Introduction to Commitment Nomenclature

Cloudability strives for full alignment with both the FinOps Foundation and FOCUS nomenclature. How we approach commitments is no different. To reiterate, commitment is the shorthand term we use to generalize these contracts. Reserved instances – AWS/Azure, savings plans – AWS/Azure, prepurchase plans – Azure, and committed use discounts (CUDs) – GCP are thus all called commitments. To reestablishing the definition from the previous section, the commitment type considers the specific service and contract, i.e. AWS EC2 reserved instance. For more information about the X commitment types we current support, see Commitment Types Supported in Cloudability. They are divided into two categories: Resource and Spend.

Commitment Category - Resource

Resource-based commitments provide a discount in exchange for a commitment to a certain amount of usage on a product or service. Resource commitments are often region specific and carry a higher savings percentage due to the certainty these contracts provide the vendor. From the customer’s perspective, resource commitments are typically less flexible due to constraints imposed around the region and/ or technology where the commitment is applicable, instance/ machine type for example. Customers must understand their current and future spend to fully understand the risk to making a commitment. For resource commitments, this risk can be greater due to this lack of flexibility.

• Reserved Instance : Provides a discount in exchange for a commitment to a certain amount of usage on a product or service. AWS uses this extensively.

• Reservations : An Azure specific term to generically describe resource commitments.

• Committed Use Discount : The GCP reserved instance variant is simply call a CUD and its applicability is limited to Compute Engine (GCE). All other CUDs are spend-based.

Commitment Category - Spend

Spend-based commitments by contrast are typically more flexible in comparison to resource-based counterparts. Spend commitments provide a discount in exchange for a commitment to a certain amount of spend on a product or service. These contracts are often made in simple dollars and can often apply across region, accounts, and other criteria like instance type.

• Savings Plan : Provides a discount in exchange for a commitment to a certain amount of spend on a service. AWS and Azure use this name for their compute spend commitments.

• Committed Use Discount : Near identical to a savings plans, the GCE spend variant is called a Flex-CUD. The other spend CUDs are simply called CUDs.

• Prepurchase Plan : An Azure specific type utilizing fungible credits lacking hourly expiration.

The following table summarizes commitment terminology across vendors:

Other Commitment Related Pricing Models

Finally, there are two other notable models to consider related to commitments, Sustained-use Discounts (SUDs) and Spot Instances.

SUDs are specific to GCP compute engine usage and automatically provide savings back to you without a formal commitment contract with GCP. When GCP recognizes specific reoccurring usage in each month, they automatically provide credits back to you.

A Spot Instance is a pricing model offered where a discounted rate is given in exchange for the use of unused capacity. Their discounts from on-demand rates fluctuate with supply and demand and can be purchased via marketplace model where users bid on available capacity. Spot instances can be significantly cheaper than standard on-demand instances but come with the risk that they can be terminated by the provider with little notice if demand for capacity increases or if a higher-paying on-demand customer needs the resources. This makes them ideal for flexible, interruption-tolerant tasks.

Both SUDs and spot instances are pricing models not formally supported by Cloudability , however, we do attempt to surface information about then when relevant to understanding your commitments’ performance or evaluating a future commitment purchase.

History of Commitments

Resource commitments were first introduced back in 2009 with AWS EC2 reserved instances. Competitors soon followed with their equivalent. As strides have been made in modeling and predicting their customers’ needs, vendors have offered spend commitments with lower savings rates. While spend commitments often empower cloud customers to cover a larger portion of their spend due to their flexibility, resource commitments should not be overlooked for consistent usage that is expected to persist far into the future.