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Embotics Cloud Management Blog

Chargeback & Showback - What's your Motivation?

When looking at doing Chargeback or Showback, people have different motivations and goals they wish to accomplish. Whether it is recovering costs, naming and shaming (also known as "Shameback"), or justifying the relevance of your IT department. But really whatever the reason, the truth is that you want to, in some way, change the way in which people are consuming the resources, and to make others aware of the costs involved in providing the services.

Vm-costExpenses within IT are often quite substantial, and are seldom revenue producing, so it’s important to see how these expenses, and in particular the cost of public and private clouds, are shared among the revenue-producing business units.

So whatever the motivation, the goal of chargeback should be to provide the organization with information that’s understandable and transparent, and that allows them to control or predict the cost of performing a particular activity. Users of public cloud infrastructure  can go to Amazon and immediately see what a workload or application will cost. These same users now expect the same visibility of their internal IT consumption.

But  fear of chargeback can often paralyze even the best-run IT organizations and prevent the implementation of beneficial maturity improvement. Some customers we speak to shy away from any form of private cloud cost visibility. Their view has been that on the path to private cloud adoption, providing cost information to their line-of-business users might be something they consider in the future, but it was certainly a long way down the path.

Certainly, that view is now changing, and some organizations are taking the initial step of implementing showback as a necessary first step. Once achieved though, chargeback can place IT in a strategic position that builds financial transparency and a business-value focused environment. You can ensure that resources are focused on areas that are demand-driven, and you’ll have increased confidence in setting and managing IT budgets.

We recently published the Cloud Manager's Guide to Everything Your Boss Needs to Know About Chargeback/Showback, and outlined what you need to know about chargeback and showback to get your IT strategy and program on track, and below, I will highlight a few of those things that you need to know...but you can follow the link to get the complete document.

#1 Create a Culture of Accountability

By moving to a chargeback and service-based pricing model, you’re creating a culture of accountability for business users. Any questions about overspending become the responsibility of the business unit that requested the service, and without chargeback, those decisions become IT’s fault.

Chargeback also helps the organization mature into an ITaaS model, where Line of Businesses move from owning IT assets to renting them. Putting costs front and center allows the organization to consider the benefits of lifecycle management, where IT assets are retired as soon as they’re no longer required.

#2 Use Showback as a Stepping-Stone

Showback is sometimes seen as a necessary step towards ensuring that the correct processes are in place before implementing full chargeback, along with the criticism and complaints that may arise from the business units.

Showback doesn’t require departments to limit their usage, but an awareness of cost usually raises the question of why one department is “spending” more than others. If you’re not on the path to full-on chargeback adoption, what some call “shameback” is often enough to create an organizational accountability that starts to drive costs down.

#3 Create a Service Catalog that Meets the Majority of Needs

By looking at what’s currently being delivered and focusing on the key services that are being requested, you can develop a service catalog that allows you to aggregate services, allowing you to report on who’s using which service and how many of each type are being used.

Without a catalog, it’s much harder to report on all the “custom” services being provided. Likewise, it’s more difficult to see the benefits from providing a self-service approach to IT services, including a reduction in costs.

#4 Keep Costs at a High-Level

When building out costs, don’t get too granular. The resources required to pull detailed costs together, whether in terms of reporting, time or manpower, all translate to extra expense. As the business requires it, you can go deeper and more detailed, but to start with, keep it only as granular as you truly need.

This is most true when starting out with cost visibility, or showback. Formal chargeback may certainly require more accurate costs. But showback is more about transforming the organizational conversation about IT costs, so getting it close is good enough.

 Download the Complete Guide 


 

Topics: Public Cloud Private Cloud Hybrid Cloud Cloud Management Platform (CMP) Cost Management Chargeback & Showback