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Managing Commitment Based Discounts

Definition

Cloud services have different approaches that leverage spend commitment to offer discounts on services. These vary from customized commercially negotiated discounts, to spend-based commitment discounts like AWS Savings Plans, resource-based commitment discounts like Google CUDs and others.

Spend-based commitment discounts and resource-based commitment discounts are the most popular rate optimizations that cloud service providers offer. This is partially because CSP native tooling and FinOps platforms enable you to plan, manage, and benefit from these types of discount constructs.

Each cloud service provider has a slightly different offering with its own specific rules on how it works and the discounts it provides. You must also consider the implementation models that organizations use, based on their needs, and how the overall process should work inside an organization.

Altogether, the implementation of these strategies drives an organization’s Effective Savings Rate (ESR). It is important to note that under utilization of a commitment based discount would also negatively impact ESR as would significant usage not covered by discounts.

Maturity Assessment

WHERE ARE ORGANIZATIONS IN TERMS OF MATURITY

Crawl

72.1%

Walk

23.2%

Run

4.7%

Responses indicate that organizations operating at a FinOps Run maturity utilize high levels of available cloud discount constructs to improve costs rather than pay on-demand pricing. Responses showed most organizations had adopted some strategies for using cloud discount offerings with the majority in cohorts operating their cloud cost management practices at a FinOps Crawl and Walk maturity

Take the State of FinOps 2024 Survey

Crawl

Walk

Run


Functional Activity

written for each persona responsible for the functional activity and processes encapsulated by his Capability. each one should be associated generally to one of the FinOps Phases (Inform, Optimize, Operate). for example:

As a [FinOps Persona], I will [functional activity] so that [desired outcome] is achieved.

Measure(s) of Success & KPI

Measures of success are represented in the context of cloud costs and may include one or more key performance indicators ( KPI ), describe objectives with key results ( OKR ), and declare thresholds defining outliers or acceptable variance from forecasted trends.

Inputs

the information used that contributes to the measure(s) of success listed above; information here may include specific datasources, reports or any relevant input

Related Domains

Featured Resources

Commitment Based Discounts Overview

Commitment Based Discounts Overview

How to Use a

How to Use a "Green/Red" Approach to RI Buying

Centralizing Prepaid Cloud Discount Reservations (Koch Industries)

Centralizing Prepaid Cloud Discount Reservations (Koch Industries)

Fear of Commitment to Reserved Instances and the Pain of Waiting

Fear of Commitment to Reserved Instances and the Pain of Waiting

Cloud Service Provider Commitment Based Discounts Offerings Matrix

Cloud Service Provider Commitment Based Discounts Offerings Matrix

Capability Assets