What is the Pareto principle applied to business software?

The Pareto principle states that, in many systems, a minority of causes produces the majority of effects: the most common formulation is the 80/20 rule, where roughly 80% of outcomes come from roughly 20% of inputs, although the real proportions vary case by case and are not a fixed law. Applied to business software, the principle translates into this: most of the value that people extract every day from an ERP, a CRM, or a data platform comes from a small share of the available features, while the rest of the catalog sits mostly unused. For anyone deciding what to build or what to buy, the principle is a tool for allocating time and budget toward the functions that actually generate value, instead of spreading them evenly across an entire list of requirements. It is not an exact mathematical law but a prioritization heuristic, and that is exactly how it should be used, not as a precise prediction of a percentage.

See also: Agile · Organizing development in short cycles, re-deciding priorities: it works only if the contract lets the scope change.

A name its own author corrected

The name comes from an attribution that Joseph M. Juran himself corrected in public. It was Juran who, in the 1940s, coined the phrase "Pareto principle," tying the phenomenon to the observations of Italian economist Vilfredo Pareto on wealth distribution in the late nineteenth century. In 1975, though, Juran published in Quality Progress (May 1975, vol. 8, no. 5, pp. 8-9) the article "The Non-Pareto Principle; Mea Culpa," writing that the principle as a universal "was not original with Pareto" and that, to his knowledge, "the first exposition was by myself." Pareto had observed an income distribution, not stated a rule for managing quality. Juran admits he picked that name for communication reasons, not historical accuracy: attributing the idea to an already-known economist made it more memorable and easier to sell inside an organization. Juran corrected himself on a second point too: he had named the two parts "vital few and trivial many", then changed "trivial" to "useful many", because that residual 80% is not junk.

A concrete example

A typical case is a manufacturing company replacing a generalist ERP with a system more tightly targeted at its real processes. Before the switch, whoever uses it daily in production and administration navigates a menu with dozens of modules, but the actual daily work concentrates on order management, inventory, and invoicing: three or four areas that cover nearly all operations. According to the Pendo 2019 Feature Adoption Report, which measured 615 subscription software products, on average 80% of features are rarely or never used, while a core of about 12% of features drives 80% of daily usage. The rest of the catalog stays unused but keeps weighing on the annual license fee, on training for whoever joins the company, and on the surface every vendor update can break. Applying the Pareto principle here does not mean cutting everything used rarely, but deciding deliberately which modules are worth their maintenance cost and which were simply inherited from a bundle sold whole, a risk covered in more depth under vendor lock-in.

Why it matters for decision makers

For anyone evaluating a software investment, the Pareto principle is a selection criterion, not just a post-hoc analysis tool: before signing a contract, it is worth asking what percentage of the product's features will actually be used by the people working with it, and whether that minority core can be obtained with a smaller, cheaper, and easier-to-maintain tool. The same criterion guides the choice between building a custom tool and adopting an off-the-shelf product, covered under AI use case selection, and it is an argument for the incremental delivery of the forward deployed engineer model: build the core that generates value first, verify it in the field, and only then decide whether to extend it, instead of specifying an entire catalog of functions upfront that, in the end, nobody will really use.