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Chapter 9
Pricing Methods Across Linked Networks

Keith A. Jones

Designing and developing an effective network cost allocation system so it is compatible with the host chargeback system is no easy task. However, data center managers must implement a strategy to recover costs across linked networks and to demonstrate to senior-level management that the data center is more than a service bureau — it is a profit center, as well.

PROBLEMS ADDRESSED

Data centers, when under efficient management, provide services to a business enterprise that are recovered by a cost allocation system that distributes these costs to customer business units. Operational expenses can be allocated across data communications network infrastructures along the lines of chargeback systems established for the host processing environments.

Most data center managers are already very much aware of all the host system resources that must be charged back to their users. This includes the most common direct system use charge categories (e.g., host CPU, system printer, DASD storage, and tape drive units) as well as indirect resource costs that must be billed (e.g., space, utilities, and technical support services).

Many data center managers may not be as well aware of the resources that must be charged to recover costs across host-linked enterprisewide information networks — or the impact that such networks can have on their host resource costs. Use of these networks can result in new categories of host data center costs that must be recovered through more complex pricing methods. Although data center managers can readily accommodate any of the more conventional unexpected changes in data center operating expense (e.g., a rise in utility or paper costs) by using an industry-standard strategy that adjusts availability of host access to match available capacity, they are often uncomfortable at the prospect of chargeout across their host network links. This is primarily because they are not as aware of their options for recovering unexpected changes in costs of supporting an enterprisewide data network.

CHARGEABLE RESOURCES

At first, it is easier for a data center manager to focus on effects to support chargeback of direct network costs on services involving equipment with very short paybacks and high plug-compatibility. The ideal initial resources are modems, terminals, printers, and if already in place, a central help desk telephone line to contact vendors.

The ideal arrangement is to leverage the volume-purchasing power of the central-site data center to obtain the lowest possible direct cost for the business client users. In addition to increasing economies of scale in purchase of hardware, software, and supplies, the data center can offer a central focal point for vendor contacts, negotiations, and coordination of maintenance services — at lower pass-through costs than can be obtained by independent arrangements.

Data center managers should begin viewing their function as more than just a service bureau for data processing services. The network-linked host data center provides expanded opportunities to offer an enterprisewide range of business information management support services (e.g., computer systems hardware and software purchasing, inventory control, financial analysis, and physical plant engineering).

Especially if existing departments within the organization already offer such basic services, the data center does not have to provide these services directly. Instead, data center management should increasingly position and present its overall operation as a ready and effective conduit to help enable each business enterprise client to tap into — and leverage — existing packets of expertise within the organization. Data center managers are in a unique position to identify common areas of operational business needs and present both internal and external sources as options to help pool costs.

Regardless of the source of the resources that make up the information enterprise network and host system costs that are to be allocated across the client service base, the primary consideration of the data center manager must be that of defining the categories of use that are to be charged. The chargeable resource categories must be easily understood by the customers who are to be billed and must be measurable by use statistics that can be readily accumulated for the review of customers in their billing statement. This is true regardless of whether the costs are to be allocated according to direct line item unit measure charges or indirect fee assignments.

As with the host chargeback system, it is first of all necessary to be able to identify — and track — all possible network services and resources. Once there is a reasonable assurance that a system of resource accounting procedures has been established that does not allow any network cost or any contingent host system cost to escape unaccounted for, data center managers can consolidate individual categories of network services and resource costs into network cost pools suitable for use in pricing out network chargeback billings.

The definition of these cost pools must be sufficiently detailed to support future strategy for directing patterns of desirable network use in a manner that is predictable and compatible to host cost-efficiency and cost-containment procedures. In other words, categories of resource that are identified to network customers for cost allocation purposes must serve to increase customer awareness of the types of expenses involved in managing the network, regardless of how much is to be billed to recover costs of each resource type.

NETWORK RESOURCE CATEGORIES

The chargeable resources for enterprisewide network cost allocation can absorb some of the data center resources (e.g., printing, database use, data media, and data center operational services) as well as the resources required for the network. The most important network resource categories are discussed in the following sections.


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