Cloud spending doesn’t have to feel like a guessing game. One of the smartest—and often overlooked—ways to take charge of your cloud costs is by tapping into commitment-based discounts. Whether you’re utilizing AWS Reserved Instances (RIs), Azure Reservations, Google Cloud’s CUDs and SUDs, or any other vendor program, these discounts can lead to substantial savings for your organization.
However, truly benefiting from these programs takes more than just a one-off purchase. It requires a solid strategy, careful oversight, and ongoing alignment with your usage patterns.
Understanding Commitment-Based Discounts
Commitment-based discounts are a great way to save money by agreeing to use certain cloud resources for a specific time frame, typically between 1 and 3 years. This includes options like:
- Reserved Instances (RIs)
- Savings Plans
- Commitment-Based Discounts (CUDs)
- Sustained Use Discounts (SUDs)
These programs really reward predictability. In exchange, your organization can enjoy rates much lower than on-demand pricing, making them an essential part of any FinOps strategy.
Step 1: Know Your Baseline
Before diving into any commitments, take a moment to analyze your cloud usage thoroughly. Start by pinpointing:
- Resources you use consistently
- Workloads that remain steady
- Differences between peak and baseline consumption
- Services and regions where you’re spending the most
Pay special attention to workloads that are always running or highly predictable—think production databases, backend APIs, or user-facing applications that operate around the clock.
Step 2: Understand Commitment Options
Every cloud provider has its own unique set of terms and rules for their commitment programs. It’s important to take a closer look at key details such as:
- Term lengths (1-year vs. 3-year)
- Service coverage (compute, storage, specific instance families)
- Regional or zonal applicability
- Flexibility to modify or exchange commitments
Make sure to align commitment with your business strategy. If you’re a growing company, opting for shorter terms can give you more flexibility. On the other hand, if you have stable workloads, longer commitments can lead to better discounts.
Steps for Ongoing Management & Remediation
The journey doesn’t end there once you’ve made that first commitment. Here’s how to keep everything on track:
Initial Purchase: Start with a cautious estimate—you can always ramp up your commitments later. Steer clear of the pitfall of overcommitting just because of temporary spikes.
Monitor Usage: Use built-in dashboards or third-party tools to keep an eye on your actual consumption. Watch for commitments that aren’t being fully utilized or unexpected spikes that might indicate it’s time to adjust.
Evaluate ROI: Compare your projected savings to what you’re actually seeing. Are your commitments providing the value you anticipated? If they fall short, it might be time to rethink your assumptions.
Adjust Commitments: Take advantage of your provider’s options to modify or swap out Reserved Instances and tweak your Savings Plans. Don’t let outdated commitments eat away at your budget.
Renew and Expand: As your initial terms come to an end, take a moment to reassess. If your usage has increased, this could be a great chance to boost your commitments and unlock even more savings.
Leverage Automation Tools: Cloud-native and third-party tools can notify you about unused reservations, predict usage, and recommend the right-sized commitments. These tools help shift from reactive fixes to proactive optimization.
When approached thoughtfully, commitment-based discounts can do much more than trim costs—they can actually drive financial flexibility. By syncing cloud contracts with actual usage and using tools for ongoing optimization, your organization can unlock funds for innovation, growth, and staying ahead of the competition. Commit with confidence, keep an eye on things with purpose, and adapt swiftly. That’s how FinOps teams tap into the full power of cloud investments.
Talk to an expert to learn more. Schedule a free consultation with The IT Strategists
About The IT Strategists
We help organizations simplify the complexities of cloud licensing, contract negotiations, cost management, and FinOps. As trusted partners, we combine deep industry expertise with tailored strategies to maximize value, control spending, and fuel sustainable growth. To learn more visit www.TheITStrategists.com.