In today’s digital age, many businesses rely on cloud computing for their IT needs. This technology offers various benefits, including scalability, flexibility, and cost savings. However, it also presents some challenges, including managing expenses and ensuring that service providers meet their service level agreements (SLAs). Chargeback and show-back are two financial management tools that can help organisations overcome these challenges.
Chargeback
It is a financial management approach where the IT department charges business units or departments for the resources they consume. This approach is often used in shared services environments.Where multiple business units share IT infrastructure and services.
It provides transparency and accountability to business units.Allowing them to understand the true cost of IT services they consume. It also helps IT departments to manage their budgets and allocate costs more accurately.
In a cloud environment, It can be implemented using various techniques. One approach is to use a metering system that measures the consumption of resources, such as CPU time, memory, storage, and network bandwidth.
The metering data is then used to calculate the cost of services, which can be charged back to business units or departments. Another approach is to use a flat-rate pricing model, where business units are charged a fixed fee based on their expected usage of IT services.
Showback
Showback is a similar financial management approach to chargeback, but instead of charging business units for their consumption of IT resources, it shows them the cost of the resources they use.
It provides business units with visibility into their IT spending.Allowing them to understand the cost of their IT services and identify opportunities for optimization. It is often used in organizations where chargeback is not practical or where transparency and visibility are the primary objectives.
In a cloud environment, showback can be implemented using various techniques. One approach is to use a dashboard that displays the cost of IT resources used by each business unit or department.
The dashboard can also provide insights into how the resources are being used, allowing business units to identify areas where they can optimize their IT spending. Another approach is to use a monthly report that shows the cost of IT services consumed by each business unit or department, along with recommendations for optimizing IT spending.
Chargeback and showback are both useful financial management tools in a cloud environment.But they have different strengths and weaknesses. It provides business units with accountability for their IT spending and helps IT departments manage their budgets and allocate costs more accurately.
However, it can be complex to implement and may require significant investment in metering and billing systems.
Showback, on the other hand, provides business units with visibility into their IT spending and allows them to identify opportunities for optimization. It is easier to implement than chargeback but may not provide the same level of accountability.
Best Practices for Chargeback and Showback
When implementing chargeback or showback in a cloud environment, there are several best practices to follow. These include:
- Define clear policies and procedures: Define clear policies and procedures for chargeback or showback, including how IT resources will be metered, how costs will be calculated, and how charges or costs will be allocated.
- Get buy-in from business units: Ensure that business units understand the benefits of chargeback or showback and are willing to participate. Get buy-in from business unit leaders and involve them in the design of the chargeback or showback system.
- Use automation: Use automation to collect metering data, calculate costs, and generate bills or reports. This can help reduce errors and save time.
- Provide training and support: Provide training and support to business units on how to read and interpret the bills or reports. This can help ensure that business units understand the cost of their IT services and can identify opportunities for optimization.
- Continuously monitor and optimize: Continuously monitor and optimize the chargeback or showback system to ensure that it remains effective and relevant
