In cloud computing, chargeback models help users to bill the cost to internal consumers of cloud services. It means that not all expenditure falls under one department. Instead, each business unit becomes responsible for its consumption.
Accuracy of the chargeback model. For a chargeback model to be effective, it has to quantify the right price paid by a given business unit with utmost clarity.
Transparency of your chargeback model. A good understanding of the cloud chargeback model helps implement effective chargebacks.
Control on cloud consumption. Business units with a deeper control of cloud resources will embrace your chargeback model, making it more effective.
A tagging and account strategy is vital as ways to identify costs. By either assigning a tag to a resource or by designating a cost center that pays for resources in a certain account, practitioners can identify who is accountable for the expense incurred.
Chargeback vs Showback Value Addition
A chargeback happens when the actual cost being incurred is allocated back to the budget or P&L of an individual team.
Showback happens when you show teams what they are spending, but the dollars are allocated internally from a central budget.
Showback leaves a bill on the table for analysis; chargeback leaves the same bill but requires payment.
Customer use cases
Centralize negotiated discounts
Custom negotiated discounts with a cloud provider typically increase the more you commit to spending.
The economy of scale a central team can get enables the best possible rates, at a level that individual business units cannot achieve
Sometimes these rates are highly confidential as well, and there’s a desire not to share them broadly in the organization.
Shared corporate costs across accounts
Support charges are a common example of this challenge. Cloud vendor support charges are generally applied at the parent account level.
Modern architecture has also introduced more shared costs with the rise of shared platforms. These platforms have multiple teams working with the same core resources, such as data lakes built-in, commonly shared S3 buckets, or Kubernetes systems running on shared clusters.
Centralize RIs and keep some portion of the savings
This approach allows a central team to fund itself and also shares the benefits of savings with the teams.
However, there may be some pushback from teams who have been required to give up control of RI buying and thus are unable to access all the savings possible.