Storage Soup

Aug 14 2008   8:13AM GMT

The great storage chargeback debate

Tskyers Tory Skyers Profile: Tskyers


“You need HOW MUCH for storage?!” That question has been heard by many of us currently submitting budgets for the next calendar year, quickly followed by “Are you SURE you need that much disk? Didn’t we just get disk last year? Where did they all go!? I want your house audited. Now!”

Okay, maybe not the audit part, but for most of us, getting the type of disk we need in the quantity we need it is an uphill battle. Add SSD, deduplication, and longer-term retention to the mix, and things are getting a bit hairy with my budgetary requests. I’m at such a point now with a few of my smaller clients, and when they get that “you’re crazy” look, I bring up the chargeback model.

I think I just heard a collective sigh from the interwebs.

I understand both sides of the chargeback dilemma: the accounting side, that has to somehow keep track of all this without keeping track of all this; and the IT side, that is constantly being painted as the cost center only because no one is taking ownership of their parts of the “plumbing.” People (read departments) will request outrageous resources when they don’t have to directly foot the bill. That part I get, but are they so vehemently against accounting for their infrastructure usage?

In my opinion, chargeback would actually lead to better data management habits — at least in the long term — because if you have to pay for everything out of your own budget, then you’ll be more careful about separating what you need from what you want. How many of our managers and accounting folks have processes in place to account for each department’s use of the “utilities” that make up IT and understand that IT isn’t the root of all expenses?

I had an energetic debate with a co-worker about this very issue. I took the stance that chargeback is the way to go. He offered a more community-oriented accounting method. We went back and forth, point and counterpoint, until concluding that it just depends on what your business environment will support and the level of organization that business has in place.

For instance, if you have a well-organized, project-oriented IT environment, and have a project portfolio ready for sizing, you can plan a community budget very well and effectively fund addition to your infrastructure through a single IT budget. The reality from <i>my</I> experience (read, SMB clients) is that most companies are not so well-organized, don’t have a project portfolio for the next 12 months, and will not be able to identify budgetary requirements for infrastructure improvements.

In these cases, chargeback (or, at the very least, departmental accounting) is key to being able to answer my opening question with confidence.

Traditional SAN storage may be easy to bill for, but what of virtualized storage? Take it a step further, how about Softricity/Microsoft’s Softgrid? (Softricity is the company Microsoft acquired not too long ago that allows for application-level virtualization as opposed to host virtualization.) How do you quantify and itemize a streamed, virtualized application?

Then there’s the question floating just below the surface of the chargeback debate: How do I, as a department, know you are giving me what I’m being “billed” for? That question opens a giant can of worms in my mind (and there are already creepy crawlies up there, no need to add worms to the mix).

The crux of what I’m getting at is: Are we as technologists — and storage pros specifically — asking for too much or too little when it comes to chargeback? Are there still companies out there that don’t see the light when it comes to chargeback and departmental accounting. Should we as storage pros be leading the way for other areas of IT to follow our example?

8  Comments on this Post

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  • Chuck Hollis
    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!
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  • Jesse
    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.
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  • Monty
    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.
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  • Tory Skyers
    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 for more details about this aspect of chargeback in specific.
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  • MarkFitz
    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 We have built detailed chargeback and power usage reports. They drill down to the user level and we map and show VM usage.
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  • Ted Vaczy
    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.
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  • Kevin Daly
    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
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  • Patrick Graham
    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.
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