What’s allocation versus usage-based billing?
(Happy 2008, Everyone! This will be a big year for us – Valign will formally launch its product later this spring…)
I’ve gotten this question a lot from people interested in understanding how to figure out the usage and costs of their virtual environment. Several of our beta users are just now getting a feel for the power of allocation-based billing. This is especially beneficial as they plan a smooth roll out and transition into chargeback for their virtual infrastructure. So below is a short run-down on this topic. (Keep an eye out on our resources page because we hope to produce a short whitepaper on this topic later this spring.)
A simple way to describe an allocation model is “pay for the resources you are dedicated” and an on-demand, usage model as “pay as you go for what resources you use.” A hybrid model allows both allocation for some resources and usage-based for other resources (e.g. allocation for VCPUs and usage for storage).
Basically, in an allocation-based billing model, the owner of a VM pays for e.g. the number of virtual CPUs (VCPUs), reserved memory assigned to a virtual machine, network bandwidth or maybe a chunk of storage and that price won’t be variable in their bills. This is great, “flat-rate” style of pricing to produce predictable bills for users or as the basis for cost calculations. It can also be a nice, comfortable way to get your business units prepared for the concept of IT billing in the short term and perhaps move to usage-based billing later to really drive optimized usage from your consumers.
As such, the majority of VMware customers plan to begin with an allocation-based model for the above reasons, but also because it’s easier for everyone to understand! VAlign handles the difficulty of understanding and implementing this model with our ability to leverage the cost-pool calculator and wizards to help guide you to ‘price’ aspects of your infrastructure and let it determine the allocation.
Once customers are more comfortable with the bills they are producing, the move to usage-based biling is easier. And, although it’s a bit more variable and potentially tricky to implement politically, the benefits outweigh the costs. Providing true usage-based bills is the most powerful way to curb VMware sprawl, optimize IT Operations and change user behavior. You turn the lights off when you leave the house because it’s you the bill comes to at the end of the month!
Comments
Got something to say?