Ten Liters of Gasoline
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I'm back from South America, and am now in Chicago, Illinois. I'm having breakfast at the Starbucksdowntown, and thought I would make a post before all of my meetings today.
On this trip, I met with IBM Business Partners and sales reps from Argentina, Colombia, Ecuador and Venezuela. While I have visited thefirst three countries on past trips, this was my first time to Caracas, Venezuela. I grew up in La Paz, Bolivia, and speak Spanish fluently, so had no problemgetting around and holding discussions with everyone. While my friends in the US are oftensurprised I speak multiple languages, it doesn't surprise anyone I visit in other countries.If you are going to have worldwide job responsibilities for a global company that does businessin over 180 countries, the least you could do is learn a few additional languages. I suspect themajority of the 350,000 IBM employees speak at least two languages, the exceptions being mostly the 50,000 orso employees that live in the United States.
I flew on American Airlines from Tucson to Dallas to Caracas, and was only slightly delayed as a resultof all of the flight cancellations that happened earlier that week. Some companies designate a single "official airline" for their employees to use. That makessense if all of your employees are located in a single city, and that city is the hub for yourdesignated airline.IBM is too big, too spread out, and sells technology to nearly every airline to make sucha designation. Instead, IBM tries to spread its business out to multiple carriers, although all ofmy colleagues seems to have their own personal favorites. Mine are American Airlines, Singapore Airlines and Cathay Pacific.
While other people were upset over the delays, I found American Airlines did a great job keeping me informed,and all their employees I talked to seemed to be handling the situation fairly well. If youfly on American, I recommend you sign up for "text message" notifications. I did this for everyleg of my trip, and was kept up to date on times, gates and status. Very helpful!American Airlines even started their own corporate blog: [AA Conversation] (Special thanks to my friend[Paul Gillen] for pointing this out)
(I read somewhere that if you are going to travel anywhere, you need to remember to bringboth your sunscreen and your sense of humor, otherwise you are going to get burned. Goodadvice! Trust me, you don't even know how bad it can really be until you travel in the third world.)
Anyhoo, last week, IBM Venezuela celebrated its 70th anniversary. That's right, IBM has been doingbusiness in Venezuela for the past 70 years. Also last week, IBM put out its impressive [1Q08 quarterly results],including 10 percent growth for IBM System Storage product line worldwide, comparing what IBM earned this first quarter to what IBM earned the first quarter of last year. For just the Latin American countries,the growth for IBM System Storage was 20 percent!There are a lot of oil and gas companies in Venezuela. With a barrel of oil selling at more than$117 US dollars, these companies are looking to spend their newly earned profits on IBM systems, software and services.
As for the picture above, that is a one-thousand Bolivares coin, worth about 47 US cents atthis week's official exchange rate. As with many Latin American countries going through [years of high inflation], Venezuela was tired of all those zeros on their money. For example, a cheeseburger, freedom fries and a Cokeat McDonald's would set you back 20,000 Bolivares.This year the Venezuelan governmentcreated a new currency called "Bolivares Fuertes" (VEF), lopping off the last three zeros.So, the coin above would be replaced by a new coin with a big "1" on it instead, and an old 2000 Bolivares billwould be replaced by a new 2 Bolivares Fuertes bill. Unfortunately,I had to give all my new Venezuelan money back at the airport upon leaving, but they let me keep the coinabove, since it is old money, as a souvenir so that I could use it as a ball mark for playing golf.
(The term Bolivares is named after Simon Bolivar who was born in Caracas. He is famous throughoutSouth America, and was, and I am not making this up, the first president of Colombia, the secondpresident of Venezuela, the first president of Bolivia, and the sixth president of Peru. Here isthe [Wikipedia article] to learn more.)
Gasoline costs a mere 100 old Bolivares per liter.For those who don't do metric, gasoline therefore costsless than 18 cents per gallon. By comparison, in the USA, the average today was $3.47 US dollarsper gallon, of which 18.4 cents of this is Federal tax. That's right, we pay more just in taxes forgasoline than los venezolanos pay for it all.
The side effect of cheap gas is bad traffic. Everybody in Venezuela drives their own car, and nobody thinksabout the price of gasoline, carpooling, or taking public transportation, acting much like Americans used to, up until a few years ago. With some of the gridlock we faced, it might have been faster (but not safer)to walk there instead.
Which makes me wonder if American Airlines fills up their airplanes with fuel at these lower prices when theypick up people in Caracas to take them back to the United States. In 2002, fuel represented 10 percentof the average airline's operating expenses, but today it is now 25 percent. That is a drastic increase!
The same is happening in data centers. In the past, electricity was so cheap, and such a small percentof the total IT budget, nobody gave it much thought. But as the usage of electricity increased, andthe cost per KWh went up, this has a multiplying effect, and the growth in power and cooling costs isgrowing four times faster than the average IT hardware budget increase.