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.