The Carbon Footprint Game

Let’s get one thing straight: There is no such thing as “zero emission.”

Fortunately, an analysis at Seeking Alpha has raised awareness of this today. It’s one of two reports that came out that coincidentally made comparisons between Tesla and Toyota.

(Let’s dispense with the more fun one first: The guys at Marketwatch claim it’s cheaper to own/lease and operate a Tesla Model 3 than it is a Toyota Camry.)

Now, on to the more serious topic of carbon footprint.

To be clear, I’m a big fan of the rapid ascent of EV autos in the world. I do think Tesla has spurred the makings of a revolution and the big manufacturers are falling right in line.

But, just as companies exploited the “Green” label by slapping it on everything and anything, (they might as well have added “Gluten Free”) the claims of “zero emission” are spurious at best and misleading to boot.

What the Seeking Alpha article finally points out is that we have to look holistically at the Tesla — or any electric vehicle — when analyzing the carbon footprint. And in this case, according to the report, the Tesla Model 3 is, overall, a bigger polluter than a Toyota Camry.

Ouch.

Now the argument here, while thoughtful and meticulously researched, has drawn fire a la the comment section. I am not going to claim I can dispute the position of the author or the uproar in peanut gallery with any level of authority.

But what I do appreciate about this report is that for the first time, at least that I’ve seen, someone is analyzing EV car manufacturers’ carbon footprint based not just on the “tailpipe” emissions or lack thereof, but on:

1. The overall cost of manufacturing the vehicle

2. The fact that the electricity used to charge the batteries has to come from somewhere and more often than not that is a coal-, gas-, or oil-fired plant. The emission at the tailpipe might be zero but really it just means the emission has been moved elsewhere.

Certainly, solar is offsetting some of that. Many EV owners are eco-conscious and putting solar on their roofs. This is a good thing.

But it still must be taken into account that it all vehicles — in fact everything that is produced, requires raw materials that are extracted, transported and refined (using carbon-spewing vehicles and machines). It requires energy to power the manufacturing process. It requires oil and gas to transport the finished product via air, rail, road or sea.

So here’s my point: I like the Seeking Alpha article for raising awareness around the need to look holistically at how what we buy and use contributes to the overall carbon footprint.

It is one of my peeves are the “Zero Emission” bumper stickers and branding the EV car companies exploit.

Nothing in this world that humans touch or use is zero emission. Nothing.

The death of a Software Salesman

I don’t know if this take on Splunk is fair or not but it does help to underscore an important point that I have been trying to get across about the proverbial pail of cold water that has been dumped on the traditional software company’s sales force.

This Alphasights article spells out in excruciating detail what challenges lie ahead for Splunk, a company that started as a “Google” for log file searches, and claims to “turn machine data into answers.”

I worked with Splunk’s CEO Doug Merritt years ago at SAP, where we were both members of the senior management team.

I was impressed by Doug’s intelligence, his drive and his zeal.

But here’s the one sure thing, sure for Splunk or any other software company making the transition to SaaS (software as a service). The change is more difficult than adhering to new GAAP revenue recognition requirements. The change is a vast cultural shift.

First and foremost the glory days of selling to IT are over.

This was an easy sell, all things considered, where renewal rates were almost a given and service and support was automatic.

The sales cycle was long, to be sure — usually 6-9 months. And often the customers started with modest pilots.

They also had to contend with selling vaporware and bloatware and dealing with the consequences of holding the customers’ hands as they awaited new features and bug fixes, which could take months and sometimes years.

But they loved this model, because it was a perpetual license where the commissions were up front. And once they had them locked in, renewal was a cakewalk.

It’s not so easy on the SaaS side. That’s because first of all, the relationships that software vendors have built with IT are only part of the story. Today, lots of people can influence what software or service they want to use, because of the rampant viral adoption.

In this world, they are competing to continually maintain the relationship with the customer, and they do so knowing the barrier to change, or the switching cost, is considerably lower for a customer than it was for that customer acquiring installed software that locked them.

The upgrades and new features are iterative and this requires constant connection with the R&D group who are spitting out bug fixes, new features etc. as they complete them, rather than bundled once a year.

The vendors acutely know their customers are not going to overpay as they did in the past, because they use Elastic Computing to subscribe to only the compute resources they need for any application.

And they know, again, that the customer can switch at any time, making it important for them to be realistic in setting expectations in the sale.

All the big guns — SAP, Oracle, Microsoft, Adobe — in the software world are well on their way to making the transition. But they have been at it a long time. Interesting that Microsoft Office 365’s revenue surpassed it’s traditional installed Office version last quarter. This is a seminal moment.

The opinions in this article are mine (George Paolini). I have no investments in Splunk and no affiliation (other than as a reader) with AlphaSights.