8.1 Examples: Commitment Discount Scenarios
A commitment discount is a billing discount model that offers reduced rates on preselected SKUs in exchange for an obligated usage or spend amount over a predefined term. Commitment discounts typically consist of purchase and usage records within cost and usage datasets.
Usage-based commitment discounts obligate a customer to a predetermined amount of usage over a preselected term. In some cases, usage-based commitment discounts also feature commitment discount flexibility which may expand the types of resources that a commitment discount can cover. It is important to note when mixing commitment discounts with and without commitment discount flexibility, the CommitmentDiscountUnit should reflect this difference.
Spend-based commitment discounts obligate a customer to a predetermined amount of spend over a preselected term. In the usage examples below, each row measures the monetary amount of the hourly commit consumed by the commitment discount, so the CommitmentDiscountUnit chosen is "USD", or the billing currency.
8.1.1 Purchasing
While customers are bound to the term of a commitment discount, providers offer some or all of the following payment options before and/or during the term:
- All Upfront - The commitment discount is paid in full before the term begins.
- No Upfront - The commitment discount is paid on a repeated basis, typically over each billing period of the term.
- Partial Upfront - Some of the commitment discount is paid before the term begins, and the rest is paid repeatedly over the term.
For example, if a customer buys a 1-year, spend-based commitment discount with a $1.00 hourly commit and pays with the partial option, the commitment discount's payment consists of a one-time purchase in the beginning of the term and monthly recurring purchases with the following totals:
- One-Time - $4,380 (
24 hours * 365 days * $1.00 * 0.5) - Recurring - $182.50 (
24 hours * 365 days * $1.00 / 12 months)
8.1.2 Usage
Commitment discounts follow a "use-it-or-lose-it" model where the amortization of a commitment discount's purchase applies evenly to eligible resources over each charge period of the term.
For example, if a customer buys a spend-based commitment discount with a $1.00 hourly commit in January (31 days), only $1.00 is eligible for consumption for each hourly charge period. If a customer has eligible resources running during this charge period, an amount of up to $1.00 will be allocated to these resources. Conversely, if a customer does not have eligible resources running that fully take advantage of this $1.00 during this charge period, then some or all of this amount will go to waste.
8.1.3 Commitment Discounts in FOCUS
Within the FOCUS specification, the following examples demonstrate how a commitment discount appears across various payment and usage scenarios.
8.1.3.1 Purchase Rows
All commitment discount purchases appear with a positive BilledCost, PricingCategory as "Standard", and with the commitment discount's id populating both the ResourceId and CommitmentDiscountId value. One-time purchases appear as a single record with ChargeCategory as "Purchase", ChargeFrequency as "One-Time", and the total quantity and units for commitment discount's term reflected as CommitmentDiscountQuantity and CommitmentDiscountUnit, respectively.
Recurring purchases are allocated across all corresponding charge periods of the term when ChargeCategory is "Purchase", ChargeFrequency is "Recurring", and CommitmentDiscountQuantity and CommitmentDiscountUnit are reflected only for that charge period.
Using the same commitment discount example as above with a one-year, spend-based commitment discount with a $1.00 hourly commit purchased on Jan 1, 2023, various purchase options are available:
8.1.3.1.1 Scenario #1: All Upfront
The entire commitment discount is billed once during the first charge period of the term for $8,670 (derived as 24 hours * 365 days * $1.00).
8.1.3.1.2 Scenario #2: No Upfront
The commitment discount is billed across all 8,760 (24 hours * 365 days) charge periods of the term with $1.00 allocated to each charge period over the term.
This example shows the first three hourly rows of 8,760 total rows that are all the same except for the incrementing monthly and hourly timeframes denoted in the Billing Period and Charge Period columns, respectively.
8.1.3.1.3 Scenario #3: Partial Upfront
With a 50/50 split, half of the commitment is billed once during the first charge period of the term for $4,380 (derived as 24 hours * 182.5 days * $1.00), and the other half is billed across each charge period over the term, derived as ($1.00 * 8,760 hours * 0.5). Amortized costs incur half of the amount (i.e., $0.50) from the one-time purchase and the other half from the recurring purchase.
This example shows the first three hourly rows of 8,760 total rows that are all the same except for the incrementing monthly and hourly timeframes denoted in the Billing Period and Charge Period columns, respectively.
8.1.3.2 Usage Rows
Amortization of commitment discounts occur similarly regardless of how commitment discount purchases are made. The same usage-based or spend-based amount is applied evenly across all charge periods and potentially allocated to eligible resources. Continuing with the same commitment discount example, a one-year, spend-based commitment discount with a $1.00 hourly commit and 1 resource (for simplicity) yields 4 types of scenarios that can occur during a charge period:
- Scenario #1: An eligible resource fully consumes the allocated amount (100% utilization)
- Scenario #2: No eligible resource consumes the allocated amount (0% utilization)
- Scenario #3: An eligible resource partially consumes the allocated amount (75% utilization)
- Scenario #4: An eligible resource fully consumes the $1.00 hourly commit with an overage (100% utilization + overage)
8.1.3.2.1 Scenario #1: An eligible resource fully consumes the allocated amount (100% utilization)
In this scenario, one eligible resource runs for the full hour and consumes $1.00, so one row allocated to the resource is produced.
8.1.3.2.2 Scenario #2: No eligible resource consumes the allocated amount (0% utilization)
In this situation, the full eligible, $1.00 amount remained unutilized and results in 1 unused row. In this scenario, it is important to note that while CommitmentDiscountQuantity is not because $1 was still drawn down by the commitment discount even though, no resource was allocated, so ConsumedQuantity and ConsumedUnit are null.
8.1.3.2.3 Scenario #3: An eligible resource partially consumes the allocated amount (75% utilization)
In this scenario, one eligible resource runs for the full hour and consumes $0.75 of the $1.00 allocation. One row shows $0.75 to a resource, and the other row shows that $0.25 was unused.
8.1.3.2.4 Scenario #4: An eligible resource fully consumes the $1.00 hourly commit with an overage (100% utilization + overage)
In this scenario, one eligible resource runs for the full hour and is charged $1.50. One row shows that $1.00 was amortized from the commitment discount, and the other shows that $0.50 was charged as standard, on-demand spend.