2023 Predictions: The Energy Crisis Fuels Cloud Consumption


Go back to the previous video in this series, 2023 Predictions: Digital Spend is Not Discretionary.

Paul Gottsegen

Let's move into your prediction number two. So. interesting, everybody talks about cloud. We care about cloud and people recognize cloud has been a key driver for many years and continues to gain momentum. I haven't heard much about this connection to energy in the way you stated it. So, talk a little bit further. What's the connection with energy?

Of course, you're there in Europe where it's even more top of mind, though it's top of mind everywhere. You're probably on the cutting edge of how clients are thinking about energy and what the connection to cloud is there.


Steve Hall

Yeah, it is. First of all, energy prices have absolutely doubled across Europe. I know we're in the States this week where gas or petrol is $3.54 a gallon. In the UK or in Germany or across the world right now, that's $2 a liter now, which works out to be $9.45 a gallon. Think about what it means from a consumer standpoint. Now explode that into the data center costs. And what we're seeing is an 80% cost increase for power consumption within the data centers. We're honestly seeing bills just doubled for power, and we don't see a quick end to this.

You couple that with agreements from Paris Accord, the latest COP, how we think about climate change and what we're doing. We've got to get better dollars on the energy. We've got to reduce carbon emissions. We've got to be able to get better control of the cost there. And quite frankly, the hyperscalers are well skilled in this. The hyperscalers have much more energy efficient solutions, more carbon neutral solutions, quite frankly. And the energy costs in the cloud are significantly lower than the energy costs within the internal datacenter. We're putting that together to drive for that new view of what they think and how they drive that forward.

Now, it's interesting because they've also done a lot of studies for this. Microsoft, several years ago, sunk a data center in the North Sea, started processing and saying, hey, what could we do from a cooling perspective, which is a big cost too for the data center, if we drop a data center into the North Sea and let the water naturally cool it. Incredible results: up time went up, costs were dramatically dropped, the carbon emission footprint was dramatically different.

So, lots of good stories and good anecdotes of what we're seeing with the cloud providers as it relates to the energy consumption and how we think that will drop, quite frankly, going forward for a lot of enterprise clients.


Paul Gottsegen

Okay. Very interesting. And yeah, I would shudder to pay $10 a gallon for gas. You're right. I can't even imagine.

So hey, let’s just keep going on cloud. I know another topic you referenced which might not be directly tied to energy is this industry verticalization concept as it applies to cloud, and I know the hyperscalers and many others are putting together these industry cloud solutions. This is something that is definitely real. It took shape in 2022. So, talk about where industry cloud goes in 2023 related to this cloud push.


Steve Hall

Yeah, I love this trend, and it's a great question, Paul. If you think about the cloud over the past five years, the real push has been getting workloads and consumption. And then, you know, you sort of go back to 2009, things started really coming. The last five years have really been acceleration of workloads.

That's been a lot of heavy lifting, cloud-native apps and everything else. What we see now because of the regulatory environment, data sovereignty and lots of associated issues, is that the hyperscalers are working directly with GSIs in a really mutual way to say, “Let's have specific solutions for healthcare. Let's create a cloud solution that tackles healthcare directly, where we can make sure we've got a safe, HIPA-compliant, regulatory-compliant environment, and we can have targeted solutions that may be heavy on analytics or create different solutions where we can process patient data in a secure environment.”

These industry cloud solutions are allowing organizations to come together. We used to call them community clouds, but now they're really, truly industry solutions where the hyperscalers are also creating capabilities to better exploit the capabilities from a technology standpoint to go forward with it. We're seeing it in healthcare, we're seeing it in insurance, we're seeing it in financial services. I think you're going to see it in a lot of different industries where it just makes sense.

Oil and gas industry is a natural one, you know. How do you bring together resources to really help on the analytics on the upstream side of it or the exploration side of it? There will be a lot of different solutions. Hyperscalers and GSIs are coming together to solve that. It is going to be a great use of our resources.

Continue to the next video to dive into Trend #3: The future of work is digital.


About the authors

Paul Gottsegen

Paul Gottsegen

Paul is Partner and President, ISG Client Experience, managing the firm’s marketing activity, including demand generation, branding and communications. From 2019 to 2023, Paul led the ISG Research business to great heights and continues as Chair, ISG Research.

The first 20 years of his career, Paul was a classic product marketing leader for PC hardware, including launching the industry’s first network servers. He has since applied that product marketing experience to CMO roles in large services firms. While marketing is his “center of gravity,” he has led large sales organizations and has been a general manager with full P&L responsibility.

Prior to ISG, he was the Chief Marketing Officer for Mindtree and Infosys, completing end-to-end branding and marketing turnarounds. As Vice President of Enterprise Marketing at HP, Dell Inc., and Compaq earlier in his career, Paul led product marketing, revenue marketing and enterprise alliances for the network server businesses. As owner of Compaq’s largest P&L, Paul led 40 percent annual revenue growth per year.

Paul is Board Chair of the Gastric Cancer Foundation. He holds a bachelor’s degree in computer science from Brandeis University and a master’s degree in business administration from The Wharton School.
Steve Hall

Steve Hall

What he does at ISG

As the leader of ISG’s business in EMEA and an Executive Board Member, Steve provides strategic insight and advice to help ISG’s clients solve their most critical business challenges, helping them adopt and optimize the technology and operating models they need to compete successfully. In particular, he uses his long experience and broad expertise to challenge and inspire them to think about their risks and opportunities in new and unexpected ways.

Past achievements for clients

Steve leads his team’s engagement with clients with an industry-recognized and highly valued perspective on the most important trends in business and technology. He asks and answers the big questions: Why do you need to transform? What’s your best way forward? What do you need to accelerate? And where should you invest your technology dollars to make it all happen?

Among his many client success stories, his ability to take in the big picture, define the problem and connect the dots to the right solutions helped one legacy postal and shipping giant transform itself into a modern logistics powerhouse. He also guided a global energy industry leader through a complex operating model and IT provider transition, helping them see past the obvious cost cutting measures to identify the root causes of their challenges—and delivering savings far beyond what they had imagined.