Price, politics working against VMware vCenter Chargeback

Chargeback is a tough sell in any organization, but VMware isn't making it any easier by pricing its new vCenter Chargeback so high.

Is VMware's new vCenter Chargeback dead on arrival? At its current list price of $750 per managed processor, it may well be. Even though some VMware users understand how Chargeback could help them better utilize resources and reduce sprawl, its price tag will make it a hard sell.

"At $750 per processor, there's no way in heck I could get management to sign off on what's basically improved power and cooling," said Kent Altena, infrastructure architect at Farm Bureau Life Insurance Co. (FBL) in West Des Moines, Iowa.

Altena oversees about 45 VMware ESX hosts running 750 virtual machines, and he has been thinking about ways to push application owners to shut down test and development virtual machines when they're done with them. FBL currently bills project owners for virtual machines by taking the total cost of a server and calculating the virtual machine's (VM's) share of the resources -- especially memory. "It works great," he said, "but it doesn't give them a model to turn their VMs off. Ever."

By implementing Chargeback, FBL's cost-allocation model would shift from purchasing to renting, which would drive users to turn off unneeded VMs. That, in turn, would help FBL drive utilization higher than the 35-1 to 40-1 consolidation ratio it typically strives for.

Conversations last year with VMware insiders had led Altena to believe that Chargeback would be included in a vSphere 4 bundle, in much the same way Fault Tolerance or Data Recovery are included. (Indeed, at least one blogger has called on VMware to make Chargeback free). But now, Altena's plans to move FBL to more of a utility model are off. "It's really hard to get management to sign off on an additional purchase that will theoretically save you money down the road," he said.

Meanwhile, VMware users who have implemented a competing product called VKernel Chargeback have good things to say about chargeback as a discipline and the product itself, which starts at $199 per processor.

The San Diego Data Processing Center (SDDPC), a nonprofit agency that supports the IT needs of San Diego County, recently implemented VKernel Chargeback as it prepared to start charging its users for test and development resources.

"In fiscal year 2010, we're going to charge for dev/test as well as production," said Rick Scherer, virtualization infrastructure architect. "If we're going to start charging for machines that used to be free, it has to be fair."

Previously, SDDPC charged a flat rate per VM, but Scherer argued that the system was inadequate. With Chargeback, Scherer says he'll be able to charge departments for their exact usage.

Showback, not chargeback
SDDPC has yet to bill any actual customers. "We'll see how it goes, what the perception will be," Scherer said. Most other VKernel customers never go that far, said Kevin Conklin, VKernel vice president of product management and marketing. Instead, they use Chargeback for internal reporting only -- "showback," as it were.

"Only about 10% of our Chargeback customers tie it to billing," said Conklin. "Otherwise, they use it to show to the other groups how usage is done."

That's the case for VKernel Chargeback customer Belron US, a vehicle glass repair and replacement company in Columbus, Ohio. "I use it to get reliable data on what's going on, but it's not necessarily rolled up in to a financial transaction," said Rick Vanover, Belron systems administrator.

Chargeback, he added, "is more of an accounting decision. I can't make those claims. All I can do is analogize [the departments'] usage, and say to them, 'You have this much of the host's worth of capacity.'" Vanover said having the tool makes it easier to garner approval for new purchases. "It's easier to ask for money during the budget cycle if you can show them what you've already done," he said.

If VMware is to break with tradition and succeed in selling vCenter Chargeback, it will need to focus on this idea of showback, said Andi Mann, a senior analyst at Enterprise Management Associates Inc.

According to research Mann conducted this winter, chargeback was ranked last in importance among 18 different IT disciplines, and it had the lowest of all the satisfaction ratings. "It is perceived very poorly," he said.

That's a shame, Mann added, because implementing chargeback is very highly correlated with other measures of successful IT management. For example, IT department with chargeback have a higher VM-to-admin ratio and enjoy better resource utilization. "Chargeback is really important and vastly underrated," he said. "It drives directly at a bunch of [positive] metrics."

Chargeback's real problem isn't technology; it's politics, Mann said. Most organizations simply aren't prepared for IT to bill them. "IT can't tell the business what it has to pay. The business tells IT how much it can spend," Mann said, adding, that to do chargeback, "you need high level support for that kind of program, or else it's not going to work."

On the other hand, he noted, showback "maintains the existing power relationship, but cost accountability becomes a positive thing instead of a negative thing." If VMware focuses on showback rather than actual chargeback, "it will have marginal success," Mann said. Otherwise? "I'm skeptical."

Let us know what you think about the story; email: Alex Barrett, News Director.

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