(gentle instrumental music) >> Okay, we're back with Tom Christensen who's the global technology advisor and executive analyst at Hitachi Vantara. And we're exploring how Hitachi Vantara drives customer success, specifically with partners. You know Tom, it's funny, back in the early part of the last decade, there was this big push around, remember it was called green IT, and then the 07-08 financial crisis sort of put that on the back burner. But sustainability is back, and it seems to be emerging as a mega trend in IT. Are you seeing this? Is it same wine new label? How real is this trend and where's the pressure coming from? >> Well, we clearly see that sustainability is a mega trend in the IT sector. And when we talk to CIOs or senior IT leaders or simply just invite them in for a round table on this topic, they all tell us that they get the pressure from three different angles. The first one is really end consumers, and end consumers nowadays are beginning to ask questions about the green profile and what are the company doing for the environment. And this one here is both private and public companies as well. The second pressure that we see, is coming from the government. The government thinks that companies are not moving fast enough, so they want to put laws in that are forcing companies to move faster. And we see that in Germany as an example, where they are giving a law into enterprise companies to follow the human rights and sustainability, three levels back in the supply chain. But we also see that in EU they are talking about a new law that they want to put into action, and that one will replicate to 27 countries in Europe. But this one is not only Europe, it's the rest of the world where governments are talking about forcing companies to move faster than we have done in the past. So we see two types of pressure coming in, and at the same time, this one here starts off at the CEO at a company, because they want to have the competitive edge and be able to be relevant in the market. And for that reason they're beginning to put KPIs on themselves as the CEO, but they also are hiring sustainability officers with sustainability KPIs. And when that happens, it replicates down in the organization and we can now see that some CIOs, they have a KPI, others are indirectly measured. So we see direct and indirect. The same with CFOs and other C levels, they all get measured on it, and for that reason it replicates down to IT people. And that's what they tell us on these round tables. I get that pressure every day, every week, every quarter. But where is the pressure coming from? Well, the pressure is coming from end consumers and new laws that are put into action, that force companies to think differently and have focus on their green profile and doing something good for the environment. So those are the three pressures that we see. But when we talk to CFOs as an example, we are beginning to see that they have a new score system where they put out request for proposal, and this one is in about 58% of all request for proposal that we receive, that they are asking for our sustainability take, what are you doing as a vendor? And in their store system, cost has the highest priority and number two is sustainability. It weighs about 15, 20 to 25% when they look at your proposal that you submit to a CFO. But in some cases the CFO say, "I don't even know where the pressure is coming from. I'm asked to do it." But they're asked to do it because end consumers, laws, and so on, are forcing them to do it. But I would answer, yeah sustainability has become a maker trend this year and it's even growing faster and faster every month we move forward. >> Yeah, Tom, it feels like it's here to stay this time. And your point about public policy is right on, and we saw the EU leading with privacy and GDPR, and it looks like it's going to lead again here. Just shifting gears, I've been to a number of Hitachi facilities in my day. Odawara is my favorite, because on a clear day you can see Mount Fuji but other plants I've been to as well. What does Hitachi do in the production facility to reduce CO2 emissions? >> Yeah, I think you're hitting a good point here. So what we have, we have a facility in Japan and we have one in Europe and we have one in America as well, to keep our production close to our customers and reduce transportation for the factory out to our customers. But you know, in the EMEA region, back in 2013, we created a new factory. And when we did that, we were asked to do it in an energy neutral way, which means that we are moving from being powered by black energy to green energy in that factory. And we built a factory with concrete walls that were extremely thick to make it cold in the summertime and hot in the wintertime, with minimum energy consumption. But we also put 17,000 square meters of solar panels on the roof to power that factory. We were collecting rain water to flush it in the toilet. We were removing light bulbs with LED. And when we send out our equipment to our customers, we put it in a rack, instead of sending out 25 packages to a customer. We want to reduce the waste as much as possible. And you know, this one was pretty new back in 2013. It was actually the biggest project in EMEA at that time. I will say if you want to build a factory today that's the way you are going to do it. But it has a huge impact for us when electricity is going up in price and oil and gas prices are coming up. We are running with energy neutral in our facility, which is a big benefit for us going forward. But it is also a competitive advantage to be able to explain what we have been doing the last eight, nine years in that factory. We are actually walking the talk, and we make that decision, even though it was a really hard decision to do back in 2013. When you do decisions like this one here, the return of investment is not coming the first couple of years. It's something that comes far out in the future, but right now we are beginning to see the benefit of the decision we made back in 2013. >> I want to come back to the economics, but before I do, I want to pick up on something you just said, because you hear the slogan, "Sustainability by design." A lot of people might think, "Okay, that's just a marketing slogan to vector into this mega trend," but it sounds like it's something that you've been working on for quite some time based on your last comments. Can you add some color to that? >> Yeah, so, the factory is just one example of what you need to do to reduce the CO2 emission in that part of the life of a product. The other one is really innovating new technology to drive down the CO2 emission. And here we are laser focused on what we call decarbonization by design. And this one is something that we have done the last eight years, so this is far from new for us. So between each generation of products that we have put out over the last eight years, we've been able to reduce the CO2 emission by up to 30 to 60% between each generation of products that we have put into the market. So we are laser focused on driving that one down but we are far from done, we still got eight years before we hit our first target net zero in 2030. So we got a roadmap where we want to achieve even more with new technology. At its core it's a technology innovator and our answer is to reduce the CO2 emission, and the decarbonization of the data center is going to be through innovating new technology because it has the speed, the scale, and the impact to make it possible to reach your sustainability objectives going forward. >> How about recycling? Where does that fit? I mean, the other day it was... A lot of times at a hotel you used to get bottled water now you get plant-based waters in a box and so we are seeing it all around us. But for a manufacturer of your size, recycling and circular economy, how does that fit into your plans? >> Yeah, let me try to explain what we are doing here because one thing is how you produce it. Another thing is how you innovate all that new technology, but you also need to combine that with service and software, otherwise you won't get the full benefit. So what we are doing here when it comes to exploring circular economics, it's kind of where we have an eternity mindset. We want to see if it is possible to get nothing out to the landfill. This is the aim that we are looking at. So when you buy a product today you get an option to keep it in your data center for up to 10 years. But what we want to do when you keep it for 10 years, is to upgrade only parts of the system. So let's say that you need more CPU power, you just switch the controller to next generation controller and you get more CPU power in your storage system, to keep it those 10 years. But you can also expand with new disk media, flash media, even media that doesn't exist today will be supported over those 10 years. You can change your protocol in the front end of your system to have new protocols and connect to your server environment with the latest and greatest technology. See, the benefit here is that, you don't have to put your system into a truck and a recycle process after three years, four years, five years, you can actually postpone that one for 10 years. And this one is reducing the emission again. But once we take it back, you put it on the truck and we take it into our recycling facility. And here we take our own equipment, like computer network and switches, but we also take competitive equipment in and we recycle as much as we can. In many cases, it's only 1% that goes to the landfill or 2% that goes to the landfill. The remaining material will go into new products either in our cycle or in other parts of the electronic industry. So it will be reused for other products. So when we look at what we've been doing for many years that has been linear economics, where you buy material, you make your product, you put it into production, and it goes into the landfill afterwards. The recycling economics is really, you buy material, you make your product, you put it into production, and you recycle as much as possible. The remaining part will go into the landfill. But where we are right now is exploring circular economics, where you actually buy material, make it, put it into production, and you reuse as much as you can. And only 1-2% is going into the landfill right now. So we have come along, and we honestly believe that the circular economics is the new economics going forward for many industries in the world. >> Yeah, and that addresses some of the things that we were talking about earlier about sustainability by design. You have to design that so that you can take advantage of that circular economy. I do want to come back to the economics, because in the early days of so-called green IT, there was a lot of talk about, "Well I'll never be able to lower the power bill, and the facilities people don't talk to the IT people," and that's changed. So explain why sustainability is good business, not just an expense item, but can really drive bottom line profitability. I understand it's going to take some time, but help us understand your experience there Tom. >> Yeah, let me try to explain that one. You often get the question about sustainability. Isn't that a cost? I mean how much does it cost to get that green profile? But you know, in reality, when you do a deep dive into the data center, you realize that sustainability is a cost saving activity. And this one is quite interesting, and we have now done more than 1,200 data center assessment around the world, where we have looked at data centers. And let me give you just an average number from a global bank that we work with. And this one is not different from all the other cases that we are doing. So when we look at the storage area, what we can do on the electricity by moving an old legacy data center into a new modernized infrastructure, is to reduce the electricity by 96%. This is a very high number, and a lot of money that you save, but the CO2 emission is reduced by 96% as well. The floor space can go up to 35% reduction as well. When we move down to the compute part, we are talking about 61% reduction in electricity on the compute part, just by moving from legacy to new modern infrastructure, and 61% on the CO2 emission as well. And see this one here is quite interesting, because you save electricity and you do something really good for the environment at the same time. In this case I'm talking about here, the customer was paying 2.5 million U.S. dollar annually, and by just modernizing that infrastructure, we could bring it down to 1.1 million. This is 1.4 million savings straight into your pocket and you can start the next activity here, looking at moving from virtual machine to containers. Containers only use 10% of the CPU resources compared to a virtual machine. Move up to the application layer if you have that kind of capability in your organization. Modernizing your application with sustainability by design and you can reduce the CO2 emission by up to 50%. There's so much we can do in that data center, but we often start at the infrastructure first and then we move up in the chain and we give customers benefit in all these different layers. >> Yeah, a big theme of this program today is what you guys are doing with partners. Are partners aware of this in your view? Are they in tune with it? Are they demanding it? What message would you like to give the channel partners, resellers, and distributors who may be watching? >> So the way to look at it is that we offer a platform with product, service and software, and that platform can elevate the conversation much higher up in the organization, and partners get the opportunity here to go up and talk to sustainability officers about what we are doing. They can even take it up to the CEO, and talk about how can you reach your sustainability KPI in the data center. What we've see in this round table when we have sustainability officers in the room, is that they are very focused on the green profile, and what is going out of the company. They rarely have a deep understanding of what is going on in the data center. Why? Because it's really technical and they don't have that background. So just by elevating the conversation to these sustainability officers, you can tell them what they should measure and how they should measure that. And you can be sure that that will replicate down to the CIO and the CFO, and there will immediately be a request for proposal going forward. So this one here is really a golden opportunity to take that story, go out and talk to different people in the organization, to be relevant, and have an impact, and make it more easy for you to win that proposal when it gets out. >> Well, really solid story on a super important topic. Thanks Tom, really appreciate your time and taking us through your perspectives. >> Thank you Dave, for the invitation. >> Yeah, you bet. Okay, in a moment we'll be back to summarize our final thoughts, keep it right there. (gentle instrumental music)