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.

The foundation of an effective chargeback depends on four main factors. With these factors in mind, you can have tactics to do effective chargebacks for the cloud.

These factors are:

  • 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.
  • Cost of the chargeback model. Some chargeback models are more costly to implement than others.
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What Makes Cloud Chargeback Models Ineffective?

  • Resentment toward the chargeback models often leads to a dispute.
  • The cost of the chargeback can make it expensive to implement.
  • The lack of knowledge, transparency, and understanding within business units makes it difficult to understand a chargeback.

To resolve these issues, you’ll need an effective cloud chargeback model.

Seven Steps to an Effective Cloud Chargeback Model

1. Collaborate on the chargeback idea.

Because chargebacks affect specific units in an organization, make sure they accept the chargeback idea. Cost centers, profit centers, and corporate functions should participate in making the cloud chargeback model. If IT has a budget, other business units should understand ways of channeling the budget. And if IT puts a chargeback on other business units, explain the underlying benefits. Collaboration means educating everyone on the importance of chargebacks. For example, free budgets can finance innovation and scaling.

2. Plan the process.

Let both the IT and Finance units plan the chargeback model. In this process, they should integrate all ideas raised while collaborating on the chargeback model. In this second step, assign responsibilities and roles for every user. Create an accountability system to help each business unit take care of mishaps. List all cost center products and services.

3. Gather enough resources.

Even though it’s possible to manage your chargeback model in Excel, it’s not a best practice. There are more effective tools than spreadsheets to help you implement chargebacks more effectively. Gather the right tools to automate cost tracking, bill calculation, and money transfer.

4. Calculate the total costs.

In cloud computing, there are two major types of costs. There are capital costs and operating costs. Capital costs are lower because of several discount offerings and free services from top cloud providers. Pay careful attention to the total cost of ownership. Model the total cost of owning all IT products and services you need in the cloud. It will raise an understanding of the approximate range of budget you need.

5. Allocate budgets to each business unit.

For chargebacks to be effective, each business unit will need its budget. An IT unit does not consume 100 percent of cloud services. In fact, it serves other business units using available tools. For this reason, the cloud computing budget doesn’t have to go 100 percent to IT. Allocate budgets based on average consumption.

6. Push for self-sustainability.

The next step is to make each department self-sustainable. Departments can achieve self-sustainability by selling more of their products and services. Since each unit has a budget, marketing products becomes easier.

7. Use a tagging feature:

Top cloud providers now have a tagging feature. Tags make it possible to measure and account for resources in each workstream.

The Bottom Line

That’s how to do an effective chargeback model for the cloud. To learn more about chargebacks for the cloud and how you can make the best use of them, contact us at