Dean Nelson on Combatting Digital Infrastructure Waste

ADAPT’s Director of Strategic Research (Matt Boon) spoke to Virtual Power Systems’ CEO, Dean Nelson, to hear his take on the current state of global infrastructure.

In reflection of 2.4% global energy data centres draw annually, Dean presented actions leaders can take today to combat growing digital waste. Investing in renewable energy, creating a ‘carbon sticker’ (similar to a nutrition label, but for data centres), and a carbon tax were his most urgent solutions.

In the interview, Dean posited that digital colleagues (cognitive AI assistants) are the only solution to the worsening skills shortage.

He also discussed the most effective ways infrastructure teams can communicate the value they bring to the business. In doing so, this would present opportunities to build trust with the board and gain buy-in for IT initiatives.

Matt Boon:

Dean, it’s hard to believe it was two years ago you and I stood together on stage at Connected Cloud & Data Centre Edge on the Gold Coast, back in March 2020. I don’t think even you or I, as we did the old elbow bumps, could have foreseen what was ahead of us.

Welcome and thanks for joining me today for something of a virtual fireside chat to really share some perspective as, if you like, a precursor for a more detailed conversation you and I are going to have live and virtually direct at the ADAPT Connected Cloud & Data Centre event to be held in Sydney on March the 23rd.

Before we get started, maybe tell me and the audience, what have you been up to the past couple of years, Dean?

Dean Nelson:

Like everyone else, I’ve been surviving the pandemic, so locked at home was an interesting year, but I took advantage of it in a big way.

In the startup I’m at, we shut down our offices. We suddenly were able to hire talent everywhere instead of having to focus on the expensive Bay area. We re-platformed everything, we rewrote every line of code, so it suddenly was when life gives you lemons, you come back and make lemonade. It was a very productive timeframe.

I’m travelling quite a bit now again. So with the Infrastructure Masons and with VPS, customer visits, partner sites and of course all of our events that are going on and I was just in Hawaii for nine days with dozens and dozens of meetings and hundreds of people and I didn’t get COVID so everything’s good.

Matt Boon:

That’s pretty good. That’s a good outcome when you have so many meetings and you walk out of there unscathed in many ways. It’s interesting so getting onto topic of the session and the event that we’re having in a few weeks.

Now when I think about infrastructure, I immediately get images of servers, storage, networking and the like, the hardware, the tin and quite often in conversations we have.The infrastructure itself can be seen if you like, as the antithesis of what digital really needs to be and what people think it needs to be is probably a better way of putting it.

Yet you have been discussing, and I think, promoting quite heavily this concept of digital infrastructure. Can you maybe share some perspectives on this? What is digital infrastructure?

Dean Nelson:

Yes, I’ve been spending quite a bit of time on this because there’s a big problem that we have when it comes to digital infrastructure. Nobody knows how big it is. Sounds simple, but if you were to ask, you get wild variations of size.

What I did for the last seven months is I jumped in with a bunch of industry folks and including Rob Aldrich which is the chair of the Sustainability Committee of the Infrastructure Masons, and we started sinking our teeth into this problem.

The reason is that we can’t show the progress we’re making if we don’t have a baseline; we don’t have a starting point. To do that, we have to have a definition of what our actual industry is.

What is digital infrastructure? For us, we made it really simple so that real estate technologists, layman could understand it.

Digital infrastructure is a collection of data centre locations that deliver electronic services to people and machines.”

Very simple. Those are locations where you and I are consuming electronic services.

Machines are using it as well because we’re in that age. To do that now that with that definition there’s a big, a couple set of words in there, data centre.

We had to double click into that to understand what are data centres. Data centres are real estate locations again that house IT equipment that process, store and transmit data.

Again, very simple. We’ve got this great big portfolio locations that deliver services to people and machines and they are classified as data centres because they do one or more of these three things. They process that data, they store that data or they transmit that data simple. Very, very simple.

Then from that point, we needed to understand one other thing, how do you classify what’s inside of digital infrastructure? We said data centres but what’s a data centre? If it’s those real estate locations then we have to classify what types.

We came up with three categories and this is very different than what we’ve done before. Those categories are providers, networks and crypto.”

This was a very interesting thing. For us the data centres that are providers include cloud and hyperscale, enterprise, co-location, ads.

Everybody that’s providing services to themselves and their company and or to others like co-location companies, cloud providers, et cetera and that is a big category. That includes all the hyperscalers Google, Microsoft, Amazon as well as the social media things like Meta and TikTok, et cetera it’s just a very large portfolio.

Then we also have networks and networks ironically was the largest category. Think of these as carrier hotels where all the exchanges happen. Internet exchange, fixed networks, mobile networks, towers.

Everywhere in which when you pick up your device and it leaves your device, it hits the edge, the demarcation point into digital infrastructure and everything that happens inside is a portion of those digital services, that includes networks.

On top of that, crypto is the same thing. It’s all based on blockchain technology and the largest consumer is Bitcoin and Bitcoin at 80% of that, it was the third largest categories.

Once we have that you start to classify these in, we can start to look at the size of our industry.

The punchline is this; there are 7 million data centre locations. They have 105 gigawatts of built capacity, power capacity. They consume 594 terawatt hours of energy and that represents 2.4% of the global energy draw.”

That’s the digital infrastructure that we all use every day everywhere.

Matt Boon:

No, that’s very good. When you look at that energy use side of things, do you think that’s one of the most important reasons that we should be thinking differently about this digital infrastructure of today and tomorrow?

Clearly, that’s a very tangible challenge we need to overcome, a tangible benefit we can achieve as well. As we think about that, where do you really see the starting point, if you like, Dean? Where do we start with this?

We can talk about outcomes but is it more of assessing almost having a reality check of where we are today but what’s the starting point for organisations as they think about this digital infrastructure journey of the future?

Dean Nelson:

For us, in iMasons we’re uniting the builders of the digital age and those people are running some of the biggest portfolios in the world, including cloud, including enterprise that they’re serving themselves and including co-location companies that are housing tonnes and tonnes of companies including cloud.

What we wanted to be able to do is first look at the size of that industry, define it, understand the size because inside of that portfolio 105 gigawatts, 37 gigawatts is unused. Unused globally.

When you think about that, when you calculate it 220 billion dollars worth of investments that are not yielding the returns that they could.”

When you start to look at it from a revenue standpoint, those are tens of billions of dollars of revenue left on the table. There’s an economic aspect of that but there’s also a sustainability side.

From the ecology, we’re not using what we have as efficiently as we could, but we didn’t know that before because we weren’t really measuring it. We get that started. Now, remember when you’re in cloud and you’re utilising cloud, cloud optimises for what they do. Why?

Because there’s an economic incentive and they’re also driving sustainability. They want high utilisation. The more people we can share on equipment that’s why virtualisation, the more efficient it would be.

When you’re in cloud, you’re automatically getting a bonus from a sustainability standpoint but you’re also duplicating things all over the place like you’d have on your own.

There’s a whole bunch of digital waste that goes on. There’s a whole bunch of inefficient code.”

When you start to look at your entire portfolio and what resources you’re consuming, there’s a significant amount of opportunity but there has to be a forcing function and motivation for people to do something and usually that’s either economic driven to begin with or some other business outcome that allows the company to take advantage of the changes and the effort that you would be putting in to achieve them.

Matt Boon:

If you like, we’re putting the onus of responsibility now on the cloud providers. When we think about the carbon footprint, the sustainability, it’s all very well in good thinking we are doing a great job here but we’re not really holding them to account, are we? Perhaps as effectively as we should be.

Dean Nelson:

I honestly think that probably the most progressive companies in our industry right now are the cloud players and they should get a lot of credit for it. The reason is that they’ve seen this for the last decade and they’ve made major commitments.

For example, the largest purchasers of renewable energy in the world are the cloud players, starting with Google, Amazon, Microsoft, Facebook, or Meta, Apple. They all put in billions and billions of dollars to go back and get source energy.”

The thing that we’re missing here is that’s only a part of the carbon story. When you look at digital infrastructure, now that we’ve framed it up, if we were to align as an industry on that standard and we’ve started to now focus on what the embodied carbon and the consumed energy and its associated carbon was, we could have real-time tracking of the carbon footprint for digital infrastructure globally.

Now cloud again, they’re the leaders when it comes down to efficiency and speed, and utilisation in those things and lots of laggards are coming in and taking those things and applying them.

When we start to look at the whole thing, everybody now sees that what you can measure, you can change, and we haven’t been able to measure our industry before. I have to say; as technologists, this is like 101. We should be able to use technology to drive the outcomes we’re looking for, which for us, everybody’s aligning around sustainability and how we can do our part to help the planet.

Even though we’re 2.4% of a global energy draw, we will increase because by the way there’s a forecast of 20,000 megawatts in new capacity over the next four years that will be deployed on top of the 105.”

That 20 gigawatts is associated with India, Latin and Africa. If we perpetuate the problems we have here, we have the same inefficiencies around the world. We have a great opportunity or to come together to do something different about that.

The concept here that I’m thinking is that, I wrote an article about this in Interio Global magazine and it has the concept of a carbon sticker, a carbon sticker. Imagine you have a nutrition label inside of a food item that you go in and buy at the store. You know what’s in it.

You know the salt; you know the sodium or all the other elements. What if you knew the embodied carbon? This is concrete, steel, plastics, copper. You knew what was built and from there you now have a base embodied carbon for the data centre. Then you have the equipment inside of it that’s consuming energy and you know that source energy.

You can have a real-time accounting of embodied plus source energy and you could have now a carbon tax that’s associated with any traffic that’s going through that data centre.”

Remember there are 7 million locations. Every one of them has a unique street address which means we can get rid of duplication.

That means that that data centre will have a specific carbon footprint that could be registered to be able to know in real-time what carbon is being emitted for the actual consumption of digital services. That concept for me, is the way we really move the needle.

Matt Boon:

If we really looking at that very granular level it’s quickly important as you say, if we have visibility we can then measure it effectively.

That gives us the visibility we need to measure and then act effectively on this as well. Shifting gears a little bit now Dean, as well as leading Infrastructure Masons you’ve been responsible for several very large global initiatives within large global organisations Uber Metal, eBay foundational services, now CEO at Virtual Power Systems.

I’d love to get some of your thoughts as a leader within these organisations. We are seeing one of the most significant skill shortages we perhaps ever seen here in Australia. We’re so heavily reliant on immigration our border has been shut for the best part of two years now.

I’d love to get a sense from you is how can technology itself help us overcome these ongoing challenges rather than perhaps exacerbate them?

If we throw lots more technology at things, we need more resources to manage and that sort of thing.

How do we balance the need for resources with the ability of technology to help us overcome some of those challenges, do you think?

Dean Nelson:

When I was in Sydney with you guys on the Gold Coast a couple of years ago, I threw out some numbers. If you think about it, 8 billion people on the planet we’re going to have 130 billion things and there are a trillion sensors.

The punchline in this is that we don’t have enough people on the planet to be able to serve what’s here and what’s coming. We can’t just count on people doing all the work.

What we need to do is augment the people with digital colleagues and the ability to leverage to technology in that manner to enhance the workforce.”

I’ll give you an example on edge data centres. There are 7 million data centres today. There’s going to be millions and millions more because we’re going to be rolling out these smaller modular things all the way down to the street corners.

There’s going to be one kilowatt worth of a data centre sitting on the street corner, serving everything that is an autonomous vehicle and all that. Well, guess what? We’re not going to have enough people to go back and service all those, we need to optimise all of it.

There’s no reason why we can’t have digital colleagues that are watching everything and dynamically adapting to this because those colleagues can be experts in workflow management, in break fix, in ticketing, in all the other aspects as we call this basic automation but imagine a cognitive AI that allows you to be able to do that.

The only way that we’re going to be able to solve this talent shortage is by accepting the fact that there are only so many people that we’re going to be able to throw at the problem.”

We need to augment it with more people and the people that we are throwing, we need to reskill them in the ways to take full advantage of those digital colleagues and this technology that’s going to help them accelerate and basically have higher ratios of what they can support.

To me, this is one of those realities that people have a hard time facing. I’ll just keep either throwing money at it or I’m going to throw people at it. You’re going to run out of one or both.

Matt Boon:

I like that concept of the digital colleague. We hear a lot about digital twins but I like digital colleague sounds good to me as well, Dean.

Now over the past two years, two or so years since you and I met, I’ve hosted many executives. We’ve talked about a lot of things here today, but many of the audience will have a connected cloud and data centre are struggling if you like to show value.

We use the old metrics, we have ROI, we have TCO and the like. Do you think those metrics are good enough? Are they really the best way for us as leaders of digital infrastructure into the future to show value back to our organisations, the CEO and the board and the like.

Dean Nelson:

For me personally I found, especially in the last decade that the amount of work that you put into showing metrics, if you don’t show something that shows the impact to the business, it’s almost wasted effort.

For example at eBay, if you didn’t have something that enabled the people on the platform to have higher engagement, it really wasn’t a lot of value. On Uber, if you didn’t have a way in which you could accelerate the amount of volume on the platform, more trips, more food delivered.

More transactions that are happening at a lower cost, it’s really not that interesting. The whole point is engagement and experience and every business has this. When you’re delivering technology, it’s not just deliver technology and try to do it at the lowest cost.

You’re trying to deliver an experience that’s going to enhance whatever metrics that your company is really caring about.”

PayPal is a perfect example of it. How do you make the payment systems where it’s second nature and simple when everybody just does it automatically?

You guys had Sri Shivananda in a virtual conference before. Sri’s amazing and he’s a technologist but he’s a business person. He’s a business person that applies technology to enhance the business. He happens to have the title of CTO.

Everybody needs to think in that manner that how are you adding to the business itself? ROI, TCO, et cetera. Yes, great metrics underneath but in the end of it, what do they translate to?

Engagement, acceleration, market penetration. Those things are what matter and if you can’t show your association to those, you’re less valuable.”

Matt Boon:

It’s interesting. We need to meet in the middle somewhere because we hear time and time again that lack of digital literacy at the CEO and the board is causing challenges for technologists but then at the same time, lack of business acumen at the technologist level is causing many problems as well. We need to meet somewhere in the middle is key here at the end of the day.

Dean Nelson:

There’s one story you just reminded me of, Bob Swan was the CFO at eBay. He was also the CEO at Intel. As CFO, I spent a lot of time with him because I spent a lot of money on infrastructure.

He gave me a compliment that I’ve never forgotten, you see he said, “you make the complex simple.”

You’re able to go back and help me understand analogy wise, et cetera, what this thing means that I don’t need to understand the technology and with that, that builds trust. That build the ability to grease the skids for investment.

I remember when we did the eBay/PayPal split, I walked in with a budget that we had to rapidly put back together and he approved it on the first pass. The reason is, there was five years of history and trust that was built and I’m saying, I believe this is how we’re going to do it and we’ve got a 10 month timeframe, this is the only way it’s going to happen and he’s like, ‘let’s do it.’

To me, that’s where he understood what value we brought, he understood that we’d optimised things in such a good way already that now is like, let’s go make eBay and PayPal standalone companies so that they can separate and run themselves.

Huge project but to me it was still that ability to be able to have a conversation that isn’t making the other persons eyes typically to glaze over. It took me a while to learn how to do that.

Matt Boon:

It’s certainly an art form and a lot of trust involved there as well Dean, at the end of the day is critical.
Dean, as always, a pleasure to chat and debate these topics and indeed much more. We and the audience in general, look forward to seeing you virtually on stage next month. Thank you for joining me here today.

Dean Nelson:

Absolutely. I’m looking forward to seeing you. Wish I could be there in person but we’ll do the next best thing.

Matt Boon:

Next best thing, the borders are opening, Dean. We’ll see you here again soon hopefully.

Dean Nelson:

Excellent. Gold Coast, here I come.

Dean Nelson virtually presented on Infrastructure and Skills in 2022 at ADAPT’s Connected Cloud & DC Edge event for Australia’s executive leaders.