficient, that those reports kick out to them even though they’re IBM machines?

MR. RAMSEY:  I’m not aware that we do it today, but I think we probably have the information to give you that report.  Where it gets a little complicated is if you have your own system that you run, I think we could do that very straightforwardly because we measure all that stuff.  A lot of times, you kind of commingle things in terms of the capacity that you’re using, so it’s almost like cloud computing.  You get a surge of that, and you don’t know exactly what portion is there.  So to the extent you have a dedicated system that’s being operated, or a kind of a protected environment, which we do have in a lot of the military and intelligence things, you could certainly get the data for that.

Q:  Thanks. 

MR. RAMSEY:  All right.

Q:  Yes.  John D. Shilling with the Millennium Institute.  And you had mentioned the case of that one company that saved £20 million or something by turning off its computers.  And I’ve heard a number of other cases where companies discover various ways of saving energy, save money.  And I’m curious, when you’re marketing these various things, why it’s difficult with companies that are supposed to be maximizing profits, that they aren’t eagerly looking for ways of saving large sums of money.  What kind of hurdles do you have to overcome to get them to make more money?

MR. RAMSEY:  The single biggest one is the one I mentioned for IBM and for – I think, I’ve seen this in discussions we’ve had with government almost every time, and that is the energy budget is not collocated with the IT budget, if you will.  So if you’re trying to lower your energy costs, you don’t know what your energy costs are, you don’t know what sort of impact you’re going to have on it, nor do you get the benefit of that. 

And the extra money – when you’re doing the change, there’s kind of a period where you have to spend a little bit more in order to get the benefit downstream and the return comes in somebody else’s budget.  So that’s the biggest problem of how do you get the management system and measurement system to recognize that the benefits are going to occur over here.  The investment needs to come on the left hand.  That’s the single biggest barrier I see. 

Once people see this, it doesn’t take much time for them to begin to see the value of doing it.  But most CIOs, I mean, they feel that they ought to do it, but they also would like to have somebody help them figure out how to do that investment.  That’s the problem you run into, particularly true in government where you have declining budgets that people are dealing with.  They don’t have the wherewithal in their minds to be able to invest, particularly if they see – 

Now, GSA is working on this problem. They’re very well aware of this issue and trying to do some things to – (inaudible).  I think I heard earlier from the Air Force that they’ve tried to figure out a way that they’re going to give you kind of the half benefit, which I think will be a very good motivator to do it. 

Q:  Hi.  Bahri Aliriza with Polytrade International Corp.  I’m also a former IBM systems engineer from way back.

MR. RAMSEY:  Oh, you are.

Q:  I know that IBM has a lot of buildings worldwide, and my question for you is for a green energy technology that would help your buildings, how friendly is IBM as far as working with new inventions or inventions that are – do you have your own research and development or would you be willing to study it and test it yourself?

MR. RAMSEY:  I think we would be interested in anybody who has a proposal that says that you can help us save costs.  We are well out of Mitzi’s not-invented-here mentality – if we ever had it as bad as she said it was – we probably did in certain places, maybe more than I know, but we’re certainly well beyond that today.  So all these things I talked about, the water, the power, we are collaborating with the world on these things.  So we’re not trying to create intellectual property, so we’re trying to figure out ways to help out clients figure out ways to improve their operations.  So we’d be very interested in doing that.

Q:  Okay.  Then we can talk later.

MR. RAMSEY:  We should get Jim.  I can tell you that IBM’s real state strategy has been a tremendous financial boon to the corporation for a number of years.  We are dramatically reducing the buildings because of the mobility I talked about.  We’re taking a lot less expensive space on the outskirts of buildings or whatever.  So there’s a large savings – I don’t know off the top of my head – that we’ve realized by just reducing the number of buildings, the real state costs associated with doing it, but we still have a very significant number of buildings where your technology would be very important for us.

MR. LOVING:  Yes, we had a real estate and site operations.  This isn’t on.  Is this on?  Our real estate and site operations has gone through a couple of phases of how it manages our real estate portfolio worldwide, and they’ve actually characterized our buildings into four categories.  We’ve got office buildings, we’ve got manufacturing sites, we’ve got data centers, and I forget the fourth category. 

So they’ve actually – we have previously outsourced that, but because of the cost drivers that Todd has alluded to, we’ve now got a centralized management with a distributed – a centralized management of the cost – centralized operations, but it’s a big driver in terms of operations. 

So we had to treat it as a strategic asset, which is the answer to the question that was asked earlier about the separation of the costs.  You have to have accountability, and so, whether it be corporate responsibility or energy efficiency, it has to come from the top.  It has to be a strategic initiative.

Q:  If I can ask one more related question – when I was IBM, I had awards for giving out suggestions and ideas for things that can improve energy, any kind of idea that can improve money.  But people that are here, I don’t know if it’s still available for anyone that’s outside of IMB where they can give energy suggestions that maybe they can get monetary –

MR. RAMSEY:  So do we pay outside who comes in with an idea for helping us save?

Q:  If they can prove to you that it saves money and everybody wins.

MR. LOVING:  Write a proposal.

MR. RAMSEY:  Yes, I think anytime we save costs, we’ll be very creative on that.  I don’t know that we have a formal program for doing that, like the internal program you’re talking about, but we certainly have incentives for people to figure out a way to cut costs. 

Q:  Thanks.

MR. RAMSEY:  I don’t know that we’ve thought of it for external.  Yes?

Q:  Certainly, in the mid-’70s and the mid –

MS. WERTHEIM:  State your name.

Q:  Pardon me?

MS. WERTHEIM:  Your name?

Q:  Oh, B.K. Lundy (ph), electrical engineer.  Certainly in the mid-’70s and in the mid-’90s, the utilities had time-of-day pricing for mid- to large-size businesses, and as far as I can see, the businesses didn’t pay any attention, even when costs –

MR. RAMSEY:  Is that true?

Q:  Yes, that’s true.

MR. RAMSEY:  And why don’t I get that today, because they don’t think it’s worth – it won’t change my behavior?

Q:  Well, I think their operations – for example, if one shift manufacturing company wants to work during the day, that’s when people want to work.  So they don’t – it isn’t – the differential in pricing wasn’t enough to incentivize them to work at night, rather than during the day, and office buildings are open during the day.  So they completely shut down at night, but their energy would have been cheaper if they could have used it at night. 

And residences had been offered, in various places, peak-shaving opportunities for their electric water heaters, or air conditioners, and so forth.  And generally, residences don’t sign up for it, and if they do, the utilities don’t utilize it.  So certainly, your ideas are not new, but I think we’ll have to have some greater incentives to actually make them work.

MR. RAMSEY:  Well, you may have more facts than I do on this.  I can tell you, when they offered to our family to have this kind of peak thing, I think almost everybody in our neighborhood took advantage of the thing that came from –

Q:  (Inaudible.)

MR. RAMSEY:  Yes, we have seen in the summer – in the air conditioning, we’ve noticed there’s been some times where they’ve taken advantage of it, but we get a credit for that, I guess.  My opinion is – this is a little off the track of your particular question – but as we do kind of websites for government customers that are always trying to figure out how they’re going to pay for certain things, and we found consumers – if you add $1 to a charge for a license – a license can be $15 dollars, you add a $1 extra charge, they’ll scream bloody murder about why are they paying an extra dollar for doing it?  You take that change down and make it cheaper, they’ll suddenly use that channel – just a difference in $1 will change consumer behavior on a particular transaction. 

So I would be surprised if consumers, if they thought there was this 10 percent savings I talked about, would not react to doing it.  I would also be shocked if a business, even though they’re operating eight hours a day, the problem is they leave lights and everything else all night long.  So if they could see how much energy they’re wasting after hours, they might ask the question, how can I cut costs?

And I’ll tell you today, in the last month, there isn’t a business out there that’s not looking for every way to save cash.  And maybe they won’t three months from now, maybe they didn’t three months ago, but right now, everybody is very, very motivated to do everything they can on preserving cash outlays. 

Q:  I sold energy management systems for a while in the early ’80s and I’d find old ones – I’d find time clocks on heating and air conditioning units that were supposed to keep them off during the day – during the night, when they weren’t used.  Well, they’d be set to turn on at 3:00 a.m. in the morning because somebody once came in at 7:00 a.m. and said, hey, it’s too hot in here or whatever.  And then they’d be set to turn off at like 11:00 p.m. at night because, again, somebody was working in the evening or whatever, or not even used at all.  The time clock was there, but it was 24 hours. 

So as time goes by – and then we were selling more sophisticated systems, but it really took – we’d sell them on, oh, look, you’re going to save all this energy, but it took a manager, an operator of the system, to program it.  So I don’t know how much the companies really did save in terms of dollars, but these things go out of use after a while.  They kind of sneak up on you, of not being really utilized as effectively as you think they might.

MR. RAMSEY:  Well, you’re obviously experienced in the industry and you know the history, but I think today, there will certainly be a lot more attention to it.  And again, I know a lot of consumers who were buying these programmable thermostats in their house.  That’s investment to save power, and I hear lots of the TV stations talking about saving.  Maybe they think they’re doing a public service, but I can’t believe they would have all that stuff on if they didn’t get some feedback that the people were interested in it. 

So I don’t know what the rest of you think, but I think there’s probably maybe more sensitivity today than there was in the ’70s perhaps, and I would hope that with some of the other things that are going on, and the concern about our energy utilization, and we don’t want to be dependent on foreign oil and other things for energy, that people would be much more willing to take advantage of that today.  Companies – I know companies, in most cases, would be – they may decide that they can’t afford the investment to do some of this, or maybe they’ll lose interest, but I certainly think it’s worth us pushing the agenda on it. 

Q:  Adam Siegel, Energy Consensus.  Let me take a moment to do a different response to the previous question, which is, the analysis around the world on real-time feedback shows roughly a 10 to 15 percent reduction in personal household use, Italy, Canada, U.S., if you put a real-time feedback system with some fiscal benefit for it. 

For example, there was one which was – there are variations, but one feedback which is you pay by credit card, so you pay for your energy in front beforehand.  One town showed a 50 percent reduction in the household energy use.  It mounted back up, but two years later, it was about a 15 percent reduction.  So real-time feedback does have an impact. 

And the major change from 15, 20, 30 years ago is what IBM is trying to sell, as well as many other companies in this room, which is the intelligent systems, the management, the monitoring and otherwise.  It is far less an individual engaged, as opposed to a real-time database. 

The question of – we were talking about the agent challenge, that the money isn’t – savings from infrastructure versus the energy accounts.  Let’s do a different one.  One of the challenges is tenant agents of being tenants.  IBM, I assume, has a lot of places where you don’t own the buildings, where you’re tenants. 

MR. RAMSEY:  Correct.

Q:  How do you handle that negotiation, whether you’re the smallest tenant or the largest tenant, of trying to get the landlord to be that agent challenge, or how do you get the landlord to work with you on being smarter in this venue, so you can both benefit?

MR. RAMSEY:  We have a real estate division that does all the negotiations, so I’ve not been party to that, but I can probably guarantee you that they’re trying to go recommend some of these techniques to lower the costs and want to see our lease rates go down as a result of doing this, so I don’t – (inaudible).

MR. LOVING:  Yes, I think the answer is we don’t know, but probably similarly to the way we do procurement.  We streamline our procurement as part of our transformation.  We went to global procurement operations.  We have a set of set of instructions to suppliers, and as a large buyer or renter, we would have some leverage and so perhaps – and I don’t know this – that we have some criteria around LEED certification and other things like that, that if a landlord doesn’t do it, we won’t rent from him, but I can get you an answer to that, because that’s not what we do as our day job.

Q:  Hi.  My name is David James.  I’m will Collective Insight.  I had a question regarding a mobile workforce and I liked how you talked about measurement.  I wonder if you’ve measured the effect on productivity of having people spread out because I have some experience in the programming industry, and I see a big shift in programming going towards – (inaudible) – and teams being collocated.  I wanted to see if you’ve seen an effect, perhaps even negative, and how you mitigate for that when people aren’t collocated.

MR. RAMSEY:  So you’re saying the change of productivity for software coders, for instance, whether they’re collocated or spread out around the world?

Q:  That would be one example, or other knowledge workers.  I think there’s that hard-to-measure value of people working together, and if you have measured that, then how you trade that off against the savings with a mobile workforce.

MR. RAMSEY:  I actually don’t know how mobile we are in the software development area.  I’m looking at Jim because he’s been in several meetings where we were talking about a lot more of these statistics than I am, but we measure our productivity software fairly well.  So I’m fairly certain that we have a view of productivity of different types of software, how it’s done, and how we integrate that. 

My impression – and it’s only an impression because I don’t have the facts here – is that we think with the collaboration tools and everything else we have, we can get a kind of a near-collocated impacted with the tools and capabilities we have, and also, the fact that you can do, to some degree, around-the-clock development, if you will, for some of these things is a very attractive – I think when you have a tight timeframe of getting some stuff done. 

So it’s been a learning process, I’ll tell you.  It just didn’t happen overnight.  We learned the hard way on some things on how you improve stuff, but that’s led to a lot of the tools we use internally that we also sell to clients, but we use it internally to figure out how to make those tools overcome some of those problems.  So I think we’re committed to trying to find ways to make that distributed workforce right.  But if you want, we could probably get some statistics out of our software group on that particular thing. 

On the sales level – and I’m in the sales and marketing organization – we do measure our people on the revenue per headcount, expenses of headcount, all those types of things.  So we actually found an uptake in the productivity of our folks when they didn’t come in the office on a daily basis, and that’s because they were out more with their clients – at least, we think they were out more with their clients.  We didn’t have a camera watching what they were doing, but they seemed to spend more time with their clients and could get a lot of stuff done at their home, that they would have to commute for an hour or two every morning and try to do.  So there was a fairly significant bump in productivity when we went to that. 

And we’re almost on the other end of the problem right now is that particularly when somebody new comes in the organization, it used to be we had this bullpen, we called it, which is where everybody would kind of gather in the morning and get to know everybody and everything.  We don’t have that anymore, and so we’re trying to figure out ways to kind of create this community spirit among people, particularly new people coming into the workforce.  So that’s kind of a new challenge that came out. 

Too much of a good thing creates problems elsewhere, I guess, is one of my management philosophies, and that’s an example of where we’ve got some new challenges developed in that area, particularly with people coming in.  Those of us that have worked together for 25 years know each other already, so we don’t have to see other each day, but if you’re brand new, you don’t know anybody, it’s a big problem that we have to kind of figure out better ways to solve.  Yes?

Q:  Hi.  Rosemary Showstock (ph).  I’m with Nerac.  And I’m also a mobile employee.

MR. RAMSEY:  Oh, how do you like it?

Q:  I’m enjoying working in my bunny slippers, I will tell you that.  This is a little bit tangential – pardon?

MR. RAMSEY:  But you’re not in favor webcams this early, right?

Q:  That’s true.  A little tangential to what you were talking about, that’s obviously been in the green area for a long time.  And the one thing you didn’t bring up – and I just would like an opinion on this – is we’re talking about more mobile, working from home, so you don’t need as much real estate, which means you don’t need a cafeteria, you don’t need cafeteria workers and you don’t need all the other workers associated with supporting an office building, et cetera, et cetera.  Where do you see the green jobs?

MR. RAMSEY:  Where do I see the green – where are there new jobs created by the green phenomena?

Q:  Right.

MR. RAMSEY:  This is my opinion here, so – all right.

Q:  I’m just looking for an opinion.

MR. RAMSEY:  I think there’s an opportunity here to create a new generation of people who can do these assessments and figure out how to work with you through some of the business process transformation that goes with reducing your energy costs, reducing your costs in general as a part of doing it.  We can arm them with tools to go do things. 

In fact, that’s one of the things we’d like to recommend to the Obama administration, as they do this kind of jobs program, is that not just building new highways out there, but we ought to kind of put some intelligence – and again, you can say this is a – we don’t really sell the intelligence that goes into these things, but we think that making these – the infrastructure more intelligent is a smarter way to go in the future than just kind of paving over the old roads that are there today. 

And we think there’s an opportunity to take some number of those jobs and actually train people who are out of work to be able to do that, send them out to companies, be able to provide some financial incentives to those companies to upgrade, reduce their energy utilization, I guess, in general and document that in a way that there may be some sort of tax rebates that would create a big uptake, if you will, of people getting serious about this, because both the stimulus and the availability of people can help them do it. 

I think you can take people on different levels of sophistication.  Business process, reengineering might take a little higher level of skill, but there are certain other things that you could do with people who may not have anything other than a high school education.  They could be very effective in doing those jobs. 

So I think there is some opportunity in this area associated with helping people understand it, and then being a part of the implementation, and it will create, I think, lots of jobs associated with companies who come in with new entrepreneurial ideas of how they can go after this.  If they think people are concerned about it, I think the creativity of the American workforce will come out, just like it did in the ’90s when we went through a massive downsize. 

I don’t know if everyone remembers.  I can remember because IBM went through this.  We were putting out 100,000 people, 150,000 people a month for a period of about a year-and-a-half.  It was just amazing, the downsizing that the major corporations did and it put a lot of skilled workers out there.  And they went to work in kind of some new small businesses, and I think created the boom of the 1990s because they had a lot of small businesses doing much more productive work than people were doing in large corporations. 

So I think that same phenomena is there and the motivation is there to do it, personally.  That’s my view.  I don’t know if anybody else agrees or disagrees, but that’s my view.  Yes?

Q:  Hi.  I’m Phil Collins, Washington, D.C. attorney.  I have a question about IBM and photovoltaics.

MR. RAMSEY:  IBM and what?

Q:  Photovoltaic cells. 

MR. RAMSEY:  Oh, okay. 

Q:  You mentioned that – most of what you were talking about was energy savings, energy efficiency process improvements, but the solar photovoltaic panels can actually create energy.  I was wondering if that is a sideline for the company.

MR. RAMSEY:  I don’t know who that is.  Move away from the mike.

Q:  Is it something you plan to concentrate more on in the future?  Does it come from your chip-making and research in that area, or is it something you plan to focus on?  Is it something you’re using in your facilities?  Do you plan to manufacture it or simply to license the patents?  Also, is the technology in photovoltaics mature enough now that people should invest in it?  Should people hold off for the future, as more improvements continue to come into that field?

MR. RAMSEY:  Well, I think the answer to most of those is probably not, but let me just tell you what I think I know and then we can go from there.  I guess that’s me.  I guess I’m standing close to something.  Is there a microphone around here?  I don’t see a microphone close by.  I’ll stand back here. 

Right now, what we are doing is taking our research technologies and working in collaboration with others to say, could you apply this?  So we’re not planning on building solar cells or doing anything.  We’re making our technology, our research knowledge, available and doing some experiments with other companies.  This is where we collaborate with other companies. 

I don’t know of any instance where we’re putting solar panels in our thing.  You may know something that I don’t know about.  And I think that’s an economic issue that we don’t see the economics yet, but as soon as we see the economics, I can probably guarantee you we’ll start doing some of this. 

So this is not a new line of business for us.  It was just an example I was giving of sharing our technology.  And we have, I guess, an evolving philosophy here that the invention of the future is going to come at the intersection of a lot of things, and this is one where the intersection of what we’re doing in electronics seems to have an application outside electronics that we’re more than happy to facilitate, but I don’t think at this point we see that as a business that we want to get into.  Did that answer some of your questions at least?

Q:  Yes, yes, it did.  Thank you.

MR. RAMSEY:  All right. 

MS. WERTHEIM:  Bob, you’re going to be out last questioner for the evening.

Q:  I’m Bob Hershey.  I’m a consultant.  To what extent are you able to hold meetings online, as opposed to having people come from the various IBM offices to one place to meet?

MR. RAMSEY:  Well, you keep me honest on this, Jim.  I would say to the extent of about 95 percent.  I mean, as I said, I managed a global team for the better part of 10 years and virtually every one of our meetings was online.  I would go, because I thought it important to get out and visit the customers in their environment in the regions of the world at least once a year.  So I would meet with them face-to-face. 

But we don’t even have – we used to have an annual meeting where everybody would come in.  We don’t even do that anymore, and I think, occasionally – meaning once four or five years – we need to do something like that just to kind of refresh it, but we just do conference calls today.  We have conference call call-in numbers that are available 24 hours a day.  You do the same time if you want to talk to somebody.  It’s unbelievable how efficient these tools are for doing that.  So we have very few face-to-face. 

Now, when we’re in Washington, D.C., and we have a team of people working on a proposal, generally, we need to be together, or if we have a bunch of people who are coming into the office, we might physically get together, but I have – all day long, I have conference calls pretty much I deal with, and sometimes there’s somebody in the meeting with me and most of the time, there’s not. 

So we’ve almost taken it to the other extreme.  As I mentioned earlier, I sometimes worry about do we know who the other person is, but we seem to be able to get along.  So we have very, very few face-to-face meetings relative to the number of conference calls and everything else we have today. 

Okay.  Well, thank you for your attention.  I’m amazed so many people stayed here, so there must be drinks afterward for free or something to keep you all here.  (Laughter.)  So thank you very much.  I appreciate it.  (Applause.) 

Oh, wait a minute.  Mitzi has the final say, of course.

MS. WERTHEIM:  Right.  I want to remind you that it’s going to be at L’Enfant Plaza in the second Monday in January.  I want to thank Todd for doing a truly fabulous job.  Maybe I left at the wrong time. 

Anyway, I also want to thank the support we get from CNA, from Mazzetti and Company, and also from the Energy Consensus.  It’s a group that provides an enormous amount of free support to what we’re doing, a tremendous amount of ideas and I’m grateful for everyone who is in the Energy Consensus. 

Have a wonderful holiday.  See you in ’09 and take care of yourself.  Don’t get stuck in the snow.  There are big snow storms coming.  Thank you.  Good night. 

(Applause.)

(END)

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120808 Transcript.pdf