8.3 Examples: Commitment Discount Flexibility
A usage-based commitment discount obligates a customer to a usage amount for one or more related SKUs in return for reduced rates. For example, when a usage-based commitment discount is purchased to cover a specific database SKU, this commitment will cover every hour over the period where at least one instance of this SKU is running. The usage-based commitment can cover 1 resource over the hour, or in the case of commitment discount flexibility, it can cover a portion of 1 resource or multiple resources at a time.
When mixing usage-based commitment discounts with and without commitment discount flexibility and CommitmentDiscountQuantity measured by time, it is important to differentiate the CommitmentDiscountUnit for each type of commitment discount. In each scenario below, commitment discounts without commitment discount flexibility applied use "Hour" as the CommitmentDiscountUnit, and conversely commitment discounts with commitment discount flexibility applied use "Normalized Hour" as the CommitmentDiscountUnit.
For more details on exactly how commitment discounts purchase and usage rows appear with and without commitment discount flexibility, see the following scenarios:
8.3.1 100% Utilization Without Commitment Discount Flexibility
8.3.1.1 Context
For this example, fictitious service provider, LatticeScale, offers the following SKU catalog which is used in the scenario below.
8.3.1.2 SKU Catalog
| Service | Sku Id | Sku Price Id | Sku Price Unit Price | Normalization Factor |
|---|---|---|---|---|
| Compute | VM_SMALL | VM_SMALL_COMMITTED_PURCHASE_NO_UPFRONT | $0.50 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_COMMITTED_PURCHASE_NO_UPFRONT | $1.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_COMMITTED_PURCHASE_NO_UPFRONT | $1.50 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_COMMITTED_PURCHASE_NO_UPFRONT | $2.00 | 4 |
| Compute | VM_SMALL | VM_SMALL_COMMITTED_HOUR | $0.50 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_COMMITTED_HOUR | $1.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_COMMITTED_HOUR | $1.50 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_COMMITTED_HOUR | $2.00 | 4 |
| Compute | VM_SMALL | VM_SMALL_ON_DEMAND_HOUR | $1.00 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_ON_DEMAND_HOUR | $2.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_ON_DEMAND_HOUR | $3.00 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_ON_DEMAND_HOUR | $4.00 | 4 |
The above SKU Catalog shows that this service provider only has 1 service that offers 4 virtual machine SKUs at various list rates, commitment discount rates, and normalization factors. Each SKU's normalization factor classifies its relative size to its commitment discount rate. Usage-based commitment discounts with commitment discount flexibility can fully cover any combination of 1 or more SKUs where the sum of their normalization factor is less than or equal to the normalization factor of the commitment discount.
8.3.1.3 Scenario
- 1 no upfront commitment discount is purchased for 1 year (2023) for 1 VM_LARGE.
- 1 VM_LARGE resource runs for 1 hour from 2023-01-01T00:00:00 to 2023-01-01T01:00:00.
8.3.1.4 Outcome
- 1 recurring, purchase record exists for 1 eligible "Hour" of the no upfront, commitment discount and incurs a $1.50 BilledCost.
- The commitment discount covers the first charge period for 1 VM_LARGE resource incurring a $1.50 EffectiveCost.
8.3.2 0% Utilization Without Commitment Discount Flexibility
8.3.2.1 Context
For this example, fictitious service provider, LatticeScale, offers the following SKU catalog which is used in the scenario below.
8.3.2.2 SKU Catalog
| Service | Sku Id | Sku Price Id | Sku Price Unit Price | Normalization Factor |
|---|---|---|---|---|
| Compute | VM_SMALL | VM_SMALL_COMMITTED_PURCHASE_NO_UPFRONT | $0.50 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_COMMITTED_PURCHASE_NO_UPFRONT | $1.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_COMMITTED_PURCHASE_NO_UPFRONT | $1.50 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_COMMITTED_PURCHASE_NO_UPFRONT | $2.00 | 4 |
| Compute | VM_SMALL | VM_SMALL_COMMITTED_HOUR | $0.50 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_COMMITTED_HOUR | $1.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_COMMITTED_HOUR | $1.50 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_COMMITTED_HOUR | $2.00 | 4 |
| Compute | VM_SMALL | VM_SMALL_ON_DEMAND_HOUR | $1.00 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_ON_DEMAND_HOUR | $2.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_ON_DEMAND_HOUR | $3.00 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_ON_DEMAND_HOUR | $4.00 | 4 |
The above SKU Catalog shows that this service provider only has 1 service that offers 4 virtual machine SKUs at various list unit prices, commitment discount unit prices, and normalization factors. Each SKU's normalization factor classifies its relative size to its commitment discount unit price. Usage-based commitment discounts with commitment discount flexibility can fully cover any combination of 1 or more SKUs where the sum of their normalization factor is less than or equal to the normalization factor of the commitment discount.
8.3.2.3 Scenario
- 1 no upfront commitment discount is purchased for 1 year (2023) for 1 VM_LARGE.
- 1 VM_MEDIUM resource runs for 1 hour from 2023-01-01T00:00:00 to 2023-01-01T01:00:00.
8.3.2.4 Outcome
- 1 recurring, purchase record exists for 1 eligible "Hour" of the no upfront, commitment discount and incurs a $1.50 BilledCost.
- The VM_LARGE commitment discount is unused for the corresponding charge period because no VM_LARGE resources are running and incurs a $1.50 EffectiveCost.
- 1 hour of on-demand usage is incurred by the VM_MEDIUM resource and incurs a $2.00 BilledCost and EffectiveCost.
8.3.3 100% Utilization with Commitment Discount Flexibility with 1 Resource
8.3.3.1 Context
For this example, fictitious service provider, LatticeScale, offers the following SKU catalog which is used in the scenario below.
8.3.3.2 SKU Catalog
| Service | Sku Id | Sku Price Id | Sku Price Unit Price | Normalization Factor |
|---|---|---|---|---|
| Compute | VM_SMALL | VM_SMALL_COMMITTED_PURCHASE_NO_UPFRONT | $0.50 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_COMMITTED_PURCHASE_NO_UPFRONT | $1.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_COMMITTED_PURCHASE_NO_UPFRONT | $1.50 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_COMMITTED_PURCHASE_NO_UPFRONT | $2.00 | 4 |
| Compute | VM_SMALL | VM_SMALL_COMMITTED_HOUR | $0.50 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_COMMITTED_HOUR | $1.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_COMMITTED_HOUR | $1.50 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_COMMITTED_HOUR | $2.00 | 4 |
| Compute | VM_SMALL | VM_SMALL_ON_DEMAND_HOUR | $1.00 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_ON_DEMAND_HOUR | $2.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_ON_DEMAND_HOUR | $3.00 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_ON_DEMAND_HOUR | $4.00 | 4 |
The above SKU catalog shows that this service provider only has 1 service that offers 4 virtual machine SKUs at various list rates, commitment discount rates, and normalization factors. Each SKU's normalization factor classifies its relative size to its commitment discount rate. Usage-based commitment discounts with commitment discount flexibility can fully cover any combination of 1 or more SKUs where the sum of their normalization factor is less than or equal to the normalization factor of the commitment discount.
8.3.3.3 Scenario
- 1 no upfront commitment discount is purchased for 1 year (2023) for 1 VM_SMALL which has a normalization factor of 1.
- 1 VM_LARGE resource runs for 1 hour from 2023-01-01T00:00:00 to 2023-01-01T01:00:00 with a normalization factor of 4.
8.3.3.4 Outcome
- 1 recurring, purchase record exists for 1 eligible "Normalized Hour" of the no upfront, commitment discount and incurs a $0.50 BilledCost.
- The VM_SMALL commitment discount is fully utilized within the corresponding charge period, covers 25% of the VM_LARGE resource, and incurs a $0.50 EffectiveCost.
- The VM_LARGE resource incurs an additional, on-demand $2.25 BilledCost and EffectiveCost.
8.3.4 100% Utilization with Commitment Discount Flexibility with 2 Resources
8.3.4.1 Context
For this example, fictitious service provider, LatticeScale, offers the following SKU catalog which is used in the scenario below.
8.3.4.2 SKU Catalog
| Service | Sku Id | Sku Price Id | Sku Price Unit Price | Normalization Factor |
|---|---|---|---|---|
| Compute | VM_SMALL | VM_SMALL_COMMITTED_PURCHASE_NO_UPFRONT | $0.50 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_COMMITTED_PURCHASE_NO_UPFRONT | $1.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_COMMITTED_PURCHASE_NO_UPFRONT | $1.50 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_COMMITTED_PURCHASE_NO_UPFRONT | $2.00 | 4 |
| Compute | VM_SMALL | VM_SMALL_COMMITTED_HOUR | $0.50 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_COMMITTED_HOUR | $1.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_COMMITTED_HOUR | $1.50 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_COMMITTED_HOUR | $2.00 | 4 |
| Compute | VM_SMALL | VM_SMALL_ON_DEMAND_HOUR | $1.00 | 1 |
| Compute | VM_MEDIUM | VM_MEDIUM_ON_DEMAND_HOUR | $2.00 | 2 |
| Compute | VM_LARGE | VM_LARGE_ON_DEMAND_HOUR | $3.00 | 3 |
| Compute | VM_XLARGE | VM_XLARGE_ON_DEMAND_HOUR | $4.00 | 4 |
The above SKU Catalog shows that this service provider only has 1 service that offers 4 virtual machine SKUs at various list rates, commitment discount rates, and normalization factors. Each SKU's normalization factor classifies its relative size to its commitment discount rate. Usage-based commitment discounts with commitment discount flexibility can fully cover any combination of 1 or more SKUs where the sum of their normalization factor is less than or equal to the normalization factor of the commitment discount.
8.3.4.3 Scenario
- 1 no upfront commitment discount is purchased for 1 year (2023) for 1 VM_XLARGE which has a normalization factor of 8.
- 2 VM_MEDIUM resources run for 1 hour from 2023-01-01T00:00:00 to 2023-01-01T01:00:00 with a normalization factor of 4 for each.
8.3.4.4 Outcome
- 1 recurring, purchase record exists for 1 eligible "Normalized Hour" for a no upfront, commitment discount and incurs a $2.00 BilledCost.
- With commitment discount flexibility, 1 commitment discount for a VM_XLARGE covers 2 VM_MEDIUM resources within the corresponding charge period and incurs a $2.00 total EffectiveCost.
- 1 commitment discount with a normalization factor of 8 covers 2 resources with normalization factors of 4 (i.e 4 + 4 = 8).