This content is part of the Essential Guide: Private cloud implementation guide

Should you use a private cloud chargeback model?

The idea of chargebacks is to help organizations use private cloud resources efficiently by making departments pay for what they use, but the practice can backfire.

A cloud chargeback model is meant to help individual departments within the same organization use private cloud resources effectively, but not every company should use them.

The process for implementing a cloud chargeback model with respect to private cloud resources goes something like this: The organization's IT department builds the cloud, then creates isolation boundaries, resource caps and configuration templates to keep the individual departments from being able to take more than their fair share of resources.

Once the controls are in place, someone in each department is designated as a department-level administrator. He or she can create virtual machines, deploy applications, grant permissions to users within the department and do other tasks that the IT department would normally do.

In a sense, the organization's IT department takes on the role of a cloud provider, and individual departments become tenants. Each tenant is free to deploy resources within the limits that have been put in place by the IT department. The term chargeback refers to the practice of tracking each tenant's resource usage and billing the tenant for those resources.

To chargeback or not to chargeback

Organizations that support the use of a cloud chargeback model say that they hold departments accountable and help ensure the efficient use of IT resources.

Conversely, organizations that oppose chargeback fees often fear that individual departments will not derive the maximum benefit from the private cloud resources that have been made available to them if they are too focused on pinching pennies and staying within budget.

Corporate culture can weigh heavily on whether a cloud chargeback model is acceptable within the organization, but in my opinion, it is best to avoid the use of chargebacks. They create more work for the IT department because administrators must manage the chargeback system, bill tenants and take on the role of collection agent if the tenants don't pay.

Alternatives to IT chargeback fees

Organizations worried about stopping one tenant from abusing the available private cloud resources have options other than a cloud chargeback model. For example, IT can establish multi-tier quotas that apply to both individual users and the department. The IT department can place a limit on the total amount of cloud resources that a department can consume, even if none of the users within that department exceed their quotas.

Another option is to use showbacks. Showbacks are like chargebacks, except tenants are not actually billed for the private cloud resources they consume. Instead, IT sends the tenants a monthly statement showing what their resource use cost the company as a whole. This allows tenants to see the affect their resource use has on the organization without taking a hit to their departmental budgets.

Next Steps

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