Chargeback & Showback: Optimising IT costs with cloud monitoring tools

With more users across large-scale enterprises consuming cloud and Software as a Service (SaaS) products, it’s essential to be able to monitor, track and optimise all our costs holistically - and perform IT chargeback and showback to keep overall spending transparent.

IT chargeback is a strategy that allows IT to bill the costs of hardware, software, licensing, cloud services and shared services back to a customer or department. Chargeback demonstrates IT business value and ensures users utilise resources efficiently, and cut back usage where appropriate to reduce resource wastage and optimise costs.

IT showback is a strategy to track costs and spend across software, hardware and shared services allocated to a central budget, though prices are calculated for analysis purposes only - and commonly used in enterprise.

In the era of digital transformation, chargeback and showback more often than not includes our growing number of cloud resources and Software as a Service (SaaS) licensing as well.

With a properly implemented charge-back and show back process, costs are centralised into reporting which is used by decision-makers to show their different departments exactly what products, services and licenses they consume over a fiscal period - IT cost becomes transparent. For planning and budgeting purposes, this is a critical process to have, so both decision-makers and department heads have a clearer image of potential costs incurred.

For example, an enterprise’s senior HR management may want to better analyse procurement of new SaaS licensing for 50 devices, and the total costs incurred with installation, maintenance and consumption. IT would then monitor, track and report these potential expenses in the form of a cost showback statement.

To accurately process chargeback and showback for the cloud resources and SaaS licensing a high level of business insight and automation is required. Before solutions with automated cost chargeback and showback, businesses usually consolidated this sort of essential financial information into reporting invoices - a highly manual procedure with potential for inconsistencies.

Thankfully, public cloud platforms like AWS, Azure, and many other third-party vendors provide full cloud cost monitoring solutions which automate the chargeback and showback process for us - labelled by Forrester as cloud cost monitoring and optimisation (CCMO) tools.

Despite CCMO’s increasing availability for companies in the cloud, many still face recurring issues with effective cost monitoring and visible tracking of cloud and SaaS expenditure across the organisation. The problem for most commonly comes down to two major factors:

  • Pain-point #1: Enterprises lack CCMO tools altogether, and don’t have a way to consolidate, monitor and track all costs and spend across their cloud and SaaS consumption in an accessible, visualised (and automated) reporting structure.
  • Pain-point #2: Enterprises are adopting cloud services and software licensing at a rapid pace, but underutilising their CCMO tools essential to keep spending under control and analyse departmental and fiscal costs in a visually rich, easy-to-read format.

CCMO solutions focus on increasing visibility of expenditure across your cloud and SaaS licensing, and provides business leaders and department heads with the means to contextualise and integrate these financial insights into your day-to-day  processes. In short, it’s very valuable.

In this article, we breakdown the benefits of cloud cost monitoring and optimisation solutions, how they provide valuable showback and cost monitoring, tracking and control tools enterprises need to keep their spending transparent, and the 3 top recommendations in the CCMO space.

 

Cloud Cost Monitoring and Optimisation (CCMO): Top benefits for managing costs

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Effective cloud cost management, monitoring and optimisation comes down to having a complete view of cost across the cloud environment and our SaaS licensing. Without it, our IT planners can’t allocate resources, conduct collective cost analysis of assets (showback), and correlate them to business activities based on best practices (chargeback).

Leaders need transparency over consumption and usage to complete show back associated with business activities - for both better control over costs, and better direct investment.

Performing detailed cost analysis or handling cloud resource governance without a CCMO introduces an unnecessary number of inefficiencies and risks when it comes to staying on top of our users’ cloud and SaaS expenditure - particularly if you have multiple departments.

Manually ensuring our business units’ cloud and SaaS spend aligns to a central budget and what’s been allocated, as well as presenting all costs as part of reporting invoices is prone to errors and slower than using the automation and tracking options CCMO solutions have to offer.

Ultimately, if your business wants greater control over controlling and monitoring cloud spend and better aligning expenditure with budgets - while saving valuable time for our managers and department heads - cloud cost monitoring and optimisation tool sets are critical to examine now.

CCMOs are often in-built in the public cloud platforms we use such as Amazon Web Services (AWS), Google Cloud Platform (GCP) and Microsoft Azure, allowing us to focus our efforts in other important parts of overall enterprise cost management. For companies using a variety of SaaS products, there are also many SaaS-focused third party CCMO options available as well.

With the right automated CCMO solution, businesses can achieve the following benefits:

  • Granular cost breakdowns: A deeper overview of exactly what your business users/departments are spending their allocated budgets on, including support for reserved and spot instances, capability to set custom discounts, and more.
  • Multicloud resource monitoring: Full control, monitoring and tracking of our business users’ costs across cloud environments hosted by different providers.
  • Policy-driven auto-remediation: Policies, including tagging, that enables enterprises to prevent users from spending more than allocated budget and controlling costs overall.
  • Saving trackers with visualisations: Visually rich tracking and reporting that helps make our cost showbacks more accessible and easy to understand when analysing.

In the latest CCMO report, Forrester examined market leaders in the space and determined standalone cloud monitoring and management tools provide significant business value for enterprises wanting to have better control, monitoring and visibility over cloud and SaaS costs.

On average, Forrester found CCMOs cost significantly less to deploy and use than hybrid cloud management (HCM) tools and provide deeper cost monitoring and optimisation opportunities, a streamlined system to perform chargeback and showback, as well as an overall faster return on investment (ROI) between two to six months.

So, who are the current top recommended market leaders in the CCMO space?

 

Top 3 Cloud Cost Monitoring and Optimisation Solutions in 2019

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Apptio

Specialising as an IT financial management solution, Apptio’s CCMO tooling supports monitoring and tracking for enterprises consuming services from public cloud platforms and SaaS-based products using in-built integrations. The current product offers a comprehensive view of costs that go beyond platform fees, such as software licensing, overhead costs and maintenance billing, giving your business users a deeper report that builds a model of total cost of ownership (TCO). Managers can directly managing your licensing fees for SaaS applications (e.g. Office 365) within Apptio, import policies set in other governance tools, and gain overall much greater visibility into your spending. Apptio’s automation capabilities are currently limited, but it’s expected to be developed - but it’s monitoring and optimisation features can’t be ignored.

Rightscale

RightScale’s Optima tool can be used to perform showback reporting on all clouds supported by the platform, which includes public and private clouds, and their SaaS solutions. RightScale’s cost management platform and governance features are some of the best available for large-scale enterprises who want to build their cost monitoring, tracking and control processes around a strong policy engine with automated scheduling and life-cycle management activities. Enterprises can perform cost scenario analysis and forecast potential costs incurred across a variety of scenarios to provide department heads and management with a more comprehensive look at how their cloud and SaaS spend will look prior to committing to purchase - and use markups and markdowns to adjust costs shown from standard public cloud pricing levels before reporting and get a better idea of how spend will look with your unique use case. With continuously streamlined automation activities and policy creation, RightScale remains one of the top recommended CCMO tools right now for transparent cloud cost reporting.

ServiceNow

ServiceNow Cloud Management offers a centralised solution to consolidate billing information from public and private cloud accounts into a single system of record, to get a bigger picture of resource usage and spending for your department managers and IT. Enterprises can view all cost information in a visualised dashboard and explore cost information across a number of variables, including service category, provider, users, time, and more. ServiceNow also includes in-built application of IT policies based on a collective set of rules to ensure broad governance of the right resources while minimising risks.

 

CCMO solutions for chargeback and showback: Next steps

Keeping on top of our cloud and SaaS spend and ensuring full visibility, monitoring and tracking over our resource usage is easier than ever with the new wave of accessible CCMO solutions.

Xello speak with many enterprises who require further assistance in understanding how cloud cost showback works, and which solutions are the best to monitor, track and control their cloud and SaaS consumption costs. If you require additional assistance, reach out to our team.