The 80-20 Conundrum

It is a long-established rule of thumb that at most large companies, 80 percent of the IT budget goes for maintenance and support and keeping the systems operating, and only 20 percent is spent on new projects and development. CIOs and IT managers have tried hard over the years to shift those numbers, but most surveys and research reports indicate they haven't made much progress. That may not be acceptable in the future.

We are facing a continuing economic squeeze that is likely to result in flat or declining IT budgets, even for storage, which has been somewhat immune to past downturns. That will put pressure on storage managers and administrators that many have not faced before. You will be confronted with challenges to do much more with much less and to contribute to the overall transformation of the IT department. Those who step up to deal with these challenges head-on and offer alternatives and solutions will find themselves in a more prominent and secure position within the IT department, which is not a bad thing in and of itself.

It is possible to make dramatic changes in the way IT departments operate and the way IT budgets are spent. But it isn't easy -- or cheap. Our sister publication InformationWeek recently did a cover package on the effort by Hewlett-Packard Co. (NYSE: HPQ) to transform its IT operations. By almost any standard it was a success. But it is something that will be hard for most companies to replicate.

But first, take a look at the accomplishments: The company tripled its bandwidth at half the costs; IT employees spend 70 percent of their time on new development and 30 percent of their time on IT support; 85 data centers were consolidated to six; 700 data marts were reduced to fewer than 55; around 6,000 applications were cut down to around 1,500. HP spent around $1.7 billion building six new data centers, while at the same time cutting ongoing IT spending from 4 percent of revenue to just under 2 percent.

Those are pretty impressive numbers, ones that very few companies can come close to matching. Of course, HP CIO Randy Mott had some unique advantages as he began the three-year process to change the way HP handles its IT. He had the full support of CEO Mark Hurd and the company's executive team. He also worked for HP, which has the products and services and people to manage and automate every part of an IT operation -- just ask their sales team. And he had the backing to do it all at once, not in a piecemeal fashion like most IT transformation projects.There are details and specifics on how Mott accomplished many of the changes in the InformationWeek package of stories, and I encourage you to read it. The one regret is that it doesn't talk much about the storage component, but one can imagine that it involved virtualization and standardization and automation and all of the sophisticated capabilities that HP tries to sell every day to customers.

Most of you can only dream of what it would be like to be part of such a project. Or perhaps it will soon become your nightmare. Bob Evans, the content director of TechWeb, the parent company of both Byte and Switch and InformationWeek, in a recent blog post imagined a CEO writing an annual review to his CIO that says something like: "Pat -- You did some great things in 2008 with mobile apps, data-center consolidation, and SLAs but you failed to cut maintenance from 80% of IT spending to 60% so I'm not sure you're the right person for this job. Prove me wrong by May, or I'll have to let you go."

Are you prepared if your CIO comes to you and says he or she just got such a letter from the CEO and needs your help to transform how the department spends the IT budget? Do you have ideas and suggestions to help accomplish that shift in spending? If he points out that it probably isn't just his job that's on the line, will you come up with some creative proposals and alternatives? If upper management ends up thinking that the best way to deal with all of these IT issues is to outsource everything, will that sharpen your focus?

This isn't meant to scare you, but to suggest that thinking proactively and coming up with ideas that help the company save money, improve the efficiency of its IT operations, and change the image of the IT department from that of a cost center to a center of innovation and new development is more important than ever. Are you ready to do your part?