Cloud FinOps, 2nd Edition

Chapter 17. Understanding Commitment-Based Discounts

Commitment-based discounts are a perfect example of the collaborative, data-driven decision making of FinOps. They bridge the gap between technology teams and finance teams, requiring alignment that can be challenging to achieve. However, when alignment is reached, commitment-based discounts can bring a significant cost efficiency advantage in the form of improved cloud unit economics, giving you the same compute power for a big discount.

Note

This chapter is one of the most likely to become out of date—probably before this book even makes it to market—as there are always new updates to cloud provider offerings. We suggest checking the details in this chapter against what your cloud service provider is currently offering. Fear not, though: while there have been many changes to offerings over the years, the core best practices around reservations remain consistent.

Introduction to Commitment-Based Discounts

Reserved Instances (RIs), Savings Plans (SPs), Committed Use Discounts (CUDs), and Flexible Committed Use Discounts (Flexible CUDs), collectively known as commitment-based discounts, are the most popular and important cost optimizations that cloud service providers offer. This is because commitment-based discounts represent the largest percentage discount you can achieve in cloud and often apply to the largest areas of cloud spend in your bill.

Note

This chapter focuses primarily on commitment-based discounts for compute ...