Chargeback has always been hard for IT, but cloud computing forces the issue. At the same time, pushback from business users continues.

Beth Stackpole, Contributor

May 18, 2012

5 Min Read

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As cloud management tools and platforms evolve to better handle metering and chargeback, IT shops are still struggling with the practice--both from the standpoint of financial management challenges and ongoing pushback from business users.

Implementing chargeback has been a longstanding problem for IT, which traditionally has either avoided the practice or employed simple math to apportion costs based on headcount or some other broad metric. Yet in a cloud environment, where effective metering and chargeback are a core tenet of the service model, those types of stopgap measures are no longer viable.

"In the past, chargeback has been allocated as funny money, moving money back and forth between departments and IT, but it's a completely different game in the cloud," said Dave Zabrowski, president and founder of CloudCruiser, a provider of cloud cost management solutions. "With the new paradigm of IT as a service, chargeback is absolutely necessary because you're talking about real money. There's an invoice coming in that has to be paid."

Third-party public clouds like Amazon's EC2 have pretty well-defined pricing structures, making it easy for business groups to know exactly what they're paying for when it comes to compute time, storage, and servers. But Zabrowski says these third-party offerings typically don't provide the granularity of detail that is necessary for true cost accounting on an enterprise scale, nor do they have the ability to show total spend across heterogeneous clouds, whether they are public or private or orchestrated by another third-party vendor.

[ EMC World kicks off this week. Learn what to expect; see EMC's Gelsinger Talks Cloud Storage, Pricing Pressure. ]

This loss of transparency is one of the biggest challenges for IT in terms of implementing effective chargeback. Most systems can handle chargeback at an account level (i.e., Joe Developer spun up this cloud for this duration and incurred this charge on his credit card), but there is still a gap in terms of linking that granular usage data to a particular project or business process.

Zabrowski calls this hierarchical resource mapping and says it's a core capability of the CloudCruiser cost management offering. "Hierarchical resource mapping means whoever used it is charged--it doesn't matter if it's at a project level, a department level, or a region or different country," he explains. "Whatever the organizational structure is, we take those costs and map them back to those consumers, holding them accountable."

The transparency problem gets even more complex when IT tries to assign a cost to services as part of putting together a services catalog for a private cloud. Say, for example, a marketing manager is looking to run a campaign over the weekend. The key question for IT is to figure out the costs associated with that end-to-end process, including the virtual machines, storage, CPU power, and network resources associated with deploying that service.

A task much easier said than done, according to cloud experts, who say the rub is that financial management and costing don't comfortably fall into IT's domain. "The thinking is that costing is someone else's job--everyone points fingers and it falls by the wayside," explained Dave Bartoletti, senior analyst of infrastructure and operations at Forrester Research. "But the cloud is putting the squeeze on IT to understand what the costs really are and to start thinking like a service center, not a cost center."

Products like CloudCruiser can take the burden off of IT to do that level of financial management. The tool will automatically track usage at a granular level and provide reports that show business users exactly what they're spending. There are also analytics capabilities and the ability to set alerts so a group knows if it's hit its budget threshold or if it needs to re-provision cloud resources to optimize its spend. "IT hasn't had the tools to know what things cost," Zabrowski says. "But if you're moving to an IT service model, you have to turn yourself into a business, and to do that, you have to put costs into the hands of the decision makers so they can understand the costs and optimize them."

Just because they understand the costs doesn't necessarily mean business units will readily agree to pay up, however. Business has historically pushed back on IT chargeback, mostly because it was either dissatisfied with IT service, or it balked at tying any direct charges for compute power to its specific budgets.

"There has always been a bit of tug of war between IT and business users and that cultural and organizational dynamic certainly still exists in the cloud," noted Jeffrey Kaplan, managing director of THINKstrategies, a cloud consultancy and analyst group. "Most people will be hesitant to move in this direction both in IT and the business side until they see new systems and services specifically designed to overcome barriers to success."

Private clouds are more than a trendy buzzword--they represent Virtualization 2.0. For IT organizations willing to dispense with traditional application hosting models, a plethora of pure cloud software options beckons. Our Understanding Private Cloud Stacks report explains what's available. (Free registration required.)

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