Factors to Consider When Creating Azure Chargeback Model

azure chargeback model

Azure chargeback model is a financial management framework of allocating costs for different units in your organization depending on their spending. Designers use this framework to create cost transparency and stick to preset budgets.

Implementing an acceptable Azure chargeback model can have numerous benefits for your company. It makes business units aware of the resources they consume often, encouraging them to make better decisions. It also leads to improved ROI and higher overall performance in the organization.

With Azure chargeback, you can allocate costs internally to each department. There are lots of approaches you can take when creating an Azure chargeback model. These include:

  • High-level allocation: this approach charges on user size. It can be either the number of employees or the revenue generated.
  • Low-Level Allocation: charges using simple metrics such as server and user counts
  • Tiered Flat Rate: Users incur charges for the services they access, whether they use them or not.
  • Direct Cost (DC): charges user based on resource dedicated ownership
  • Measured Resource Usage (MRU): charges users for specific resources such as storage consumed, bandwidth, etc.
  • Service-Based Pricing (SBP): charges per specific measured unit of service
  • Negotiated Flat Rate (NFR): charges users on a projected or negotiated usage of a service

As seen above, there are many approaches to Azure chargeback modeling. You determine the success or failure of your chargeback model through various factors.

Factors That Determine the Success of an Azure Chargeback Model

For your chargeback model to be acceptable, you need to consider several factors. These factors include:

Fairness

Are you creating a chargeback model that reflects actual consumption? On the other hand, do you rely on estimated allocation?

Each business unit wants to incur accurate costs based on their spending. They want assurance that they aren’t paying for costs they didn’t incur.

You need to communicate any questions perfectly. You have to let people know they are paying fairly, which is extremely important where you use a service across the organization.

Predictability

Business units want a predictable chargeback model. It’s imperative to run an Azure chargeback model that allows business units to predict their spending. Ideally, a predictable model is more valuable than low costs.

On normal usage, costs shouldn’t differ by more than 5%. When costs fluctuate, most business units ought to question why. In the event a business unit scales its resources, the executed costs should be predictable as well.

Manageable

Most organizations find chargeback models highly overwhelming. Don’t implement an Azure chargeback model unless you are sure you can run it efficiently. Ideally, it’s best to start with a showback approach where you only provide business units with details of their spending. Once you have managed to achieve that effectively, you to implement chargebacks.

The main catch here understanding the cost structure of the underlying services you provide. After that, you can get people comfortable with the billing process. You must ensure they understand their invoices and are comfortable diving into the actual chargeback process.

Effectiveness

When creating an Azure chargeback model, it’s best to ensure it achieves the desired results. These include cost control and awareness.

An ideal chargeback model should allow users to view costs on their own. This awareness encourages users to maximize resource utilization and configure the cloud optimally. It should also discourage users from choosing expensive services just because they are available. With such a model, you can easily achieve competitive pricing and keep internal conflicts minimum.

Controllability

An ideal chargeback model should provide users with the ability to control their billing. Users should have the ability to realize cost optimization capabilities for the cloud services they use.

Transparency

A transparent chargeback model is crucial for your organization. Your customer or individual business units want to understand how charges form. They also need to understand what their charges are, and the units that make up the costs.

Being transparent in your chargeback increases the buy-in from the consumer. On the flip side, users will resent a non-transparent model, leading to its failure.

Acceptability

Organizations need to accept the Azure chargeback model within the organization. Business units or customers should appreciate and own the model without much friction. If they accept the model, it will definitely succeed, and vice versa. For a model to be acceptable, it should be accurate, transparent, and auditable.

Manage Your Azure Chargeback Model With nOps

The above are some of the factors that determine the success of an Azure chargeback. Your main aim is to ensure it is transparent, accurate, and fair to the users. With a model that achieves all the above features, you are good to go.

nOps billing and Cost Management feature allows you to create an effective cloud chargeback model. Utilize our chargeback capabilities to create a universally acceptable model that charges customers fairly.

Start your nOps free trial or schedule a demo to see it live in action!