It’s been a little while since I wrote about the impact of energy costs on business, but just because I have been silent doesn’t mean the issue is quiescent — just the opposite. Demand is stronger than ever and supply is trying to catch up, but it will fail.
The result will be higher energy and transportation costs in the year ahead, and those higher costs could upset an already sluggish recovery. To ward off a nasty surprise, companies need to find more ways to reduce business process dependency on energy and transportation. It also puts more emphasis on the front-office solutions that have come to market in the last few years that help in many cases to accomplish those goals.
Let’s unpack this.
Drying Up
According to Brian Hicks at the Energy and Capital newsletter and author of Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century, peak oil didn’t go away, it’s still with us. As a refresher, peak oil means that the planet’s ability to produce oil (supply) is receding as demand continues to advance. Countries like Brazil, India and China are entering the middle class and demanding the cars and lifestyles of that status and that means greater demand for energy.
“The 20 largest oil fields in the world account for roughly 25 percent of total global oil production. The majority of these giants are already in decline,” Hicks notes in a recent publication. That’s not a very comforting thought. Some will say that hydraulic fracturing in the U.S. is producing a bonanza in new oil and gas discoveries, and they are right. The flip side of the coin, however, is that the new finds are simply replacing the declines elsewhere. Energy is one big fungible asset, and you need to think about net capacity — and that simply places us on a treadmill.
I am not going to argue about the benefits and advantages of other energy sources or of greater or lesser exploration. You can find lots of information online. Regardless, oil is primary, and the story is worrying — oil is harder to find and extract, which means the costs continue to rise, and that’s reflected at the pump.
Reducing Demand
This is why front-office technology is so important, in my view. Many of the business processes now mediated by things like social media are replacing energy-gobbling practices like long-distance travel for sales calls and inefficient marketing campaigns. When travel costs become highly variable as they are now when energy costs are starting to spike, those costs eat into margins and make profits harder to come by. Without profits, companies become more wary of hiring new people and an economic downturn can begin or accelerate.
Ironically, slower economic activity causes energy prices to moderate and the boom-and-bust cycle renews. This kind of rapid cycling through highs and lows is no way to run an economy, though, and that’s why business needs to do everything it can to conserve cash by conserving energy.
This is all good news for the CRM industry. As collaboration software makes it easier to get things done without moving around so much, business benefits. As social technologies help spread the word about features, functions and benefits, less face-to-face selling needs to happen.
But we’re not done. Here are some solutions that are just coming into view.
There are new and credible companies like TenHands (it’s a growing list) that provides the ability to embed bi-directional video calling into Salesforce.com and other applications. That means communicating directly between vendor and customer when the customer wants the connection. That can be right in the middle of a decision process or at a crisis moment when the customer can benefit from a direct service interaction. (I hope Microsoft is listening to this. Ever hear of Lync?)
The Internet of Things
As I’ve written before, Oracle’s Exa-hardware line will make significant contributions to reduced energy consumption as more companies begin to consolidate their operations onto this gear. The cooling requirements for data centers alone are amazing and every watt not used in computing is also a watt not used in cooling. So it makes a lot of sense to consolidate systems whenever possible.
Don’t forget the Internet of Things. Salesforce has been talking up the importance of turning machines into nodes in social networks for several years. It started with Toyota and cars, but this year the idea migrated to airlines (Virgin), retail (Burberry’s), jet engines (GE) and even refreshment (Coke). All of these vendors have made their wares nodes that send important performance data to headquarters to optimize performance, reduce inefficiencies and improve customer experiences. These ideas might be the greatest efficiency gain since the Internet was started.
We’re really just beginning to explore the ways that our technologies can help us reduce our energy demand in business and it couldn’t happen at a better time. That’s why I am so bullish on CRM and the front office.
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Love the perspective; very interesting and entirely relevant to the current economic situation. When we talk about CRM we usually don’t realize the real economic impact it can have on our business when effectively implemented.
We’ve seen considerable increases as we’ve been implementing our CRM JobNimbus. That fact that it’s been really easy for our team to get in and use it has been its mainstay. Definitely helpful through these tough times.