How virtualization managers can implement chargebacks

For some of us who have been doing server virtualization for a number of years, the idea of virtualization chargeback may seem like a no-brainer. But as we close out 2012, believe it or not, many organizations are either just now getting their feet wet with server virtualization or private cloud environments, or they’re finally expanding and moving to the next stage of their virtualization journey. These folks may not yet be at a point where they can start charging back for these virtual resources being used.

If we consider virtualization to be a journey, then the idea of chargeback or the ability to price and cost a virtualization environment should be considered a journey within a journey. (Does it sound like I just saw “The Hobbit” this weekend?)

[ Also on InfoWorld: Red Hat Enterprise Virtualization 3.1 edges closer to vSphere, Hyper-V | VMware vCenter Server 5.1 will soon support Microsoft Hyper-V servers | Track the latest trends in virtualization in InfoWorld’s Virtualization Report newsletter. ]

As an organization makes its way down the virtualization maturity path, moving into chargeback assumes that the IT department has done its homework of assembling the true virtualization pricing and costs involved, with a clear buy-in from the business.

In many organizations, chargeback rules are directed by the finance arm of the company. Unfortunately, many of these rules live in a physical, legacy world where the chargeback model requires a vendor invoice or receipt in order to pass on that charge to the line of business. As is the case with physical server equipment, it’s usually an asset that can be tagged and touched.

But that model fails to translate well in a virtual world. In a virtual data center, hardware is being shared; the idea of one application per server or the understanding that one server belongs to a single business unit is a thing of the past. Instead, IT organizations have to look at alternative methods such as charging users for the resources that are either allocated or consumed within a shared environment (sharing the use of CPU, memory, networking and storage).

The question then: How do you charge a business unit for using a fraction of a server that took you 10 minutes to setup and deploy? And how do you implement a fair model that everyone will understand and readily accept? And are companies ready for this?

Alex Rosemblat, product marketing manager at Dell, told InfoWorld he has noted a general trend over the last year where there are more requests for chargeback within a virtualization management solution, but for an overall flow, the number of prospects asking for this capability is still less than 10 percent.

He went on to say, “The most interesting thing about when some form of cost measurement is requested by a prospect, it is almost always seen as a ‘need to have’ rather than a ‘nice to have,’ — i.e. people that ask for this are dead set on quickly rolling out chargeback in their organizations.”

Rosemblat’s coworker, Bryan Semple, chief marketing officer for VKernel (now part of Dell), said the concept of charging back is just not gaining traction, likely due to accounting rules, issues with integrating into account systems, and the basic operating procedures for IT.

If an organization isn’t ready to implement a full chargeback solution because of accounting or political pressures, it could always start that journey by implementing something called “showback.” Instead of throwing out a dollar amount at the business unit, this step allows the IT organization to show a department the amount of resources they are actually consuming. Doing so helps promote the early stages of cost awareness in regard to IT assets.

Brian Radovich, group product manager at SolarWinds, said his company is hearing a lot from customers about chargeback and showback, though this capability may not be the highest item on their punch lists.

“For the customers who need it, it’s an important feature on their list,” said Radovich. “The general trend is more people are using chargeback, and as the cloud creeps into their infrastructure, chargeback and showback will become critical to controlling costs.”

To respond to the showback challenge, SolarWinds Virtualization Manager offers its customers a set of dashboards for services, departments, users, and more that can show a company exactly how many resources (CPU, memory, network and storage) they are consuming in their infrastructure. They take that concept of showback one step further, expanding into chargeback by allowing their customers to assign dollar amounts to these resources so that they can expose actual costs on the dashboard.

In 2012, server virtualization is no longer a mystical black box that requires a special degree to implement the technology. Because virtualization has made it so easy to deploy and spin up new machines, people tend to forget that these VMs are consuming real resources. Showback has become a great way to help prevent or curb virtual machine sprawl and keep people honest. That’s why showback has also been referred to as “shameback.”

“I think the more interesting trend is around measuring virtual infrastructure efficiency,” said Semple. “We have been working with several large VM consumers and the head of IT wants to know, ‘is my environment efficient?’ Directors of infrastructure have money, data center space, power, and people. Measuring how efficiently they are using these four resources to deliver required IT services I think is where the conversation needs to go regardless of whether we are talking about a private cloud or a standard virtualized environment.”

Semple added that standard measures like VM density or resource utilization just don’t tell the story in a meaningful way, so his company is working on ways to express efficiency and help directors of IT improve efficiency over time whether they are doing chargeback, showback, or neither in their environments.

To the folks at Dell, showback and optimization are related. Any IT organization attempting to rightsize allocation of resources to VMs can use showback reports to not only show that VMs are costing money, but that in some cases, application owners are wasting IT resources by requesting more memory or CPUs than required. Therefore, showback reporting has provided significant benefit to IT teams when budgeting — especially when requesting additional capex.

If you can’t show people what’s out there, and how much of it they are using or wasting, then it’s hard to hold them accountable and even more difficult to advance down the virtualization maturity model. But as you can see, that also means you don’t have to stick a price tag on things with a full-blown chargeback solution either — at least not right away.

This article, “How virtualization managers can implement chargebacks,” was originally published at InfoWorld.com. Read more of David Marshall’s Virtualization Report blog and follow the latest developments in virtualization at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.