Bouke Groenescheij

My personal adventures in the quest for virtual perfectness.

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Chargeback challenge

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I got a question from @repping yesterday which got me thinking. His question was: "Do you know a good site where I can find memory prices for enterprise hardware.". Later it became clear he wanted to use that price to calculate chargeback for memory. He wanted to know the amount/GB. My fist reaction was: well, looking at the total amount of memory in combination with certain size DIMMs - the price rises with larger and larger DIMMs.

I think Dell uses a quite transparent site, with reasonable prices. Let's take a typical server, an R720 which can hold 2 XEONs and hold 24 DIMMs. Here is a table with the current price at time of writing this post:

Amount Price Price/GB
2GB 70 euro 35 euro
4GB 77 euro 19,25 euro
8GB 130 euro 16,25 euro
16GB 350 euro 21,88 euro
32GB 2.100 euro 65,63 euro

So if I would buy a server right now, and I want "the best bang for the buck", I should go for 8GB DIMMs - stated that 192GB of memory would be sufficient.

But this got me thinking: what price should be used to charge a customer, what would be reasonable? A VM with 2GB: use 70 euro, or use 32,50 euro? Also, if I would need monster VMs, buy the 32GB DIMMs since I need some VMs with 256GB of mem... Would I use the 65 euro/GB for chargeback also for smaller customers. And what if I would upgrade to newer hardware...

And would you charge for configured memory or actual in use, including memory saving techniques.

This isn't only relevant to memory, but also CPU, disk space usage (perhaps even IO usage), network vlan usage (perhaps even IO usage). And don't forget the maintenance contracts for hardware, physical racks, power, cooling, building, backup, monitoring tooling, antivirus. Then there are license costs, FTE's designing, configuring and supporting the infrastructure. What about the design impacts: n-1 or n-2 solution where cluster sizes also make a change in total capacity you can run. And test equipment... And disaster recovery site...

Chargeback isn't easy! But what would be your solution for calculating the price/GB?

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  • Hugo Strydom Friday, 13 April 2012

    How difficult do you want to make the calculation ? :-) When I help clients with this the first thing I say is: Keep it simple.
    But lets look at a calculation.

    1. Assume a 10:1 ratio of vRam:pRam. (If you have vCOPS...you can get the optimal ratio by looking at "Efficiency" as an indication for your environment).
    2. Cost recovery period of 3 years for hardware
    3. Profit of 10%
    4. Cost per gb of memory at $35
    5. Cluster Capacity of max util 65% (Or what HA have been set to)

    Calulation as follow :

    vRam per gb = $35 / 10 = $3.5 (Cost per Gb / ratio vRam:pRam)
    Recovery over 3 years (36 months) = $3.5 / 36 = $0.1 per month per Gb of vRam
    Add 10% profit = $0.1 + 10% = $0.11
    Add 35% for HA Reservation : $0.11 + 35% = $0.15

    Next is to remember that u will not fill you resources up on your cluster from day 1...thus you will only run your cluster at 65% at maybe year 2 to 3. Thus for the first 2 years your run at a lost and break even on charge out costs in year 3. Thus your need to add some recovery costs for the first 2 years. Maybe add 60% for that or make sure you recover your costs in year 1 then the rest of the years it is profit. Also remeber that you can limit your capital layout/expence by not buying (if this is a 20 node cluster) all 20 hosts...but rather buy them as you need capacity. Thus you will start of with 5 hosts and grow into your max cluster size.

    There are many other ways of doing the calulation...this is really only a simple way.

    You can also use the Chargeback Cost Tool and get a per hour rate and work that up to a montly cost.

    Hope that helps.

    Reply Cancel
  • Bouke Groenescheij Friday, 13 April 2012

    Hi Hugo,

    Thank you very much on your comment and I agree: "Keep it simple". And I really like your view on filling up resources, the first few years you'll run at a lost (so yet another variable to take into account).

    But still, lately we see an exponential growth in ‘Monster-VMs’. So we were forced to buy ‘Monster-blades’ holding 1TB of memory. With multiple hosts the hardware costs billions. Most expensive part: memory. In the end, we also want to use these servers to host ‘normal’ VMs – but how can we justify our customer saying "yeah, we know, memory is expensive since we used 32GB DIMMs. Oh yeah, we know – you only use 1GB, but we’ll charge you triple anyway."
    I guess we’ll end up using the same exponential rate used in physical memory- if you use more memory, you’ll be paying more money per GB.

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