Chargeback in a Cloud and Non-Cloud Environment

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.


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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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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http://en.wikipedia.org/wiki/Amazon_Web_Services


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]

http://en.wikipedia.org/wiki/Amazon_Web_Services

http://en.wikipedia.org/wiki/ElasticHosts

http://en.wikipedia.org/wiki/Azure_Services_Platform

http://en.wikipedia.org/wiki/Logicworks

http://en.wikipedia.org/wiki/Google

http://en.wikipedia.org/wiki/Joyent

http://en.wikipedia.org/wiki/Jitscale

http://en.wikipedia.org/wiki/Linode

http://en.wikipedia.org/wiki/Maximizer_Software

http://en.wikipedia.org/wiki/Maximizer_Software

http://en.wikipedia.org/wiki/Rackspace_Cloud

http://en.wikipedia.org/wiki/Rackspace_Cloud

http://en.wikipedia.org/wiki/Salesforce

http://en.wikipedia.org/wiki/Skytap

http://en.wikipedia.org/wiki/Workday


http://en.wikipedia.org/wiki/AppScale

http://en.wikipedia.org/wiki/3tera

http://en.wikipedia.org/wiki/3tera

http://en.wikipedia.org/wiki/Cloud.com







http://en.wikipedia.org/wiki/Enomaly_Inc

http://en.wikipedia.org/wiki/Enomaly_Inc

http://en.wikipedia.org/wiki/Eucalyptus_(computing)




http://en.wikipedia.org/wiki/Gluster




http://en.wikipedia.org/wiki/Nimbus_(cloud_computing)

http://en.wikipedia.org/wiki/Nimbus_(cloud_computing)



http://en.wikipedia.org/wiki/OnApp


http://en.wikipedia.org/wiki/OpenStack

http://en.wikipedia.org/wiki/Parallels,_Inc.

http://en.wikipedia.org/w/index.php?title=Joyent,_Inc&action=edit&redlink=1

http://en.wikipedia.org/wiki/VCloud

http://en.wikipedia.org/wiki/VCloud

http://en.wikipedia.org/wiki/Go_Cloud

http://en.wikipedia.org/wiki/Go_Cloud



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

Tanya Kristiansen

who said this?


Chargeback


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


Target


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


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

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Chargeback process

Copyright OpeniT, Inc. All rights reserved 20

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.


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:


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


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.


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


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


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


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.»


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


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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


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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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]

mailto:[email protected]


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

37

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]

mailto:[email protected]


Appendix


Define Technical implementation


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


How the calculation is done

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• Raw data

thresholduniquead-hoc

filter

• Filtered raw data

concurrency calculation

• cost values

Creating invoices


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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Technology

Chargeback in a Cloud and Non-Cloud Environment