Our Own Experience: How IBM is using Cloud

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1 Our Own Experience: How IBM is using Cloud Desmond Koh Putting a Price Tag to Cloud: Chargeback and Metering 7th October, 2010

2 The Value of Cloud Computing to the User and the Enterprise Improve Business Performance Lower cost of delivering IT services to the organization Innovative Service Offerings User perspective: Means of acquiring computing services quickly without requiring understanding of the underlying technology and with visibility of their true IT cost Organizational perspective: Delivers services for consumer and business needs in a way that is Simple and easy to use Unbounded in scale Standardized Cloud Computing Rapidly provisioned Billed accurately based on usage Changing consumption behavior Cost effective Cloud Cost Management

3 Challenges of Managing Cost in the Cloud Financial Management considerations are fundamental to profitable cloud service delivery and cost transparency How do I allocate costs of shared IT resources? What do I charge for these cloud services? What usage do I measure? What is my cost do deliver cloud services? How do I bill users for using the cloud services? How do I automate all of this? - 3 -

4 IT Charging comes in many forms, depending on management objectives How should we charge back IT costs? What is the basis for the charge? Do we charge based on units of resource usage? On units of service consumed? What will the chargeback system itself cost us? Metered Usage Usage of IT services is metered and charged according to a defined schedule Most Which chargeback model is optimal? Charge per Billable Unit Often tiered; charges recognizable units of resource or service consumed Budget Reconciliation IT budget is zeroed out each month using proxies (headcount) for allocations Expense Effort Difficulty Internal Accounting - some cost tracking of purchases, usually limited sharing of infrastructure and services Corporate Overhead - absorbed as company infrastructure cost and included in a corporate tax Least 4

5 There are 2 common approaches for charging of Cloud Services by Service Providers Charge per Billable Unit Charged based on the cost of a standard image or service (i.e. it implies a standard set of configurations) Easy calculation, can be done simply in a spreadsheet, once the unit cost is calculated. However, the calculation of unit cost must include all direct and indirect costs, and therefore this is not easy. Most commonly used for IaaS Amazon Web services is a good example of how this is done Metered Usage Used when the service is not standardized and charges must be based on actual usage Example of Charging per Billable Unit - sample charges for Amazon Web Services Where virtualized resources are shared across customers or services, this charging requires tools that will determine resource usage based on transactions, storage used, etc. Charging must calculate cost of used resources, and then apportion overhead costs according to the usage. Standard On- Linux/UNIX Usage Demand Instances Windows Usage Small (Default) $0.095 per hour $0.12 per hour Large $0.38 per hour $0.48 per hour Extra Large $0.76 per hour $0.96 per hour 5

6 Why Usage & Accounting Management? Helps determine the cost of providing IT services by appropriating costs to an organization s products, services and business functions Allows companies to allocate costs and/or chargeback to the consumers of the services Measures, analyzes, reports and bills the utilization and costs of different computing resources including servers, storage, networks, databases, virtualized environments, power, messaging and many other shared services such as SOA

7 Cloud delivery requires knowing service costs to achieve profitability DB2 Server 1 Server 2 Server 3 Service A (Server % Server 2) Service B (Server % Server 2) Monthly Revenue (Service Usage) Monthly Costs (H/W, S/W, Labor) Service A $15,800 $10,100 PROFIT Service B $20,600 $21,700 LOSS - 7 -

8 Cloud Cost Management and Charging 1. Define your service Type of service Pricing plan Metering plan 4. Bill for services consumed Aggregate service usage by user Calculate charge for using service Generate invoice Cloud Cost Management Lifecycle 2. Measure usage by service Collect resource usage data for cost Collect service usage data for billing 3. Determine service delivery cost Collect monthly cost of IT infrastructure Calculate shared resource usage rates Determine true cost of service

9 A Business Scenario: Charging for Cloud Services Cloud Subscription Select cloud service and start metering Service usage Cloud Service Requester Subscription & Instantiation Cloud Provider Administrator Cloud Service Operation Meter IT resource consumption Consider capacity changes Resource usage Cloud Offering Creation & Registration Offer Service based on QoS, Size and Cost / Rates Resource usage Cloud Service Offering Management Define SLA, KPIs and Finance/Cost model (Finance planning) Resource usage Cloud Provider Offering Manager Cloud Provider Business Planner Offering Definition Cloud Service Service Management Platform Process Engine Middleware Virtualized and Standardized Resources Physical Assets Production Termination Cloud Consumer Admin Cloud Service Termination Stop metering Correlate data Build Report Service usage - 9 -

10 Usage & Accounting Management Brings Immediate Benefits Increase Client (Business Unit) Satisfaction Real Usage = Accurate Billing Accountability = Improved services Alignment between Business and IT costs Continued Infrastructure Improvement Understanding costs can lead to managing costs Usage comparisons can lead to more effective investments Transparent Cost Management and Charging leads to Lower Infrastructure Cost Reduced server sprawl Higher utilization Rationalization of resources When running a business, nothing matters more than knowing how much something costs. You can t manage what you don t measure!

11 What is needed to do Usage & Accounting? Three variables to the equation Align IT Software Spending with Business Priorities Who is consuming which IT resources? Capability Data collectors for IT infrastructure can review consumption across multiple dimensions What is the cost of those resources, including those that are shared? Costing engine assigns cost to resource usage How should IT allocate cost for chargeback, ROI, costing analysis, and billing? Costing and reporting engine associates usage costs to consumers of IT resources All three questions help align IT spending with business priorities

12 IBM s Cloud Reference Architecture provides a model for the establishment of cloud services within an organization Service Consumer Service Provider Software as a Service: e.g. Asset mgmt, Collaboration, ERP, etc. Platform as a Service: e.g. Platforms & developer tools Infrastructure as a Service: e.g. Virtualized servers &storage Service Developer Service User Service Automation Service Catalog Mgmt Service Order and Fulfillment Services Service Offering Mgmt Subscriber Account Mgmt Business Support Services (BSS) Pricing / Rating Entitlement Services Operational Support Services (OSS) Contract Mgmt Services Billing & Payment Services Internal Service Developers Consumer Business Manager Service Delivery Portal Metering & Charging Service Provisioning & Workload Mgmt Monitoring & Event Mgmt Asset Mgmt Incident & Problem Mgmt Capacity & Performance Mgmt Configuration, Change & Release Mgmt Availability & IT Service Continuity Mgmt IT Financial Mgmt Service Level Mgmt Security & Compliance Mgmt Virtualized Infrastructure Abstraction : e.g. VMWare, KVM, Zen, LPar, etc Third Party Service Providers Partners Physical Infrastructure: Servers, Storage, Network, Facilities 12

13 What IBM products support Cloud Cost Management and Charging? Tivoli Service Automation Manager (TSAM) Produces service usage data Integrates with TUAM through data collectors that measure resource usage of the Cloud infrastructure Tivoli Usage and Accounting Manager (TUAM) Collects service usage data from TSAM Generates accurate invoices Measures resource usage of the shared cloud and enterprise IT infrastructure Allocates costs of shared cloud and enterprise IT resources Helps determine service rates for billing TSAM and TUAM are bundled into several IBM Cloud offerings such as CloudBurst and IBM Service Delivery Manager (ISDM)

14 Tivoli Usage and Accounting Manager Resource Accounting and Chargeback Tivoli Usage and Accounting Manager provides a comprehensive view of IT consumer costs within a virtualized environment or across the enterprise. It shows who is utilizing shared resources, and how much of these resources they are using. It also provides a means to do chargeback based on this usage. Highlights Can track and report departmental use and related costs of virtualized servers. Supports usage data from System p, System x, IBM Tivoli Monitoring and VMware virtualization environments. Can invoice users based on popular cost allocation methods by business unit, division, department, section, user, project, application, etc. Flexible and easy-to-use browser reports with instant drill down capability

15 Know What IT Costs! Understand the costs of business services, virtualized systems and new applications TUAM provides insights to current costs and usages TUAM easily facilitates IT s usage tracking and cost allocation of services, new applications and cost saving virtualized systems Better integrate business processes with IT TUAM provides the ability to report usage and service in business versus technical terms Understand IT costs to determine line of business, product and service profitability Improve IT systems utilization and productivity Top 10 reporting quickly identifies heaviest uses and potential abuses IT can focus on service delivery and intelligent tuning versus data gathering and reporting Enable better access to information IT Financial Management, operations, and Lines of Businesses have easy and flexible access to the resource usage they need when and where they want it Know what IT costs! When running a business, 78% nothing of CEOs matters believe more integrating than knowing business how and much technology something costs. is You fundamental can t manage for innovation what you don t measure

16 Cloud Cost Management Challenges Addressed with TSAM/TUAM Uncontrollable demand on IT resources No method of measuring how much the services are being used/ not used Management estimates to determine service rates No mechanism for billing services consumed Control supply by charging for services Show visibility of service consumption for invest/ divest decisions Determine service rates based on service costs and real service usage Provide service usage and enable accurate billing

17 Key Benefits of Cloud Cost Management Enables accurate billing for Cloud services consumed Determines the cost to deliver services Provides visibility into who is using the services and how much provided by Tivoli Usage and Accounting Manager and Tivoli Service Automation Manager 17

18 18 Thank You! Desmond Koh IT Process Management Consultant