What is committed spend?

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Committed spend is a term used in many industries to describe the value of products or services a customer agrees to purchase within a specific period of time. In exchange for the customer’s commitment to pay the agreed-upon amount, the seller provides qualifying products, technologies, or services at a discount.

In the cloud industry, committed spend may also be referred to as cloud spend, cloud commit, committed use, or consumption commitment, since cloud providers may bill customers according to the amount of resources they use or consume on an on-demand basis. Major software and cloud service providers like Red Hat, Amazon Web Services (AWS), Microsoft Azure, IBM Cloud, and Google Cloud reward customers for long-term spending by providing committed spend or committed use discounts.

Though the eligibility criteria and agreement details vary from one cloud provider to the next, almost all programs have annual or multi-year commitment terms and monthly or annual reporting requirements on cloud spend and usage. They also hold customers accountable to paying out any remainder of the commitment not spent at the end of the agreement period.

Committed spend agreements help businesses maximize their budget, take advantage of competitive deals not typically available through existing subscriptions and on-demand pricing models, and can be customized to best fit an individual customer’s needs..

When a customer makes a spend commitment, they receive software and other services at a discounted rate that scales with the size of the spend value. This means that the more you agree to spend during the commitment period, the greater your overall discount will be. Committed spend programs also reward customers who pay a portion of their commitment upfront with access to higher discount tiers.

Committed spend discounts may apply to both annual subscriptions and on-demand pricing, allowing you to get extra value out of the combination of software and services that makes the most sense for your cloud infrastructure and workloads. This strategy helps many customers take advantage of the flexibility of cloud computing to reduce overspending and shelfware, a term for software left unused when month-to-month fluctuations in cloud resource needs result in the underutilization of annual or long term subscriptions.

Many major cloud service providers offer committed spend discounts on solutions purchased through their individual marketplaces. Along with their own offerings, Red Hat products like Red Hat® Enterprise Linux®, Red Hat OpenShift®, and Red Hat Ansible® Automation Platform can also be purchased from the cloud marketplace and draw down on a customer’s cloud spend.

If you’re an existing cloud customer or are just beginning the process of migrating some or all of your IT infrastructure to the public cloud, committed spend programs like those listed below can help you save on consumption and third-party vendor solutions purchased directly from the cloud marketplace.

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Amazon Web Services Enterprise Discount Program (AWS EDP):

The AWS EDP program incentivizes long term partnerships by providing committed use discounts to customers who commit to high volume spending for a term of 1-5 years. AWS EDP discounts scale with the total spend commitment, and longer AWS committed spend terms receive higher discount pricing on AWS consumption and eligible products.

Qualifying customers have usually spent over $1 million annually on AWS services and plan to spend a similar amount or more during the commitment period.

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Microsoft Azure consumption commitment (MACC):

The MACC program offers Azure commitment discounts to enterprises who commit to spend a specific dollar amount on Azure consumption and software available in the Azure Console or Marketplace. MACC-eligible offers include both pay-as-you-go and subscription pricing and can be purchased through the console from Microsoft or procured through the Azure Marketplace from third-party vendors. Several Red Hat solutions can draw down your total spend commitment.

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Google Cloud Committed Use Discount (GCP CUD):

Google Cloud’s spend-based CUDs offer discounts for a commitment to spend a specific value on products or services for the duration of the contract. Depending on the service, spend-based CUDS are offered for either usage within a specific region or for usage across all regions. Customers are billed a discounted monthly fee according to their spend commitment, regardless of whether or not they use the full value of services. Commitments are made for 1 or 3 years terms, and discounts apply to products and services only purchased within the contract period, including Red Hat Enterprise Linux, Red Hat Ansible Automation Platform, and Red Hat OpenShift.

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IBM Cloud Enterprise Savings Plan:

The IBM Cloud Enterprise Savings Plan allows customers to make a commitment to spend a specific amount on IBM Cloud services for a set contract term and receive discounts on qualifying purchases. Customers with an Enterprise Savings Plan account also receive discounts on any overconsumption beyond their initial commitment, as well as on services incurred after the commitment period ends.

While cloud service providers offer commitment discounts on resources and consumption, Red Hat offers committed spend discounts on the procurement of Red Hat products. Whether you’re migrating some or all of your IT infrastructure to the public cloud or looking for an on-premise, consumption-based offering, Red Hat ensures that you get the most out of your company’s cloud investment no matter which solutions you choose. Red Hat’s Hybrid Committed Spend program offers you the flexibility to purchase and deploy Red Hat products when and where you need them. You can purchase from Red Hat directly or through the cloud marketplace and receive volume discounts based on your total Red Hat spend. 

You can also combine subscriptions and monthly on-demand purchases, procured through Red Hat or the cloud marketplace, and draw down on your total commitment. In other words, you can “double dip” and use your Red Hat procurement on the cloud marketplace or console toward both your committed spend agreement with a cloud provider and your Red Hat Hybrid Committed Spend. This allows you to get the most value out of your cloud budget while choosing the cloud solutions that work best for your business.

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