IT Chargeback Planning – A Critical Success Factor for Enterprise Cloud

“If you don’t know your destination, any road will do.”

That little nugget from one of my colleagues concisely sums up the theme of this brief post.  After having read a recent analyst note on IT chargeback, and knowing about some of the work going on in various IT organizations in this area, I was originally going to write a detailed post about some of the most interesting aspects of this domain.  While I was thinking, the folks at TechTarget were doing, resulting in a nice article on this topic that I encourage you to read if you want to understand more about IT chargeback concepts.

As companies invest more and more in cloud computing, one of the areas that seems to be generally overlooked is the central role of IT chargeback. After all, one of the key benefits of cloud is metering – knowing when you are using resources, at what level, and for how long.  For the first time, it is not a lot more feasible to directly allocate or allot costs for IT back to the business units that are consuming it. 

One of the reasons business units are now going around IT and using the cloud is this transparency of costs and benefits.  In most enterprises, the allocation of IT expenses can be very convoluted, resulting in mistrust and confusion about how and why charges are taken.  If I go to Amazon, however, I know exactly what I’m paying for and why.  I can also track that back to some business value or benefit of the usage of Amazon’s services. Now businesses are asking for the same “IT as a Service” approach from their IT organizations.  Anecdotally, internal customers appear willing to pay more than the public cloud price in order to get the security and manageability of an internal cloud service – at least for now. 

While many IT organizations are rushing to put up any kind of internal cloud, they are often ignoring this important aspect of their program.  Negotiating in advance with your business customers on how you’re going to charge for cloud services, and why, is a good first step.  Building the interfaces between the cloud an internal accounting systems can be pretty difficult.  It’s important to take a flexible approach to this, given that chargeback models can change quickly basesd on business conditions. 

Publishing a service catalog with pricing can make it a lot easier for internal customers to evaluate, track, and audit their internal cloud expenses.  Accurate usage information, pre-defined billing “dispute” processes, and – above all – high levels of transparency regarding internal costs to provide your services are all critical to user acceptance.  If possible, put your cloud IT chargeback plans in place before you build your cloud.  Your negotiations with business units might prompt you to make changes to your services – such as different storage solutions or networking topologies to lower costs or improve SLAs.  Making these changes at the start of a cloud project can be far less expensive than making them retroactively.

Bottom line – getting IT chargeback right is key to a successful cloud program.

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Notice: This article was originally posted at by John Treadway.

(c) CloudBzz / John Treadway

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