TechWeb

Tread Lightly On The Private Cloud

Jul 23, 2010 (08:07 PM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=226200065


One of the most enticing advantages of the private cloud is that it lets IT organizations explore metered billing as a way to justify IT budgets and to scale services based on user demands. It's easier said than done. Even as they seek ways to provide the increasing levels of metered billing popularized by public cloud services, many companies are asking, "Is it worth it for us?"

Sure, there's finally a hard metric to justify IT budgets and provide visibility back to the business units using the services. But private cloud chargeback systems can raise issues many companies aren't prepared to address, upsetting an already tenuous balance between CFO and CIO and among other departments. Consider the following:

>> Language barrier: Metered billing must be based on a unit of something. But gigabytes, CPU time, network capacity, and other terms may be intimately familiar to IT professionals, yet they're abstract to the business pros reviewing the chargebacks. And if the business can't see the value in the charges, those charges won't mean any more to them than some ambiguous IT line item on a budget spreadsheet.

>> Transparency required: Surprises at the end of the billing cycle yield frustrated, disgruntled customers, so you must make real-time usage reports accurate and securely accessible to users. If a means to deliver that kind of information doesn't exist within the company, you'll have to develop it from the ground up, keeping within broader company guidelines for information sharing.

>> Balancing act: Broadband access is critical in a private cloud environment to reach end users, and it can cost an arm and a leg, yet you don't want to discourage employees from using the technology to solve business problems or develop innovative applications to improve business competitiveness.

>> Inefficiency spotlight: Metering usage lets the business determine a fee for a discrete unit--just as other providers do. But how do you determine fair, competitive pricing for your services? It's not easy: The U.S. Small Business Administration found it was spending $1,640 for a single smart card while the General Services Administration offered the same card for $240, according to federal CIO Vivek Kundra. But price services wrong, and users could turn to outside providers.

>> Global complexities: If your business operates in a multinational environment, you will need to account for variances in currency and exchange rates, or agree that all charges will occur in one currency. Taxation also may be a factor, depending on the enterprise structure and whether you are providing private cloud services to external organizations. You may even need a finance group to handle the many potential variables here.

>> Integration issues: The company's overarching billing system must be able to support the level of detail your metered billing program requires, integrating private cloud processes like orchestration, provisioning, and monitoring and providing sufficient quality assurance to identify abnormalities or variances that may cause users to dispute charges.

>> Inevitable disputes: Metered billing requires a method to deal with customer disagreements about fees and a mechanism to apply credits or refunds to user accounts. In contentious environments, dispute resolution can take considerable time (and patience).

Step By Step

The most promising value from private clouds is to the IT organization, which can deliver technology at lower cost through automation and virtualization, and to the user, who gets faster delivery. Just because public cloud providers bill for usage doesn't mean private enterprise clouds must bill as well.

Private cloud education and pilot projects abound this year, with major expansion coming over the next few years. This dictates a cautious approach in terms of metered billing for private cloud services. When we asked which private cloud models are of greatest interest to their organizations, 79% of our 504 InformationWeek Analytics Private Cloud Survey respondents said private clouds situated in their data center without an external provider. The technology and process initiatives around standardization, consolidation, and technology refresh related to private clouds will be enough for even large enterprises to tackle for the time being.

Standard processes such as ITIL are a prerequisite to any private cloud environment and particularly to metered billing. Efficiency and automation are paramount to achieve any intended cost savings. Problems will occur in a cloud environment, and rapid triage is a must. Fortunately, most companies have been working to consolidate servers, implement standard processes, and create more efficient operating procedures, so this isn't new territory.

All these things help make metered billing possible for companies providing private cloud services to other organizations. But it may cause more problems than it solves, especially if you don't have an overall strategy to deal with the concerns that will inevitably arise. Focus instead on the service catalog, orchestration, and automated provisioning required for successful delivery of the private cloud. Consider metered billing--but evaluate other options, at least for now.