As organizations increasingly move their applications and data to the cloud, they face new challenges in managing their costs and optimizing their resource utilization. Two common approaches that organizations use to address these challenges are cloud chargeback and showback. While they may sound similar, they are two distinct strategies with different goals and outcomes.

What is chargeback?

Chargeback is a cost accounting method used to allocate the cost of cloud services to the business units or departments that consume them. It is based on the principle of "pay as you go," where the users of cloud services are billed for the resources they use, similar to how they would be charged for electricity or water usage.

Chargeback allows organizations to accurately track and allocate cloud costs to specific business units, which can help incentivize better resource utilization and increase accountability. For example, if one business unit is consistently using more cloud resources than another, chargeback can help identify the cause and encourage better utilization of resources.

What is showback?

Chowback, on the other hand, is a method of reporting the usage and costs of cloud services to business units, without actually charging them for those services. Showback provides visibility into the cloud resource utilization, enabling business units to understand the true costs associated with their use of cloud resources.

Unlike chargeback, showback is not about cost recovery but instead focuses on transparency and education. By providing detailed information on cloud usage and costs, showback can help business units make informed decisions about how to optimize their use of cloud resources.

Differences between Cloud Chargeback and Showback

The primary difference between cloud chargeback and showback is the objective of each approach. Chargeback is focused on cost recovery, while showback is focused on transparency and education.

Another difference between the two approaches is the level of accountability they create. Chargeback creates a direct financial accountability for cloud resource usage, while showback creates an indirect accountability through increased visibility into cloud resource usage.

Finally, chargeback can be more complex to implement than showback, as it requires a billing system and cost allocation methodology. Showback, on the other hand, can be implemented more easily by leveraging existing cloud usage data and reporting tools.

Which Approach is Right for Your Organization?

Both chargeback and showback have their benefits and drawbacks, and the approach that is best for your organization will depend on your specific goals and requirements.

If your goal is to recover costs and incentivize better resource utilization, chargeback may be the better option. On the other hand, if your goal is to increase transparency and enable informed decision making, showback may be the better option.

Ultimately, the decision of whether to use chargeback or showback, or a combination of the two, will depend on your organization's unique needs and priorities. Regardless of which approach you choose, implementing cloud cost management strategies can help you optimize your use of cloud resources and maximize the value of your cloud investments.