IT chargeback: Take back the cost of your virtual infrastructure

IT departments looking to expand their virtual deployments without taxing IT budgets could benefit from putting chargeback processes in place, industry watchers say.

Network/Systems Management Alert By Denise Dubie, Network World
January 05, 2010 04:02 PM ET

Industry analysis by Beth Schultz, plus the latest news headlines.

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IT managers hoping to optimize virtual resources in 2010 should consider putting best practices around IT chargeback in place, according to industry watchers, who report that charging back for a virtual infrastructure will help IT track resource consumption and justify expanding virtual infrastructure.

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IT chargeback in its entirely would involve IT managers to be able to track how assets are being used by the end-user community and associate a cost with that asset and the amount of resources consumed. The financial and technology discipline is sophisticated and challenging even for extremely mature IT organizations, but industry watchers argue that putting processes in place could be a good start to a broader, more advanced IT capacity planning and chargeback strategy – and incremental benefits can be achieved along the journey.

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For instance, IT groups could gain an understanding of the costs associated with their virtual infrastructure, be able to communicate the costs to those controlling the budget and ultimately get approval to expand or adapt virtual implementations – without necessarily having the full chargeback mechanism in place.

“As you continue to consolidate your server infrastructure and make it more cloudlike, a key hurdle that you must overcome is cost allocation for the virtual infrastructure,” a recent Forrester Research report reads. “While most enterprises are not yet charging back or tracking virtual machine costs in a sophisticated manner, accounting for resource consumption helps to convey the ongoing cost savings being achieved through virtualization and to justify its expansion by way of future capital purchases.”

Forrester offers a set of seven steps that could be a starting point for an IT chargeback process. IT should be able to accurately communicate how moving applications and end users off physical servers to virtual machines benefits the company, the report says. The methodology Forrester offers begins with IT department determining the total cost of ownership of its physical server deployment. Next IT managers should add the cost of the virtual infrastructure to the total. Then Forrester says IT needs to determine the standard size of virtual machines that will be available for various units of consumption and follow that process with deciding the number of each virtual machine size can fit on a physical system.

The fifth step requires IT to “divide the per virtual host cost by this number of virtual machines.” Next IT departments should determine their billing period and last “get the pricing optics right to convey value,” the report reads.

After following these steps, Forrest analyst say IT departments should offer incentives to end users to use the virtual resources in appropriate ways. Establishing this information and encouraging end users to take advantage of the necessary resources via IT service catalogs, for instance, will make it easier for companies ready to deploy IT chargeback technology to expand and automate their processes with technology.

Schultz is a longtime IT journalist. You can email her or find her here.