Chargeback overview
Accounts for IT budgets (hardware and software costs) are important to maintain for any organization, however, they do not necessarily directly correlates to specific IT services and the business value they provide. To optimize spend, avoid waste, and align investment with evolving needs and priorities, it’s essential to gain clear visibility into the true cost of each service. Chargeback in BMC Helix Capacity Optimization enables you to generate an accurate service-by-service accounting that makes it possible for both IT and lines of business to make more cost-effective decisions based on the relative costs. Using chargeback, you charge an entity that utilizes a resource according to their utilization and take more optimal decisions.
Chargeback terminology
To understand Chargeback better, you need to be aware of the following terminologies:
- Target
- Cost object
- Basic cost object
- Composite cost object
- Fixed-rate cost objects
- Allocation-based cost objects
- Utilization-based cost objects
- Cost rate
Target
A target is an entity that utilizes a resource, and to which resource costs are charged back in turn. Target entities can be structured into hierarchies to represent either organizational or logical structures.
In essence, targets are customers (organizations, business units) that consume a service offering, to which service offering costs are charged back.
Cost object
A cost object is any entity with an associated cost that you want to measure. The process of calculating IT costs over time is called accounting. Cost objects can be classified into the following types:
Basic cost object
A basic cost object is any entity with an associated cost that you want to measure. For example, VM costs in terms of CPU and memory utilization, cost per instance of a Xen server, and so on.
Composite cost object
A composite cost object defines a typical set of service offering costs. This type of cost object applies simultaneously to the same service.
Fixed-rate cost objects
In a fixed-rate cost object, a fixed cost (equal to the cost rate) is accumulated on an hourly basis for the cost object allocated to the target.
The formula for calculating fixed-rate costs is:
In this formula:
- cr is the cost rate
- Δt is the time duration for which the cost object is allocated to the target.
Allocation-based cost objects
Allocation-based cost objects take into account the quantity of resources (or instances of cost objects) that are allocated to a target.
The formula for calculating allocation-based costs is:
In this formula:
- cr is the cost rate
- q is the quantity of resources allocated to the target
- Δt is the time duration for which the cost object is allocated to the target.
The quantity of resources allocated to the target can change over a period of time, therefore the formula is applied to each interval, during which q remains constant. Later, all contributions are summed up.
Quantity allocations for allocation-based cost objects
The only data needed for calculating allocation-based cost objects is the quantity of allocated resources. This is called a quantity allocation, and is a characteristic of the cost object.
Utilization-based cost objects
Utilization-based cost objects take into account the measured utilization of resources (or instances of cost objects). They are also referred to as Measured Resource Usage (MRU).
The formula for calculating utilization-based costs is:
In this formula:
- cr is the cost rate
- Er is the resource consumption for a specific resource.
The SUM is calculated over all resources allocated to the target.
Resource consumption
A resource and its corresponding cost object can have a measured utilization over time, which can be integrated over a given time interval to obtain the Resource Consumption.
The formula for calculating resource consumption is:
In this formula:
- Ui are utilization samples over different time intervals
- Δt is the time interval
- E denotes resource consumption, because its meaning is very similar to that of of energy when utilization is interpreted as power consumption.
Named allocations for resource consumption
To compute resource consumption, you must know exactly which resource is allocated to a target. This is called a named allocation.
Cost rate
Cost rate is the price of a specific basic cost object, that is, the unit cost for the consumption of specific resources. For example, VM memory costs per hour, VM CPU utilization costs per minute.