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Cloud computing: Why you can't ignore chargeback

Bernard Golden | Nov. 8, 2010
One reason chargeback is controversial is that it's really hard for IT groups to accurately assess the actual cost of a resource on a granular basis.

FRAMINGHAM, 5 NOVEMBER 2010 - One of the most controversial issues in cloud computing is chargeback: pricing consumed resources on a granular basis. Amazon posts its prices publicly for all to see -- so much for compute, so much per gigabyte sent over the network, etc. Chargeback in the cloud computing arena is the same kind of highly granular pricing associated with use of internal resources.

The reason chargeback is controversial is not, perhaps, for the reason you might expect. You might think that resource users would prefer to avoid chargeback is because they currently get resources for free, and implementing chargeback would result in more budgetary outflow.

But you'd be wrong. Resource users already pay for consuming IT resources, it's just that the costs are typically quite lumpy -- perhaps so much per month for a server (whether physical or virtual), plus an associated IT overhead cost where large swaths of IT's costs are assigned to user departments on some kind of budget algorithm.

Why Chargeback is Controversial

One reason chargeback is controversial is that it's really hard for IT groups to accurately assess the actual cost of a resource on a granular basis. Different types of direct IT costs (e.g., servers vs. storage) get assigned to different budgets and groups within IT, which makes it hard to roll up costs to get a true picture of resource costs. This is not to mention the fact that other costs (e.g., power) may actually be paid by entire different divisions of a company (for example, data center power is often paid by the facilities organization).

In this sense, IT chargeback reminds me of hospital billing. If you've ever tried to get an accurate accounting of the fee for a hospital service prior to getting the bill, you know that it's impossible. Hospitals just don't work that way. Every group in the hospital does its job, assigns its service codes, and at some point down the road all of the individual cost assignments are totaled up and sent along in a summary bill.

So too does IT do its job and eventually tots up its costs and divvies up the number among different user groups, but good luck if you want to find out what the real cost, say, of an individual server hour is.

Another reason chargeback is controversial is for an unexpected reason -- some user groups prefer confusion in billing because they "overconsume" IT resources and, consequently, get a sweet deal on their costs. Of course, for every "overconsumer" there's an "underconsumer" that's paying for more than they're using, but...Mr Overconsumer is going to fight chargeback tooth and nail.

 

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