Instruction to create a smart chargeback strategy for cloud computing


There is a prevailing uncertainty over the economic climate’s ability to recover. Amidst this feeling, the cloud’s offerings of reducing capital expenses and easing management burden, and at the same time increasing speed, flexibility and scalability for business needs are gaining quite a hype among companies. Nevertheless, they also bring back issues of IT chargebacks, whose complexity was an ordeal for many CFOs and CIOs.

Transfer of Responsibility

Business unit, project or overall annual requirements can assign IT budgets. However, cloud computing, being an IT resource with usage-based billing, resurrects the concept of charging the costs back to individual departments. The methods of charging back are as critical as the architecture, support and other considerations when building a cloud, though the establishing and disseminating a new costing model is tiring. Previously, chargebacks have been a pain in the neck since it’s difficult to calculate the full cost of service delivery due to different variables accompanying it. However, cloud computing helps organizations to have flexible IT resourcing in their operational costs for cheaper, more sustainable and predictable business workload management. All the while, when it’s necessary they can have access to extra resources on demand without worrying about spending more for additional hardware, electricity bill, as well as maintenance and labor costs.

IT to take control

Cloud computing provides a flexible working environment, but also brings along the concern about cost allocation between different groups in a company. When a department questions its budget share for cloud services comparing to others, problems arise. For that reason, any CIO who is intending a move to the cloud must cooperate with the CFO for standard procedures to ensure that each business unit can enjoy pay-

In case of private cloud, all departments involved are required to cover a part of the operating expenses. These expenses not only include direct application usage expense, but also additional costs, which must be charged back based on fair usage statistics. If you have the right tracking information, it’s simple to calculate the proportion, so the real problem here is to find the right management system for usage monitoring and control in private cloud.

So far, we have the following components to ensure an effective chargeback strategy:

  • Reaching an agreement upon a suitable pricing model for cloud resources
  • Using a cloud management solution to gather precise usage information
  • Ensuring usage information and associated costs are disclosed to users via services portal
  • Summing up the costs according to relevant business units to see which cost is meaningful and to provide a basis for future business decisions
  • Lining up this model with the business’ financial system and decision-making process

The implementation of well-established business service management (BSM) give IT departments a good head start into the cloud, since it allows businesses to line up IT service to serve priorities when they need it the most. With BSM, budgets are ensured to be allocated based on how relevant a user group is to business priorities at any time. When being done properly, IT funding will become much less complicated, and payments are only required for the resources each department consumed.

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