I find everything about this product confusing. What value does it provide? Seems you need to be an IT Director to understand it. What’s the relationship between pricing and value? Why is it advantageous to a company to make a minimum commitment? What are the risks in making such a commitment? And how do you mitigate that?
All materials I read on the subject, require a level of familiarity with IT management that I don’t have. Please ELI5! Hi hi.
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/r/AZURE
Having a minimal commit changes your discount levels.
Basically you agree to pay a set amount minimum per year and in exchange Azure give you a discount on their services.
If you don’t spend at least the minimum you lose the benefits
Usually if you make a spending commitment with a cloud provider, they give you a discount.
If you’re a big company, and you know you’ll need a certain amount of compute resources(to run your apps) in a year, it makes sense to commit to it. You get those resources cheaper, and the Microsoft gets a bit of valuable predictability: It helps them know how many computers they will need that year.
The main risk is that you overestimated how many computers you need – say your app suddenly became unpopular. Then you would be stuck paying for those resources, even though you no longer need them, and no longer have the revenue to support them. Mitigations for this include finding another use for the resources your committed to using. It’s also sometimes possible to sell that commitment to help recover some of the loss.
Company: “We want to move to a cloud infrastructure. We will spend up to one million dollars on this initiative”
Microsoft: “Great, we usually charge $250,000 a year for the level of cloud infrastructure you need, but I’ll tell you what, if you sign a contract committing to spending one million dollars with us, we will knock the price down to $200,000 a year and you effectively get a “free” year. What do you say?”
Company: “Sounds good to me!”
The advantage here is the company gets a discounted rate, and Microsoft gets to book a million in garaunteed revenue
instead of risking that the company could spend $250k for one year then change it’s mind and leave for AWS or someone else.
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