Everybody knows that you pay for what you use in the cloud. Likewise, everyone knows that reservations/commitments can reduce costs. But which commitment fits you? In this blog we'll highlight GCP's billing discounts to help you find your benefits.
Google Cloud offers the following discounts:
- Free tiers
- Negotiated savings
- Committed use discounts
- Sustained use discounts
- Spending based discounts
- Promotional credits
You can mix and match these discounts to improve your pricing conditions. For example, if you run a customer facing service using GKE, you could negotiate improved VM and egress cost conditions (-10%) and commit to a specific compute instance type (-55%). As a result, you would pay EUR 40,50/hour instead of EUR 100,00/hour. The final amount is calculated using: (100,00 - 10%) - 55%.
The Free tier is available for select products and grants you a free monthly usage limit. This usage limit is linked to your billing account. Therefore, as soon as you reach the limit in any of your associated projects, you start to pay.
Negotiated savings apply if you negotiate a contract with Google. In this contract you agree upon a target yearly spend (and growth). In return services are offered for discounted prices. The negotiated prices are listed in the Google Cloud Billing console.
Curious to learn more? Get in touch with us.
Committed Use Discounts
Committed use discounts offer significant discounts (~50%) for specific services/products such as VM’s (Compute Engine instances). The commitment is agreed upon for a one (1) or three (3) year period. It’s important to understand that commitments apply at the hourly level. Bursty workloads therefore don’t fully benefit from committed use discounts. Also see How committed use discounts work.
Sustained Use Discounts
Compute Engine offers Sustained use discounts on specific machine types that are used more than a fourth of a billing month. These discounts apply automatically at the VM instance level. Scale-out workloads, as a result, don't benefit from Sustained use discounts, because the VM's are short-lived.
Spending Based Discounts
Spending based discounts are similar to Negotiated savings. With this contract you negotiate that you receive benefits after a certain spend is reached. These benefits could improve pricing conditions for services or be a lump sum of credits for reaching a spend threshold.
Promotions and Other credits, finally, are granted by Google to promote or trial services/products. They are one-time fees.
When combining discounts, the discounts apply from most specific to generic. First you're billed according to your Negotiated savings. Second, Committed use discounts apply to selected products. Third, Sustained use discounts are applied to non-discounted usage. Finally, additional Spending based discounts and Promotional credits are applied.
The final discount is calculated using:
Usage cost = List price - Negotiated saving % Committed use discounts = (Eligible) Usage cost - Committed use discount % Sustained use discounts = (Eligible, non-discounted) Usage cost - Sustained use discount % Spending based discounts = (Eligible, discounted) Usage cost - Spending based discounts Promotional credits = (Eligible, discounted) Usage cost - Promotional credits Your price = Usage cost + Committed use discounts + Sustained use discounts + Spending based discounts + Promotional credits
It's important to understand that discounts apply to portions of the usage cost. Therefore, combining Negotiated savings (25%), Committed use discount (57%) and Sustained use discount (30%) doesn't yield 112% discount (25% + 57% + 30%), but 66,25% maximally ((100% - 25%) - 57%).
Google offers several billing discounts to benefit from. By understanding the available discounts you are one step further into improving your GCP pricing conditions. Please be careful that every discount has its own pros and cons, and you can combine discounts as you please. When combining discounts, be aware that the net effects depends on the eligible usage for each discount. As a result - logically - you can't get more than 100% discount.
And, as always, in case of doubt, don't hesitate to reach out to us.