We Need Cloud Expense ManagementWe Need Cloud Expense Management

The idea of CEM is to manage costs and provide visibility for planning future cloud usage.

The growth of cloud services, especially pay-by-usage billing, will generate the same issues about billing we have found with Telecom Expense Management (TEM). We need more-specialized Cloud Expense Management (CEM) tools.

TEM has matured, is productive and has definitely delivered cost savings. Within the last two years, there have been many acquisitions in the TEM space which demonstrate the attraction of these tools.

I recently attended the 2012 Telecom Expense Management National Summit in Washington, D.C. produced by CCMI. One of the speakers was Marc Lindsey, a partner at Levine, Blaszak, Block & Boothby, LLP. Marc's session was titled "Cloud Computing: A New Layer of TEM Complexity".

Marc pointed out that the cloud stakeholders in the enterprise will depend on which type of cloud service is being used (see the graphic below from Marc's presentation). Infrastructure as a Service (IaaS) appeals to the network architects looking for computing resources; IaaS is the most removed from the end user. Platform as a Service (PaaS) moves up the pyramid to the application developers. Software as a Service (SaaS) is the most visible to the end user. Each of these levels produces different forms of pricing and offers different billing situations.

Another way to view the pyramid is according to the amount of competition in the marketplace. At the bottom, IaaS is the easiest to find services where an enterprise can move from one provider to another. At the top of the pyramid, it is nearly impossible to economically move from one SaaS provider to another. Providers use different file formats, databases, and software, making it very difficult to cancel service with one provider and move to another provider. Provider lock-in is almost always assured. See "Needed: Cloud Standards", and also "A Cloud Buyer's Bill of Rights?".

Marc discussed four different cloud deployment models, all of which affect service costs:

* Public--Multi-tenancy (many enterpises) with shared resources available over the Web
* Private--Data center infrastructure dedicated to a single enterprise
* Community--A special-purpose private cloud serving multiple organizations (a group of non-profits, multiple school districts, an association of businesses)
* Hybrid, a mix of private and public cloud services
- Private cloud to host critical applications and sensitive/secure data
- Public cloud for non-core applications and generic data

The three levels of cloud pricing follow different models. IaaS charges by resource--by the hour, day or month. There are additional charges for support and possibly implementation. PaaS charges per user on a monthly basis. There are also PaaS charges for resources by the hour, day or month. There can be PaaS charges for upgraded resources and support.

SaaS is charged by user or concurrent user by the month or year. Charges can be per use, such as WebEx. There are extra charges for customization, implementation, upgraded support, and storage.

The bottom line is that each level of cloud service focuses on somewhat different billing provisions.

Locating and procuring the right CEM tools is not easy. The idea of CEM is to manage costs and provide visibility for planning future cloud usage.

But usage charges are a misnomer. Metered usage can be based on the time the resource is available for use but in fact is not being used. The billing may be by session even when the session is dormant. Billing statements cover a month with little granularity to determine who is using what and how much. A user may be billed as part of the subscription but not use the resource; the enterprise still gets billed.

The cloud provider may provide statistical information on usage that is difficult or impossible to correlate to the bill. Real time tracking reports of usage are rarely available. CEM tools should issue alerts when decomissioned resources are left on. One of Marc's comments was "Cloud provider cost management tools aren't good–so 3rd party tools are required."

Marc's final comments were:

* Tools can help to manage cloud costs, but aligning the organization's people and processes are the keys to success
* Establish rules for sizing deployment environments using reference architectures.
* Adopt and enforce approval and authorization policies that govern who can order what and how much. If this is not done, the enterprise will experience cloud anarchy. That is where departments go off on their own, using cloud services without IT oversight, and produce potential security violations.
* Set and enforce decommissioning protocols, particularly for application development and test cloud instances.