Placing a Dollar Value on System Usage?

Anonymous SysAdmin asks: "I wonder how do system admins put a dollar value on system resources? Nowadays we see many hosting providers calculating and summing system utilization like IO operations, processor usage, bandwidth, and RAM into the monthly charges (here's an example). How can they process this info and most importantly how can they put a dollar value on it? What are the common practices in the industry and what are the tools used?"

I thought it was traditional

[camelrider]

Have read "The Cuckoo's Egg" by Cliff Stoll

hmm

[larry bagina]

Maybe a better wuestion is WHY "put a dollar value on system resources?".

People don't want bandwidth or disk space or CPU cycles, they want a solution.

Because...

[McSnarf]

someone has to PAY for it.
You can want solutions all day long - if you are willing to pay the bill.
And trust me - if you are supposed to pay for the use of a gazillion dollar supercomputer, you do not want to pay more than you use.

Efficiency & Fairness

[Detritus]

It encourages efficient and fair use of the system's resources. Rather than run just any program that will produce the desired result, it forces people to consider how their program will affect other users of the system. Maybe that bubble sort isn't such a great algorithm if it uses up your CPU quota for the month in one run.

It's called accounting...

[darkov]

Have you ever wondered why accountants exist and why they sometimes get paid heaps of money? Because things like costing and pricing can be difficult to calculate, especially for a large corporation. So the short answer is get yourself an accountant or some accounting advice.

The long answer is fixed costs + variable costs + margin = price. Fixed costs are things like rent, depreciation on the hardware, your salary, etc. Anything that doesn't really change according to how much you supply, or doesn't get used up in your supply. Divide this figure per unit of supply. Variable costs are whatever it costs you per unit of supply. And margin is how much profit you want to make.

BTW, IANAA.

Re:It's called accounting...

[j-turkey]

An Excellent point, but these pricing folks typically aren't accountants, but are finance people (ie CFO's, Controllers, VP's of Finance etc).

IANAFP...or an accountant

--Turkey

"Nowadays"?

[Kris_J]

This is how business computing started. My mother used to be software support for UCC in England -- they had huge mainframes dotted around the globe and they billed by the minute (obviously easier pre-multithreading). There should be heaps of resources dating back more than 30 years on how to do this sort of thing. Heard of a library?

Times like these...

[thecampbeln]

...I wish there was a "Unnecessarily Bitter" option to moderate with =)

Re:Times like these...

[Creepy Crawler]

Actually, refreshingly bitter ;-)

Still, I'm not surprised if we went back to that system for supercomputing needs. Provide an OS, interface api and staff... And you either have your data or a nice core dump.

Have Fun

Re:Times like these...

[Kris_J]

As long as it's "+1 Unnecessarily Bitter" I'm cool with that...

Well, I'm going to hazard a guess...

[djcapelis]

I'd imagine that instead of pricing carefully most providers just attempt to work miracles and use guesswork.

Figure out how much money you need... and who many customers you can expect, set your prices to get you there. :)

Or do the delibrate well-thought out option... that might work too.

common principle

[peripatetic_bum]

It will be what the market will bare. ie, if a real systems administrator can be had for 20 thou a year, then systems administrator can expect to make 20 thou/52 weeks/5 days/8 dollars per hours.

The real question is how much need is there for rel system administrator: I ask this because I can be called a systems adminitrator for raintree IT.

I keep the web servers and mail servers running.
They run without fail. these servers collect in accounts maybe 20K a year at most (its a nonprofit)
so how much am I w

Easy

[duffbeer703]

Whatever your customers will pay.

If you provide value and good service, they will pay alot.

If you do not, they won't.

Re:Easy

[mcmonkey]

Whatever your customers will pay.

How very 19th century.

So how do you know if what you are charging is enough to cover your expenses? How do you know what is your profit? How do you calculate return on capital?

Guessing at a price for your service or product or just 'whatever your customers will pay' is a good way to go out of business.

system accounting

[kevin lyda]

they use freebsd. so they're probably using the system accounting tools in most unix/linux systems. see the accton(8), lastcomm(1), acct(2), acct(5) and sa(8) man pages.

Re:system accounting

[cyb97]

Or linux compiled with BSD-accounting, and using the acct-package (which contains acct, sa, ac, etc.)...

Re:system accounting

[kevin lyda]

yes, which was kind of covered with "using the system accounting tools in most unix/linux systems."

Variable prices

[__aafkqj3628]

When it comes to computer hackers, the simple storage of files can start to cost millions of dollars for some reason.

Talk to your bean counter

[abulafia]

In a former life, I had to do this for a dot com. This was on a consulting basis, and as an annoying (for me) side project.
The companie's CFO and I worked together on it. In general, take the cost of the machine, the depeciation cycle, the cost of maintaining the machine (admin time, support, replacement parts, bandwidth, hosting or space in the office, etc.) to get a cost per time unit. Then, using a system accounting package, estimate CPU, disk and bandwidth usage.

At this point, the accountant has to determine reasonable values for each of those, and not being an accountant, I can't speak to how that is done. Once you're this far, though, costing is simply division.

If you need to price it, that's a different matter entirely.

Re:Talk to your bean counter

[4of12]

Good listing of how to figure costs! You have my virtual mod points:)

You allude to what is really the most insidious and difficult part: trying to place a value on each of the different services that your computer provides.

I recall people charging for CPU time, disk space and pages printed, but I've lately thought that other resources should be examined such as memory occupation time, network occupancy, or, possibly even bus occupancy. Some of these really depend on the contention with other users and oug

Re:Talk to your bean counter

[abulafia]

Yeah, that gets tricky. That's why I said _pricing_ is very a very different beast.

If you're just trying to allocate costs internally, that's one thing - you don't need to worry about market issues quite so much. But if you're selling to others, pricing somehting like this is very complicated. There are whole companies that specialize in pricing things like this... (I've always wondered how they set thier prices.)

An economist might say there should be a spot market, with the price set by whatever someon

The REALLY simple method

[R2.0]

(IT Dept. Budget/12 Months)/# of computers in company = Monthly $$/computer charged to each department.

Usage? irrelevant.

You laugh, but this is the way my company does it. No, really. And it kinda sorta works.

We did it this way:

[MacEnvy]

My boss asked me to do this not long ago ... We took several factors into our calculation at my corporation. We were doing it on a server by server basis, so keep that into mind.

1) Cost of server hardware as a function of the time it would be in use
2) Cost of server OS (Window 2000 Server) over same time and over users
3) Cost of bandwidth used (fraction of total bandwidth)
4) Cost of maintaining server (personnel, electricity, hazard prevention, security, upgrades, general analysis tools)
5) How i