What does Twenty Percent Growth Mean ?

Over the years, I’ve had many CIO/CTO deliver the news that the company plans to have twenty percent growth for the next five years. I’ve often noticed that most people in IT Infrastructure don’t find this staggering. I find it hard to believe that we just blindly accept this. The simple fact is that twenty percent of business growth every year means that after five years, the company will have grown by 250% or two and half times. If you take a starting point at 100% and then grow by twenty percent every year, you’ll get this table:

Today Year 1 Year 2 Year 3 Year 4 Year 5
100 120 144 173 207 249

On a chart, it would look like this:

Twenty percent per year 1

Let assume that your executive management are given to making large claims and you think that discounting the growth to be more believable is wise. Lets say you change to the growth to ten percent per year for five years. What would happen to top line growth then ?

Today Year 1 Year 2 Year 3 Year 4 Year 5
100 110 121 145 174 209

Twenty percent per year 2

That’s a 209% increase in business over five. Lets call that double.

Is your network infrastructure going to be able to double in size over five years ? Are you able to double the number of staff ? Double the number of help desk calls ? Double the number of desktops and laser printers ? Double the number of servers ?

I wonder if you’ve taken the time to realise this ?

  • http://twitter.com/aspitzer Alex Spitzer

    I always think about that.  The interesting question is does management realize that IT assets will have to scale with it.  The company that I work for is growing close to 25% each year and when I have to add assets it almost comes as a shock to them.  Any suggestions on how to help business types see that with revenue/profit growth also comes IT asset growth?  

    • http://etherealmind.com Etherealmind

      My response is to halve the predicted growth they offer, then use that to calculate your Infrastructure growth. Then you can claim that you are growing slower than the business and saving money by spending less than the growth.

  • http://twitter.com/seanwalberg seanwalberg

    While the point itself is a good one, your math is a bit misleading. If something has “grown by” or “increased by”, then you shouldn’t be including the original 100%. So your examples above should be a growth of 150% and 109% respectively. 

    But more to the point, I think IT folk really need to understand capacity measurement.  Developers really need to understand the relationship between server/network usage and application usage. Business people need to understand how their plans fit in with IT. Business rarely get agressive growth by scaling what they have, they do it by doing something new or better.

    Put another way — if I plan on doubling my business (that’s a gain of 100% BTW) by offering HD video instead of standard video, I’m going to need far more than double the bandwidth.

  • Rick Arps

    It looks like your second chart goes from 10% to 20% between year 2 and 3.  Shouldn’t it be 100, 110, 121, 133, 146, and 161?

    • Oldpaul99

      You are right, greg was wrong (somewhat).  But his points remains valid.

  • Daniel G

    I would also say that growth is not linear in relation to all aspects of IT. For instance at my last job, while I was there we had a…

    700% growth in server/data center
    200% growth in sites/offices
    50% growth in overall employees/users
    300% growth in networking devices
    1000% application/database growth

    Added technologies such as  wireless and voip, how can you %’ize that?

    IT Staff? We added 3 helpdesk people overall. It was a massive failure. I was in a network/voice role with some server mixed in, and I was working all the time just to keep everything a float. One of the reasons I’m no longer there.

    Today overall business success does in a big way rely on your IT dept being successful as well. When the majority, if not all work, is in some way tied to a computer you have to have some type of expected reliability.

    • http://twitter.com/sysgeekguy Chris Fricke

      I was going to make a similar point but you beat me to it. Looking at the last five years in our case it was (per year approximation):

      100% growth with storage capacity
      15% growth with servers
      0% growth in department budget
      0% growth in IT staff
      0% growth with users
      and who knows how much growth in bandwidth requirements, server IO, new services, and other stuff we don’t bother with keeping track of most of the time.

      So which metric is a CIO to use? Answer: Make stuff up so it sounds fancy!