Choosing the Right Cloud Cost Allocation Solution

Cost allocation is a well understood accounting practice in IT organizations. But finding the right solution to support your business needs presents some significant challenges.

In this article we will explain the key differences that make cloud cost allocation reporting complex. We will review the available options, and outline requirements you can use to find the right solution for your organization.

Why Is Cloud Cost Allocation So Hard?

While allocating costs for physical IT infrastructure is an activity that has been performed for multiple decades, cost allocation in the cloud is an emerging business activity that brings with it substantial new complexities. These complexities are driven by the unique attributes of cloud computing, including:

Dynamic infrastructure - Instead of making a capital expenditure for servers and storage a few times a year, cloud infrastructure gets provisioned / de-provisioned on-demand by the hour and minute.
Delegation of control - Instead of lines of business collaborating with IT on the infrastructure required to support their needs, they frequently now have direct control over the provisioning and de-provisioning of their infrastructure.
Pay as you go - Over-provisioned infrastructure in physical data centers does not typically have a substantial impact on operating budgets, since the underutilized infrastructure was likely purchased via a capital expenditure in a previous budget. But in the cloud, all infrastructure is paid for based on consumption, and therefore has an impact on operating budgets.
Scale - Due to the low-level components available in IaaS (e.g. compute, storage, application-level service), the cloud has substantially increased the number of assets / resources an organization must manage and report costs against.