Comments on: The great storage chargeback debate

By: Patrick Graham

Patrick Graham — Fri, 22 Aug 2008 19:42:59 +0000

IT personnel excel at technical management. While IT personnel may have budgeting/financial experience, they typically aren’t well versed in activity based costing models.
Business Units, on the other hand, are typically focused on budget optimization. Chargeback, simply put, involves disaggregating an IT Budget and shifting the budget to Business Units.
A functional chargeback system will place IT Budget accountability with Business Units that have a keen interest in optimizing their budget. When Business Units optimize budget, there is typically an incremental impact on overall organizational expenses that might be identifiable within an organizations Income Statement. Perhaps less important, the income statement can play a key role in several key financial ratios including Return on Equity and Price Earnings Ratio.

By: Kevin Daly

Kevin Daly — Mon, 18 Aug 2008 23:35:59 +0000

Historians and social commentators have identified the Tragedy of the Commons at least since Thucydides [And who’d argue with him?] in the 5th century BCE. While the specifics range widely, the core idea is that finite resources that bear no incremental cost to users will be misused and, ultimately, destroyed.

So it was with overgrazing of Boston Common; so it is with unbridled consumption of free storage.

Chargebacks are [or should be] a mechanism for modifying behavior; as such they have to rational, but they don’t have to be rationalized quantitatively [Why is a carpool violation $241 and not some other number?].

The responsibility for managing data [and, therefore, storage] today is a critical one and tools, such as chargebacks, that bring in a level of control can be extremely valuable components of an organization’s data management plan. In many cases, the inefficiency of the use of storage resources pale in comparison to the exposure that unmanaged [unprotected, unknown] data presents to a company.

Love ‘em or hate ‘em, chargebacks are good for both users and their organization.

Kevin Daly

By: Ted Vaczy

Ted Vaczy — Mon, 18 Aug 2008 20:17:05 +0000

The first law of economics states that people make rational decisions/choices and are optimizers.

The second law states that supply and demand have an inverse relationship relative to price. This implies that when the price of a good or service is zero, demand is infinite. We dont want infinite demand for storage, in most instances.

Therefore, chargeback is an effective way of throttling demand, assuming the prices charged are rational and reflective of market costs. Chargeback also becomes an effective internal arbitor for the allocation of scarce company financial resources. Those who can best justify their requests for capital or operating dollars will receive appropriate allocations of resources and in theory create the most benefit for the company.

So yes, charge back is a good thing.

By: Mark Fitz

Mark Fitz — Mon, 18 Aug 2008 18:08:37 +0000

We feel your pain. We are a bunch of storage folks that have been tasked with this repeatedly and have decided to build our own solution. Take a look at http://www.arxscan.com. We have built detailed chargeback and power usage reports. They drill down to the user level and we map and show VM usage.

By: Tory Skyers

Tory Skyers — Mon, 18 Aug 2008 17:55:08 +0000

Chuck, there are a couple start-ups and some established companies that have products produce these reports, I used to use Sun Global Storage Management (GSM came from a company called Storability that SorageTek bought, and Sun rolled it into GSM when they bought StorageTek, which has been since been end of life’d) for a while as part of an ILM strategy, a side benefit was I could create detailed reports of storage usage by department or a number of other metrics. The downside was cost, that tool was not cheap in SMB cost terms, there was no immediate return on investment I could point to, it was mostly longer term and intangibles but that is another blog all together!! It’s funny how all these topics seem to circle around accounting for data in one way or another though.

Jesse, the environment you describe is pretty much 80% of the clients I deal with. The “just in case” is always where I see the Terabytes piling on request forms, then the blank stares when I show them how 6TB was probably overkill to maintain the CEO’s Madonna video archive and iTunes library.

Monty, you also bring up a great point, how much to charge shouldn’t be an arbitrary number but often times it is and it fluctuates with the budget climate we are in. I’ve developed an Excel spreadsheet I use to help me calculate consistent costs of tiers based on the current metrics from Storage Magazine (little graph in the front third of the mag shows storage media costs) weighted with purchase price, depreciation, human resource and maintenance(it helps to have an Excel guru for a wife). Keep an eye out on SearchStorage.com for more details about this aspect of chargeback in specific.

By: Monty

Monty — Mon, 18 Aug 2008 15:23:54 +0000

I agree 100% except for the statement that traditional SAN storage is easy to bill for.:)Our Storage vendor’s Chargeback feature certainly makes it easier but we need to get very granular to serve the needs of many that require it.

It (the general “how much to charge?”) is certainly the question I am dealing with daily…I just hope it does not turn into an eternal one.

By: Jesse

Jesse — Sun, 17 Aug 2008 13:24:27 +0000

I’m currently consulting in an environment now where as incredibly tight as they are about money, they have no policies in place for storage requirements, requests or allocation.

The upshot of all this is that when a user requests, say 500GB for their new VMWare server, the request is granted and fulfilled without question.

Now they have “free pool” of storage that is supposed to last them three years. I had to tell them last week that I give them maybe until the end of this year on what they’ve got left, and they looked at me with this “where did it all go?” look on their faces. When one application, in planning an upgrade, sees that they are currently using 70GB, and requests 200GB “just in case.” well it’s an easy question to answer.

Without a planning/approval system this is bound to happen. I do agree that storage should be billed back to the department that is using it, if for no other reason that to discourage frivolous use.

By: Chuck Hollis

Chuck Hollis — Thu, 14 Aug 2008 18:30:49 +0000

Hi Tony — great post.

In my experience, I think you can get 80% of the benefit (with 20% of the effort) by simply exposing true costs back to the business, regardless of whether or not there’s an explicit chargeback model in place or not.

The awful truth is that most business units have no idea how much storage they’re using, or how much it’s costing them. Frankly speaking, there’s more than a few IT groups who are in the same boat

At one time, we were able to document significant expense savings by being able to show line-of-business storage utilization by tier, and an implied cost of that activity.

Which, of course, leads to an interesting discussion of “why so much” and “how do we use less”. And without the need for a lengthy political battle around real chargeback.

As a business guy, I get nice reports on how much I’ve spent on travel, headcount, facilities, supplies, etc. — and I can make optimizations decisions based on those costs. If no one tells me what I’m using (and how to use less), I’m powerless …

Thanks for an interesting discussion!