Microsoft Azure recently announced an addition designed to help with Azure chargeback: cost allocation, now in preview in Azure Cost Management + Billing. We’re always glad to see cloud providers making an effort to improve their native cost management capabilities for customers, so here’s a quick look at this update.
Chargeback for Cost Accountability
Cost allocation for cloud services is an ongoing challenge. Depending on organizational structure and decisions about billing and budgets, every organization will handle it a bit differently. In some cases, separating by Azure subscription can make this easier, but in others, your organization may have shared costs such as networking or databases that need to be divided by business unit or customer. However, it is an obstacle that must be addressed in order for organizations to gain visibility, address inefficiencies, and climb up the cloud spend optimization curve to actually take action to reduce and optimize costs.
Many IT organizations address this via an Azure chargeback setup, in which the IT department provisions and delivers services, and each department or group submits internal payment back to IT based on usage. Thus, it becomes an exercise in determining how to tag and define “usage”.
In some cases, showback can be used as an alternative or stepping stone toward chargeback. The content and dollar amounts are the same – but without the accountability driven by chargeback. For this reason, it can be difficult to motivate teams to reduce costs with a showback. We have heard teams using variation on showback – ”shameback”. IT can take the costs they’re showing back and gamify savings, coupled with a public shame/reward mechanism, to drive cost-saving behavior.
What Azure Added with the Preview Cost Allocation Capabilities
The cost allocation capabilities are currently in preview for Enterprise Agreement (EA) and Microsoft Customer Agreement (MCA) accounts. It allows users to identify the costs that need to be split by subscription, resource group, or tag. Then, you can choose to move them, and allocate in any of the following ways: distribute evenly, distribute proportional to total costs, distribute proportional to either network, compute, or storage costs, or choose a custom distribution percentage.
Cost allocation does not affect your Azure invoice, and costs must stay within the original billing account. So, Azure did not actually add chargeback, but they did add visualization and reporting tools to facilitate chargeback processes within your organization, outside of Azure.
Improvements in the Right Direction – or Too Little, Too Late?
Azure and AWS are slowly iterating and improving on their cost visibility, reporting, and management capabilities – but for many customers, it’s too little, too late. The lack of visibility and reporting within the cloud providers’ native offerings is what has led to many of the third-party platforms in the market. We suspect there is still a way to go before customers’ billing and reporting needs are fully met by the CSPs themselves.
And of course, for organizations with a multi-cloud presence, the cloud costs generally need to be managed separately or via a third-party tool. There are some movements within the CSPs to at least acknowledge that their customers are using multiple providers, particularly on the part of Google Cloud. Azure Cost Management has done so in part as well, with the AWS connector addition to the platform, but it’s unclear whether the 1% charge of managed AWS spend is worth the price – especially when you may be able to pay a similar amount for specialized tools that have more features.