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Chargeback in a Cloud and Non-Cloud Environment
 

Chargeback in a Cloud and Non-Cloud Environment

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Open iT tools can also be used for IT chargeback.

Open iT tools can also be used for IT chargeback.

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  • When designing or evaluating a chargeback service, you should create a chargeback model with the following characteristics: • Accurate: assess charges for actual resource usage accurately and fully • Auditable: store and retrieve detailed records on all charges to handle billing inquiries and disputes • Flexible: modify easily to handle pricing variations, for example, for promotions and specials that might vary over time or by region • Scalable: scale components easily to handle cloud-sized workloads How is cloud computing charged?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 RamGB storageB/W
  • When designing or evaluating a chargeback service, you should create a chargeback model with the following characteristics: • Accurate: assess charges for actual resource usage accurately and fully • Auditable: store and retrieve detailed records on all charges to handle billing inquiries and disputes • Flexible: modify easily to handle pricing variations, for example, for promotions and specials that might vary over time or by region • Scalable: scale components easily to handle cloud-sized workloads How is cloud computing charged?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 RamGB storageB/W
  • Comment:
  • If you are the only one on the bus – you still pay the same price as if you are many people in the bus. You being the only one in the bus will only affect the possibility for a rate increase.

Chargeback in a Cloud and Non-Cloud Environment Chargeback in a Cloud and Non-Cloud Environment Presentation Transcript

  • 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 • ConclusionCopyright OpeniT, Inc. All rights reserved 1
  • 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: fosli@openit.comCopyright OpeniT, Inc. All rights reserved 2
  • About the Company • Open iT, Inc. - independent software vendor, founded 1999, 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.Copyright OpeniT, Inc. All rights reserved 3
  • 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 choose between a number of providers and platformsCopyright OpeniT, Inc. All rights reserved 4
  • 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.Copyright OpeniT, Inc. All rights reserved 5
  • 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.Copyright OpeniT, Inc. All rights reserved 6
  • Cost of running a sample 50,000 node cloud:Copyright OpeniT, Inc. All rights reserved 8
  • Players Service providers: Platforms: • Amazon • Abiquo[7] • Mezeo (Storage only)[14] • ElasticHosts • AppScale[8] • OnApp[15] • Microsoft Azure • CA 3Tera AppLogic • Logicworks • OpenNode[16] • Cloud.com (formerly • Google.[1][2] VMOps[9]) • OpenStack.org • Joyent[3] • ElasticHosts • Parallels • Jitscale ElasticStack[10][11] • Joyent • Linode • Enomaly ECP • VMware vCloud • Maximizer Software • Eucalyptus • Witsbits Go Cloud[17] • Rackspace Cloud • Flexiant Extility[12] • Zimory[18] • Salesforce • Gluster • Skytap • InContinuum • Workday CloudController[13] • Nimbus (cloud computing)Copyright OpeniT, Inc. All rights reserved 9
  • Said about Cloud/Chargeback The bill of IT Internal customers Chargebacks have for each can look at what been a bone of entity is they pay for: contention valuable. servers, compute forever, and the time, storage, etc., advent of cloud Debe and compare it to services really Gash, CIO, Sain what Amazon forces the issue. ts Luke’s Health system charges. It puts IT in an uncomfortable Julio Gómez, co- founder of position. Innovation Councils LLC Julio Gómez, co- From its ability to break down IT founder of Innovation silos to its flexibility, efficiency, and Councils LLC democratization around resource allocation, resulting in agile IT service delivery, cloud computing changes the way we do business and engage with each other.Copyright OpeniT, Inc. All rights reserved
  • ChargebackCopyright OpeniT, Inc. All rights reserved
  • Implementing chargeback: The Process • List the target (goal) and plan the Target process • Update Service catalog (internal/external) Define and customers (cost centers) • Test the model on last year’s data Test • Full-scale deployment DeployCopyright OpeniT, Inc. All rights reserved 12
  • TargetCopyright OpeniT, Inc. All rights reserved
  • 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 slideCopyright OpeniT, Inc. All rights reserved 14
  • 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.”Copyright OpeniT, Inc. All rights reserved 15
  • 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.Copyright OpeniT, Inc. All rights reserved 16
  • DefineCopyright OpeniT, Inc. All rights reserved
  • The Process Chargeback process Cost Generators Cost Centers Departments Software Companies Network Servers Facility Projects Staff 18Copyright OpeniT, Inc. All rights reserved
  • 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.Copyright OpeniT, Inc. All rights reserved 19
  • Units (cost of what?) Which units are needed? Example units: 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 accessCopyright OpeniT, Inc. All rights reserved 20
  • 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 HocCopyright OpeniT, Inc. All rights reserved 22
  • Allocation Models Sample allocation models: Allocation Code What it More precisely means: MC-UG-DP(A)- Day Max Max Concurrent per User Group per day F5 Concurrent averages it over the whole billing cycle. Users per (P=Exclude Weekends and public holidays). User group NF means no filtered. F10, means ignore license checkouts or processes lasting shorter than 10 minutes. DU-UG-DP(A)- Daily Distinct users per day averaged over the F15 Distinct whole billing cycle. (P=Exclude Weekends User per and public holidays). User group ELAPSED-NF Elapsed time for the whole billing cycle. Non FilteredCopyright OpeniT, Inc. All rights reserved 23
  • 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.Copyright OpeniT, Inc. All rights reserved 24
  • 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 invoicesCopyright OpeniT, Inc. All rights reserved 25
  • Monthly Invoicing? How often will you invoice? Most commonly every month a new invoice is generated.Copyright OpeniT, Inc. All rights reserved 26
  • 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.Copyright OpeniT, Inc. All rights reserved 27
  • Test and DeployCopyright OpeniT, Inc. All rights reserved
  • 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.Copyright OpeniT, Inc. All rights reserved 29
  • Chargeback in the CloudCopyright OpeniT, Inc. All rights reserved
  • 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? «Do things as simple as possible, but • Charge only for ”cloud usage” not simpler.» – 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".Copyright OpeniT, Inc. All rights reserved 31
  • Make a unified chargeback process Chargeback process Cost Generators Cost Centers Departments Software Companies Network Servers Facility Projects Staff 32Copyright OpeniT, Inc. All rights reserved
  • concurrency cost calculations distribute calculation •Raw data •Min/max/ •cost •filtered avg. per •PPU values •invoices raw data hour/day/ values threshold month/ unique ad-hoc and year. Creating invoices ppu calculations filter (tokens) Cost Generators Cost Centers Departments Companies Software Network Servers Facility Projects Cloud Staff 33Copyright OpeniT, Inc. All rights reserved
  • 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.Copyright OpeniT, Inc. All rights reserved 34
  • Open iT, Inc. Two Park Ten Place Thank You! 16300 Katy Freeway Houston, TX 77094 +1 281-599-3400 Open iT solves IT resource monitoring, reporting and Karoline Kristensens v. 5 optimization challenges to N-0661 Oslo, Norway reduce the cost and +47 22 20 40 50 complexity of managing assets in distributed and PO Box 265 Forus complex environments. N-4066 Stavanger, Norway +47 51 64 09 80 III Insular Life Bldg. Tagarao St, Lucena City Email me at: 4301 Philippines +63 42 710 8566 Fosli@openit.com www.openit.com If you can measure IT, you can optimize IT!Copyright OpeniT, Inc. All rights reserved
  • Thank You! Open iT, Inc. Two Park Ten Place Open iT solves IT resource 16300 Katy Freeway monitoring, reporting and optimization Houston, TX 77094 challenges to reduce the cost and +1 281-599-3400 complexity of managing assets in Karoline Kristensens v. 5 distributed and complex environments. N-0661 Oslo, Norway +47 22 20 40 50 PO Box 265 Forus Email me at: N-4066 Stavanger, Norway Fosli@openit.com +47 51 64 09 80 Insular Life Bldg. Tagarao St, Lucena City 4301 Philippines +63 42 710 8566 If you can measure IT, you can optimize IT! www.openit.comCopyright OpeniT, Inc. All rights reserved 36
  • AppendixCopyright OpeniT, Inc. All rights reserved
  • Define Technical implementationCopyright OpeniT, Inc. All rights reserved
  • 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. SCCopyright OpeniT, Inc. All rights reserved 39
  • How the calculation is done concurrency cost calculations distribute calculation •Raw data •Min/max/avg •cost values •Filtered raw per hour/day/ •PPU values •invoices data month/ and year. threshold unique ppu calculations ad-hoc Creating invoices (tokens) filterCopyright OpeniT, Inc. All rights reserved 40
  • 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?Copyright OpeniT, Inc. All rights reserved 41