CIO, Opinion

The 80/20 Rule Is Dead; Long Live the 80/20 Rule

If you’ve worked in IT for any length of time at all, you’ve probably heard of the 80/20 rule.  Also known as the Pareto Principle, this rule states that 80% of the IT budget an IT’s efforts go to simply keeping the lights on while only 20% is dedicated to innovation and propelling the business forward.  In actuality, the Pareto Principle states that 80% of the effect comes from 20% of the causes, but the meaning has been extended to IT operations as I described above.  Of course, 80/20 is just observation.  For some, the ratio may be a little different, but for the purposes of demonstration, this article will simply use 80/20.

“We Need To Be 20/80!”

As CIOs and other IT leaders look for ways to better address key business problems, that 80% of the budget that goes to sunk costs can look enticing.  After all, if you can just make things more efficient, you can make that 60/40, 50/50, or maybe even 20/80 and create an IT organization that spends only 20% on the basics and 80% on value add.

Unfortunately, reality gets in the way of that thinking.  Personally, I believe that the 80/20 rule, as applied to IT operations and budget, will never go away. It’s here to stay.  Allow me to explain my thinking.

“Normal” Changes Just Like Everything Else

As we consider the current plight that has put many IT organizations into this 80/20 conundrum, you might be able to tick off a handful of items that make up this 80% and long for ways to expand that 20%. But, think back, say, 10 or 15 years.  What was your 80% list then?  It probably looked a bit different than the 80% list of today.  For example, having to have lots of people around to manage your physical server farm was probably high on the list.

Wasn’t virtualization supposed to fix all of that and help IT move from 80/20 to 60/40 or some other metric?  And, here we are, still mired in 80/20 land.  But, consider a bit more holistically.  Virtualization did have a positive impact on IT and on how IT delivers its services.  Before I continue, understand that I’m just using virtualization as an example; this is not an article about virtualization itself.  Virtualization made it possible for you to deploy workloads more quickly and provide much faster time to value for new applications than would have been possible in the physical world.  More than likely, you were also able to adjust your server administration staffing levels in a positive way.

So, why are you still mired in 80/20?

Different needs now consume that 80%.  “Keeping the lights on” used to mean keeping physical servers operational, among many other things.  Now, it’s keeping the virtual environment healthy, which, while it’s fewer physical servers, now includes new software maintenance needs, different skill sets, SANs, and more.  But, as I mention, it’s more than likely that your IT department of today is far more nimble than the IT department of 10 or 15 years ago, but the baseline operational items that consume 80% of your time and budget have changed.

Let’s, for a moment, consider the possible outcomes of an initiative intended to radically change the 80/20 dynamic.  It doesn’t matter what it is, but let’s say that it moves your department to 20/80 land.  One of the following is more than likely to happen:

  • The CFO needs to cut expenses and notices that you’ve just freed up a chunk of money and grabs some, thereby negatively impacting that newly minted 20/80 ratio you created.
  • You now have the resources to do much more than you did before.  However, every time you undertake a new initiative that becomes a routine part of operations, that very initiative becomes a part of the new baseline that will make up the eventual return of the 80/20 situation.

Action Item

In other words, while it may be possible to temporarily upset that 80/20 balance, it will come back at some point, but will look different than it did before.  This is not intended to make you feel like your efforts to upset that balance are hopeless.  In fact, I believe that continually attacking that 80% is absolutely critical to the long-term success of the organization.  As mentioned, every efficiency that you put into place, while it may not change the 80/20 rule of IT, can help make the business more agile and able to compete in an increasing competitive marketplace