Copyright OpeniT, Inc. All rights reserved
Chargeback in a Cloud/Non-Cloud Environment
ITFMA
San Antonio, TX, July 22nd, 2011
Eistein Fosli
Founder, Open iT, Inc.
Copyright OpeniT, Inc. All rights reserved
Agenda
• Introduction
• Cloud Computing
• Chargeback in Cloud/Non-Cloud Environment– Target– Define– Test– Deploy
• Conclusion
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About the Speaker
• Eistein Fosli, Founder Open iT, Inc.Through his experience working for the University of Oslo and Hydro ASA, and later as an IT consultant for several larger corporations (including Statoil, Shell and Telenor), Fosli saw the need for better IT metering tools, particularly for software license management. In 1999, he founded Open iT, Inc., which creates software used widely for usage metering, competence planning and cost allocation management.
• Eistein Fosli received his Master of Computer Science degree from the University of Oslo, Norway.
• Contact info: Eistein Fosli, Open iT, Inc., 1155 Dairy Ashford, Houston, Texas 77079, Email: [email protected]
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Copyright OpeniT, Inc. All rights reserved
About the Company
• Open iT, Inc. - independent software vendor, founded1999, located in the Americas, Europe and Asia.
• Open iT creates software for IT resource monitoring, reporting and optimization. Companies around the globe use Open iT to reduce the cost and complexity of managing corporate assets.
• Open iT has extensive experience serving customers in a variety of verticals like: Electronics, Telecom, Energy, Insurance, Automotive and R&D.
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Cloud Computing
From Wikipedia:
The underlying concept of cloud (utility) computing, dating back to the 1960’s, was presented by John McCarthy at MIT, but neither hardware nor software was ready for computer time-sharing back then. In 1997, the term "Cloud Computing" was introduced (originally from diagrams depicting telephone networks as “clouds”).The service did not become publicly available until Amazon launched Amazon Web Service (AWS) in 2006. Today you can choosebetween a number ofproviders and platforms
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Business model
• A cloud can provide:
– IT infrastructure (for example, computer servers and storage), or infrastructure as a service (IaaS);
– An application runtime platform, or platform as a service (PaaS); or, – Subscription-based software, or software as a service (SaaS).
• IT services delivered as cloud services typically have the following characteristics:
– A pay-as-you-go model with minimal or no upfront costs.
– Usage-based pricing, so that customer costs are based on actual usage.
– Elasticity, so that customers can dynamically consume more or less resources as and when they need it.
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Business model (2)
• How is cloud computing charged for?
– Fixed monthly fee or “pay as you go” for usage of: small, medium, or large instances.
– Classification of small/medium/large instances is based on:
• CPU • Ram• GB storage• B/W
– Adding on other factors, such as security, SLA level, support level, encryptions, compression, and WAN services.
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Cost of running a sample 50,000 node cloud:
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Players
Service providers:
• Amazon
• ElasticHosts
• Microsoft Azure
• Logicworks
• Google.[1][2]
• Joyent[3]
• Jitscale
• Linode
• Maximizer Software
• Rackspace Cloud
• Salesforce
• Skytap
• Workday
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Platforms:
• Abiquo[7]
• AppScale[8]
• CA 3Tera AppLogic
• Cloud.com (formerly VMOps[9])
• ElasticHosts ElasticStack[10][11]
• Enomaly ECP
• Eucalyptus
• Flexiant Extility[12]
• Gluster
• InContinuum CloudController[13]
• Nimbus (cloud computing)
• Mezeo (Storage only)[14]
• OnApp[15]
• OpenNode[16]
• OpenStack.org
• Parallels
• Joyent
• VMware vCloud
• Witsbits Go Cloud[17]
• Zimory[18]
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Said about Cloud/Chargeback
Chargebacks have been a bone of contention forever, and the advent of cloud services really forces the issue.
Julio Gómez, co-founder of Innovation Councils LLC
From its ability to break down IT silos to its flexibility, efficiency, and democratization around resource allocation, resulting in agile IT service delivery, cloud computing changes the way we do business and engage with each other.
Internal customers can look at what they pay for: servers, compute time, storage, etc., and compare it to what Amazon charges. It puts IT in an uncomfortable position.
Julio Gómez, co-founder of Innovation Councils LLC
The bill of IT for each entity is valuable.
Debe Gash, CIO, Saints Luke’s Health system
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Chargeback
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Implementing chargeback: The Process
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Target •List the target (goal) and plan the process
Define •Update Service catalog (internal/external) and customers (cost centers)
Test •Test the model on last year’s data
Deploy •Full-scale deployment
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Target
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Overall Goal
• Easy to communicate and easily understood by the business.– Simple and transparent
• Easy for IT to manage, control, and verify. – We are looking for an automated system
• Considered fair by most business users.– See next slide
• Encourages optimized (IT) resource usage. – See next slide
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Fair
By fairness, I mean avoiding situations such as:
“A user of the software using it for 8 hours on Sunday afternoon pays the same as a user utilizing 8 licenses for one hour during peak time.”
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Optimize Resource Usage
• Determine the best allocation model to avoid counter-productive behavior.
– Example from “Customer A”. “Customer A” has a prior chargeback system in place, based on elapsed time only, which means leaving software on can be expensive for an end-user. This may encourage some counter-productive behaviors, as seen in the following examples:
• Starting up the application OpenWorks and loading in a dataset typically takes 30 minutes. The customer’s agreement with the software provider is based on the number of desktop counts, so customer A won’t save money if the user logs out every night and starts up the project again every morning. Charging by elapsed time (without any filtering) may lead to counter-productive behavior from the end-user, by losing 30 minutes of productive work every day.
• A better approach is in this case to charge for distinct users.
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Define
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The Process
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Cost Generators
Facilit
y
Serv
ers
Netw
ork
Sta
ff
Soft
ware
Cost Centers
Dep
art
me
nts
Pro
jects
Com
pan
ies
Chargeback process
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List Cost Centers
• List cost centers and determine how to assign usage to them:
– Organization of users as defined in the HR system (such as SAP’s HR module).
– Hostname of the computer used to run the service. Hostnames may contain strings, such as the airport code of the closest airport, to make identification easier.
– A “Project_ID” or cost center code set by the user before he uses a service.
– Other factors such as environment variables in a user environment.
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Units (cost of what?)
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Units Definitions
max dev Maximum concurrent # users
max user Maximum concurrent # devices/computers
d_user Distinct # of users
d_dev Distinct # of devices/computers
elapsed Elapsed time
a_dev All users that have access
a_users All devices that have access
Which units are needed? Example units:
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Grouping and Filters
• Grouping:– Feature to Feature set (as they appear in the vendor price book)
– Users to organization (hierarchical) , or professions, or …
– Computers to locations
– Labels
• Filters:– Threshold filters
– Unique or max in use
– Primetime/holiday
– Ad Hoc
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Allocation Models
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Sample allocation models:Allocation Code
What it means:
More precisely
MC-UG-DP(A)-F5
Day Max Concurrent Users per User group
Max Concurrent per User Group per day averages it over the whole billing cycle. (P=Exclude Weekends and public holidays). NF means no filtered. F10, means ignore license checkouts or processes lasting shorter than 10 minutes.
DU-UG-DP(A)-F15
Daily Distinct User per User group
Distinct users per day averaged over the whole billing cycle. (P=Exclude Weekends and public holidays).
ELAPSED-NF Elapsed time for the whole billing cycle. Non Filtered
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Update Service Catalog
• IT lists the offering in the service catalog to standardize IT services and costs. The purpose is to standardize definitions, specify the charges and let the customer decide what he wants and how much he wants to spend. Instead of viewing the customer as someone always wanting more, you give him a menu of choices to choose from.
• When implementing an automatic chargeback system, you may or may not already have a service catalog in place. If you do not, making a Service Catalog is a good place to start.
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Update Service Catalog
• For each item in the Service Catalog:– Define rate and unit (cost of what?), the resolution (time period), and the billing period.
– Combining Usage and the Service Catalog, creates the invoices
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Monthly Invoicing?
How often will you invoice? Most commonly every month a new invoice is generated.
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Year End Reconsolidation
• Using fixed rates for the entire period, without knowing exact usage, may lead to profit or loss for a particular service. As most IT departments are prohibited from either accumulating a loss or a profit, this must be calculated, typically once a year, and paid back or charged extra from the business units.
• Instead of reconciling each service item, it is the total amount, or a group of service items, that needs to be reconciled. This is handled by using a Profit & Loss Statement, which is designed for this purpose.
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Test and Deploy
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Try first– deploy later
• Determine the allocation model and calculate the unit cost based on last year’s data. – For the next year of data, calculate the unit cost based on usage, e.g. from Nov. 1, 2010 to Nov.
1, 2011. Do a manual check and get approval from the CIO. Some manual adjustments may be done to encourage a certain behavior. The usage of the application also determines how much of the overhead cost the application will shoulder.
• Update the tariffs and allocation model into the table for the tariffs.– Each WBS (or Material IDs) will be associated with an allocation model and a cost-per-unit for
the chargeback.
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Chargeback in the Cloud
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Why not just echo the cloud bill to the end user?
• Charge for internal and external usage at actual cost:– What if using internal resources are cheaper for the company but
more expensive for the end user?• Equipment and Software already have been bought, and need to be paid for
anyway?
• Charge only for ”cloud usage”– Fixed price for all – only cloud users will be billed per use.
• The unlucky one being thrown out in the cloud, has to pay, while the others get a ”free lunch".
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«Do things as simple as possible, but not simpler.»
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Make a unified chargeback process
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Cost Generators
Facilit
y
Serv
ers
Netw
ork
Sta
ff
Soft
ware
Cost Centers
Dep
art
me
nts
Pro
jects
Com
pan
ies
Chargeback process
Copyright OpeniT, Inc. All rights reserved
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Cost Generators
Facilit
y
Serv
ers
Netw
ork
Sta
ff
Soft
ware
Clo
ud
Cost Centers
Dep
art
men
ts
Pro
jects
Com
pan
ies
• Raw data
thresholduniquead-hoc
filter
• filtered raw data
concurrency calculation
• cost values
Creating invoices
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Conclusion
• Chargeback of cloud resources– Integrate it with your enterprise chargeback model.– Treat it as just another cost (like any “on premise” costs).– Make sure your chargeback system can read the cloud invoice (you need all the
details as input to your enterprise chargeback).
• Advantages– You will enable your own policy of the cloud usage, enforcing behaviors that gain
the whole enterprise.
• Try!– Test your model with the last year of data.– Make sure to have enough flexibility in your model to be able to adjust it as you go.
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Copyright OpeniT, Inc. All rights reserved
Open iT solves IT resource monitoring, reporting and optimization challenges to reduce the cost and complexity of managing assets in distributed and complex environments.
If you can measure IT,you can optimize IT!
Thank You!Open iT, Inc.
Two Park Ten Place16300 Katy FreewayHouston, TX 77094+1 281-599-3400
Karoline Kristensens v. 5N-0661 Oslo, Norway+47 22 20 40 50
PO Box 265 ForusN-4066 Stavanger, Norway +47 51 64 09 80
Insular Life Bldg.III
Tagarao St, Lucena City 4301 Philippines +63 42 710 8566
www.openit.com
Email me at:[email protected]
Copyright OpeniT, Inc. All rights reserved
Thank You!Open iT, Inc.
Two Park Ten Place16300 Katy FreewayHouston, TX 77094+1 281-599-3400
Karoline Kristensens v. 5N-0661 Oslo, Norway+47 22 20 40 50
PO Box 265 ForusN-4066 Stavanger, Norway +47 51 64 09 80
Insular Life Bldg.Tagarao St, Lucena City 4301 Philippines +63 42 710 8566
www.openit.com
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Open iT solves IT resource monitoring, reporting and optimization challenges to reduce the cost and complexity of managing assets in distributed and complex environments.
If you can measure IT, you can optimize IT!
Email me at:[email protected]
Copyright OpeniT, Inc. All rights reserved
Appendix
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Define Technical implementation
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Open iT dataflow
• Open iT collects, stores and combines information in a single unified way.• Provides dynamic link into an Excel sheet.• High level overview: Raw data is stored as is, but also aggregated for fast
reporting.
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SC
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How the calculation is done
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• Raw data
thresholduniquead-hoc
filter
• Filtered raw data
concurrency calculation
• cost values
Creating invoices
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Target
• Develop a more predictable chargeback model for end users.– In the current model you may have the following scenario: If in one month, you
only have one user of an application, that user gets the entire bill for the application (or WPS). That makes chargeback simple, but very unpredictable for the user. However, other people’s usage could be represented in the future rate of the software.
• AKA: If you are the only one in the bus – you shouldn’t have to pay for the all the empty seats, should you?
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