Commitments & Reservations
Commitments and Reservations exchange flexibility for lower prices. This guide describes how to use Cloudaware FinOps to analyze coverage, utilization, and effective cost for AWS Reserved Instances and Savings Plans, Azure Reservations, and Google Cloud Committed Use Discounts (CUDs).
Why Commitments Matter
Used well, commitments can deliver substantial savings compared to on‑demand pricing. Used poorly, they can lock in spend on under‑used resources or obsolete architectures.
Key questions:
How much eligible usage is covered by commitments?
Is existing purchased commitment fully utilized?
Where should more or less commitment be purchased?
Types of Commitments
Examples by provider:
EC2, RDS, Redshift, and Elasticsearch Reserved Instances.
Compute and EC2 Savings Plans.
Reservations for VMs, databases, and other services.
Committed Use Discounts (CUDs) for compute and other services.
Cloudaware ingests commitment usage and coverage data from billing and Cost Explorer‑style exports to compute effective cost and utilization metrics.
Coverage and Utilization KPIs
Important metrics include:
Coverage – percentage of eligible usage hours or spend covered by commitments.
Utilization – percentage of purchased commitment that is actually used.
Effective cost – amortized cost per unit of usage, including upfront and recurring commitment charges.
Dashboards and reports can show these KPIs by provider, service, region, and scope (BU, app, customer) to guide planning. For example, AWS SP Coverage & Utilization dashboard.
Planning and Managing Commitments
A typical process:
Assess current state.
Review coverage and utilization across providers and services.
Identify under‑utilized commitments and areas with low coverage but stable usage.
Forecast future usage.
Use forecasts and knowledge of upcoming projects to estimate baseline usage for the next 1–3 years.
Design commitment strategy.
Choose commitment types (for example, instance‑specific vs. flexible Savings Plans) and terms (1‑year vs. 3‑year).
Balance risk (over‑commitment) vs. savings.
Execute purchases.
Coordinate with finance and procurement where required.
Document rationale for purchases for future reference.
Monitor and adjust.
Track utilization and coverage over time; adjust future purchases or architectural choices if patterns change.
Commitment usage dashboards and KPIs can be used as a standard component of optimization reviews.