Mr Pareto and the Cloud

Do you know this man?

I do. He is called Vilfredo Pareto who was an Italian engineer, sociologist, economist, and philosopher.  The Pareto principle was named after him and built on observations of his such as that 80% of the land in Italy was owned by 20% of the population.

So why is Pareto relevant? Well in the world of technology we have used 80/20 quite often to describe the percentage of IT spend that goes on keeping the lights on (80%) versus money spent on innovation (20%). Sadly this is quite often not a good economic state for a typical organisation because the 80% is often wasteful and debilitating in terms of moving the organisation forward. In other words, a business derived only 20& value from 80% of their investment in technology. Not a great return on investment. We know this right? It is the age old CAPEX v OPEX debate. No one wants to be tied down to CAPEX anymore, OK a generalisation I know but bear with me,

Now as well all know by now that cloud computing promises to dramatically switch the cost mix for an organisation by moving CAPEX into OPEX. The panacea for a CFO – yes? and probably the CIO too.

So I started pondering the relevance of Pareto to the cloud computing debate.

Cloud offers the light weight, pay as you go models that can dramatically reduce the organisations IT spend patterns, whilst improving the benefit they accrue, Take moving email into the cloud or using the cloud to be a platform for application test and development.

So Mr Pareto may say  say “ Cloud computing allows a business to derive 80% business value from just 20% of the cost compared to before cloud computing when they had to spend 80% on IT just to realise 20% of the value”.

Heh neat. For many cloud conversations this may not be a bad analogy to use to get the debate some context.