How do I determine an ‘appropriate’ rate for my infrastructure components?
Hi readers. This is Elizabeth, (elizabeth at valignsoftware dot com) and I wanted to provide a little nugget on rate determination. Oh, and wish you a happy V-day! (That’s VAlign / Valentine’s day.)
We’ve been getting some inquiries from our beta users about the Cost Pool Calculator and Service Pricing Wizard we provide with VAlign. They’re of great value, and not that complex to understand, so I thought I’d just start a quick post to get the conversation going. Let me know if you have ideas, suggestions or complaints…
A lot of tools launch a little UI and prompt the user to enter a price per metric for their ‘chargeback solution’. Ugh… yeah, that would be great IF I KNEW WHAT THE RATE SHOULD BE. Most of the challenge is exactly this – determining the rate, based on the total cost pool you need to recover, usage of the resource over a period of time, etc.
Anyway, since most of us at VAlign have worked in enterprise chargeback and/or virtualization for a while, we knew customers needed something more. So we built this wizard to help ensure you don’t over- or under-recover for a CPU minute, Network i/o, disk GB, memory GB, etc. Our tool considers: (1) the capacity of the infrastructure this rate is being applied to, and (2) the amount of money a particular rate card needs to recover. (We can also aggregate and compare costs at many organizational levels, including global, line of business, department and so on.) The key here is the guidance / wizard we provide to do this.
The output of our Cost Pool Calculator (CPC) is a daily amount of money that a rate card needs to recover. The CPC is comprised of cost pools represented by a ‘tab’ (e.g. Labor or Hardware or License & Maintenance; depreciation and recovery percentages are considered by this way). Some other vendors say they have something similar but it’s basically an Excel spreadsheet – lame!
So, why is this important? When accounting views a bill, they can map charges back to the CPC and understand exactly what a bill is covering. We’re speaking to the business folks here and basically, there is no way to successfully implement IT chargeback – whether for your virtual infrastructure or any other IT services – unless finance and business execs (who might ultimately foot the bill) can understand the data you’re providing and see the back-up proof necessary to trust your numbers.
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