IT chargeback and showback help organizations control how various business units and projects (i.e., internal customers or cost centers) consume IT services (e.g., infrastructure and data transfer) by allocating costs and cross-charging accordingly. Chargeback and showback have been around since the early days of mainframes, and with the introduction of the cloud comes the need for new implementation methods and tools.
Lack of Transparency Due to the virtual and dynamic nature of the cloud, enterprises are challenged by a lack of transparency into their cloud inventories, including their resource usage and costs. In order to implement chargeback, IT costs are distributed among different lines of business (LOB), various divisions and even temporary projects at the end of every month. However, due to a lack of clear visibility into their virtual environments, CIO and CFO teams often find themselves struggling to understand their cloud bills. By trying to manually analyze usage and costs, financial IT managers tend to end up with multiple spreadsheets riddled with inaccuracies. And the situation only worsens as enterprise cloud footprints grow.
Cloud Cost Allocation Cost allocation means calculating the accumulated costs of IT services that specific business units utilize. This can be quite challenging when it comes to medium-sized and large enterprises due to their rapidly changing environments and the need to accurately allocate the costs of every part of their cloud footprints. However, allocating usage to a specific business unit or project is complex, especially in a shared infrastructure. And manually answering questions about how much a specific application’s or region’s underlying infrastructure costs might involve a lot of guesswork. In addition, financial IT managers find it challenging to explain allocated costs to business unit leaders, who therefore can’t hold themselves accountable for their own cloud environments’ footprints and costs. Often, this leads to endless discussions that result in wasted time and effort for both parties.
Chargeback Plan Internal enterprise customers are charged for billable resources that are included in their IT service catalog according to a specific chargeback plan. Cloud chargeback plan can span different usage and cost metrics that are collected for each type of resource. In addition, these can include additional costs for IT maintenance services, for example, (on top of usage costs). IT teams find it difficult to set up fair and objective chargeback plan as well as communicate the plan across their business units due to the various components and hundreds of services involved.
Continuous Optimization One of the main advantages of using the cloud is the ability to adjust your capacity according to your current needs. This includes continuously seeking out cost optimization opportunities. However, the lack of transparency into usage for each business unit as well as across organizations as a whole leaves IT teams incapable of understanding relevant opportunities (e.g., resource consolidation and long term commitments) and taking action in terms of cost optimization without harming system performance.
Define Your N-Level Cloud Start by clearly defining your organization’s structure in terms of resource ownership. You can relate to this hierarchical structure as your n-level cloud. An n-level cloud is a multi-level cloud structure in which the number of levels and complexities is determined by the needs of each business unit or project. In most cases, n-level clouds are highly correlated with an enterprise’s organizational structure:
Implement: Consistent Tagging A hierarchical structure can often times be considered to represent costs in business terms. For example, a business unit may have multiple cloud cost centers, or a cost center may include more than one business unit. From an IT operations’ perspective, the overall cost can be broken down into individual environments, such as dev/test. These singular views of various environments do not overlap, and a customized cost structure can be created for each individual purpose, which is where tags come into play. Cloud vendors such as AWS, MS Azure, Google Cloud Platform and many others, provide you with the ability to categorize and tag each of your resources. They can be tagged with more than one key (category), that reflect the multiple dimensions of visibility that are required. As shown in the picture to the right, this allows you to manage your resources and enable high-level visibility that is not necessarily correlated with the original structure. (e.g., “Stack” = dev/test/production) Make sure that all of your resources are tagged! In order to maintain visibility, a value should be given the same label throughout an entire organization by the relevant resource owner. For example, if the development department assigns the value, “development” to one resource, and “DEV” to another, there is no consistency. Your key and value must be consistent across the pool of resources. Make sure that there is a key defined for all resources that describes the owner, the stack, and the organizational unit.
Define: Custom rules for allocation of untagged resources Even with a consistent tagging policy in place, you can’t be sure that 100% of users will be tagging 100% of resources, 100% of the time. These untagged resources are “invisible” to the cost allocation process and will not be included in chargeback reports, representing a cost gap between the total bill and the chargebacks. Another case of potentially “invisible” costs is with resources that are untaggable (e.g., support fees, AWS reservations). Strict allocation rules should be defined for all untagged (and untaggable) resources. These rules may be defined as a proportion of allocated costs (e.g., if 60%/40% of tagged costs are allocated between business units A/B respectively, then the untagged resources should be allocated with the same proportion), or by strict rules (e.g. regardless of the tagged resource allocation, untagged resources should always be allocated 50%/50% between business units A/B).
Cloud computing deployments require dynamic management. Continuous monitoring and analysis systems for your resource inventory, usage and utilization are required in order to learn variations and patterns. The key to implementing cost allocation, chargeback and showback is to first create total and reliable visibility into your cloud environment at any point in time. The main focus of Cloudyn’s solution is to provide a single view of cost drivers, resource allocation, and utilization across an entire organization. It will then be easy to identify and address the areas that can be optimized.
Key Benefits - The key benefits of Cloudyn’s chargeback solution:
Cloudyn provides a complete picture of all of your cloud environments aggregated into one simple to use dashboard. You are given a single view over multiple business units and multiple cloud platforms and can use it to optimize resource purchases and allocation.
With a comprehensive and flexible report and dashboard system, it is quick and easy for your CIO and CFO teams to create their own specific views. In addition, they can provide your business unit owners with their own usage and costs reports that can hold them accountable for their IT service utilization.
Applying Business Rules to Uncategorized Resources
Despite your company’s best efforts to implement a strict tagging policy, some resources will remain untagged. Other resources are, by definition, “untaggable” (i.e., support costs). Cloudyn offers the capability to set specific parameters for the allocation of these "rogue" resources, either in proportion with the allocation of tagged resources, or by setting strict allocation rules (e.g., 20%/30%/10%/40% among four business units).
Cloudyn’s category manager also aids in overcoming tagging inconsistencies, as mentioned earlier in the challenges section (“DEV” vs. “development”).