Is 80-20 rule justified for investment in IT?

The heat is on! With every day passing by, the financial tsunami is rapidly spreading across the globe. The key issues are:

• Liquidity
• High cost of capital
• Unavailability of credit
• Volatile forex markets
• Very low levels of confidence in economy

While the Indian regulatory system seems to have minimized the impact on banking system, the impact on IT industry deserves detailed look.


Mr. Sudhakar Ram, CMD, Mastek Ltd and India Business Leader of the Year 2007 has written an insightful article in The Economic Times yesterday.

"Impact of the crisis on the Indian IT" - Mr. Sudhakar Ram

He highlights a very interesting point that "when we dig into the reasons for the crisis, while we can blame blind optimism and greed, at a more fundamental level it is a failure of systems... ...Better controls and risk management systems governing individual firms as well as the entire financial system would have helped to track the quantum of leverage and the risks associated with it — both from the perspective of board governance and regulatory oversight."

While every CIO is contemplating on what is the right amount to invest in IT during 2009, Mr. Ram has a perspective that I can't agree more.

"For too long, large institutions have been trying to get away with spending 80% of IT dollars just on maintenance — keeping the lights on — and only 20% on new initiatives.

In fact, in a recent Information Week article, Rob Preston says that IT’s Number One priority is to release money for new projects. He says: "If you think you can lay low under the corporate radar or continue to argue that the 80-20 rule is an immutable law of IT physics, then you're due for a wake-up call."


It really boils down to what goals we set for ourselves - 'tide over the tsunami' or 'prepare to emerge as a leader'. What are your thoughts on "right" investment in IT?