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How Much is This Gonna Cost? Price Models for IT Infrastructure

Steve Watkins, Guest Blogger

Steve Watkins is a Consulting Systems Engineer for Cisco Intelligent Automation for Cloud.  He came to Cisco as part of the newScale acquisition in 2011.  He has been helping customers manage the migration to IT as a Service (ITaaS) since 2004.

 

Showback and Chargeback have become increasingly hot topics for IT, especially infrastructure teams.  This is fuelled at least in part by the general acceptance of cloud computing, including private clouds and SaaS applications.   Chargeback (and even Showback) are great ways of affecting behavior of the consumers of IT.   It keeps consumers from demanding an unreasonable amount of services, and encourages them to use of what has already been invested in.  There is also a growing mandate from Finance to make IT accountable for its spend, or at the very least to justify any requests for further investment. So infrastructure teams find themselves in the unexpected position of defining prices for the services traditionally offered.   Most have no idea where to start.

Several vendors have produced offerings to help manage the showback/chargeback business case.  This post will not discuss any vendor in detail.  Instead, I want to talk about philosophy.

Broadly speaking, there are two major approaches to creating a price model for IT.  There is the Utility-based model, in which pricing derived from actual consumption of CPU cycles, RAM, bandwidth, storage, etc.  In this model, if you stood up a virtual machine for one week you would only pay for the actual amount CPU cycles and storage you consumed.

Alternately, there is Service-based pricing, which advocates a fixed price based on either the service itself or some other unit of measure such as hours, etc.  In this model, if you stood up a virtual machine for one week you would pay for how many hours the VM was active, whether you used it or not.

I always council my customers to adopt service-based pricing.  I think utility-based pricing is the wrong approach for IT departments, especially infrastructure teams.  Here are my reasons:

1.INFLEXIBLE – Utility pricing is asset based, and therefore assumes that the assets will remain more-or-less the same.  The model breaks down when you introduce changes, like renting infrastructure from public providers or changing service levels.  What about if I offer VDI next year?  That may mean two different types of pricing models, which gets even more complex.  A service-based pricing scheme works with all services.

2.POOR CAPACITY MANAGEMENT – by only charging for the CPU cycles you actually consume, it encourages users to stand up systems and leave them in place.. which is exactly what we don’t want.  Think of renting a car: you rent a car for 4 days but only drive it for a total of 3 hours, you still have to pay for all for days.  If I just paid when I actually drove it, I would keep it all the time.  We want to encourage users to return unused assets. Which leads to..

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Attend a Cloud Workshop by Cisco

I have previously blogged about the value of a having a Cloud Workshop to drive success for your first Private Cloud.   Well now Cisco’s Cloud & Systems Management Technology Group and Cisco Corporate IT will host a Workshop at the 11th International Cloud Expo.   Register to hear the best “true grit” about the Private Cloud.   I will be presenting with Rodrigo Flores, Joann Starke and Brian Cinque.

See you there.

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Top Five Differences between an Infrastructure Manager and a Cloud Management Solution

I get asked this question a lot.  Cisco has multiple exciting Converged Infrastructure solutions with partners.   There are actually two different software product “categories” covering the Infrastructure (or POD) Manager and the Cloud Management Solution.  Let dig a bit deeper in what the differences are.

OR

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So you want a real private cloud?

I had a customer ask me last week what differentiated our Cisco Intelligent Automation for Cloud solution.  He had reviewed many of the vendors in the space of private cloud software stacks including some of the virtualization vendors and was somewhat impressed to see that overall the industry was making progress in building out these solutions.  He did have a nagging thought in the back of his head that going with many vendors meant he was getting a “prefabricated” cloud experience much in the way prefab homes are offered.

His management wanted a private cloud, wanted it fast, but was not sure exact what a private cloud would look like or how it would operate.  His enterprise had specific needs, whether they be naming conventions for VMs or physical servers, or any number of integration points into 3rd partner products.  What his company really wanted was a home built to their specific needs for their private cloud.  This did not mean a fully custom house, but something that could use standard components  (think of all the standard construction components we use now a days) to build a designed to spec home.

This did not mean they needed high end digs right away but the ability to start in a pragmatic way and to enhance, extend, and build upon that first home.  This requires an underlying framework that can be used to build a company’s first pragmatic cloud and to grow up, much like my 63 year old house in its fourth remodel over the years.  The basic platform is present, we are just making much needed changes to support the needs of 2012.

After we got on the same page about clouds and why he would want to build his companies 5-10 year strategy of cloud on an extensible framework, we moved on to the composition of the solution:  product license, Cisco TAC support, and Cisco Advanced Services.  Given a clear business driver for the private cloud (such as in-sourcing of rogue VMs in the cloud, or driving infrastructure support of elastic business needs, or leverage Cisco network functionality for multi-tenancy) the financial conversation resulted in a positive outcome for both sides.  Of note was that building this individual’s Enterprise Private Cloud means that he was going to consume a good amount of Cisco Advanced Services.  To him this was a good thing as he was leveraging the knowledge and experience of the Cisco team to build and configure his cloud to start out and to scale out.  Just like when I am building a new great room in my house, I want the best people figuring out structural loads, making construction recommendations for extensions and to build out those special design features.

That is the thing about REAL private clouds, they need effort to configure it the way your company wants to operate it.

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The Enterprise’s Inclination to Private Cloud

By Uwe Lambrette, Director of Service Provider Solutions, Cisco Internet Business Solutions Group (IBSG)

Cisco IBSG’s recent interviews with about 45 enterprise CIOs and architects clearly revealed that enterprises have a preference for private cloud. They want to maintain control over their IT, especially where the architecture is new and skills need to be built. In addition, they are not comfortable with accepting externally provided cloud solutions (although there are certainly exceptions).

At the same time, the survey indicated that once enterprises have gained private-cloud experience, they are more willing to allocate this architecture to an external provider.

This is reminiscent of the classic outsourcing
 cycle, where corporate functions are moved externally once they have become a commodity.

This trend has Read More »

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