Vocab

Question 1

Unblended rates

Answer 1

Some resources are charged in decreasing rates the more you use them. This means you’re billed different rates for resources as you use more, or for longer periods during the month. By examining your bill, you can see that some resource costs are larger than others, even for the same type of resource or an identical resource. When the rates are presented this way, they’re called unblended.

Question 1

Amortized costs

Answer 1

Some cloud resources and reservations come with an upfront fee. The amortized cost of a resource takes this initial payment into account and distributes it out based on usage, attributing the prorated cost for each hour of billing.

Question 2

Amortization

Answer 2

Retiring a payment of capital gradually over time on a schedule which reflects the benefits the capital provides in each period. An upfront portion of a commitment discount payment can be amortized over the useful lifetime (1 or 3 years) of the Commitment Discount product itself.

Question 3

Commitment Renewal Mechanism

Answer 3

The method in which you renew an existing Commitment Discount once the commitment expires. Depending on the CSP, the renewal may have to be manually completed, it may be automated, or it may be scheduled in advance

Question 4

Cost of goods sold (COGS)

Answer 4

Measures how many dollars of outlay it takes to generate revenues in a specific period. For example if a power company is trucking coal out of storage and into a power plant, it records the cost of the coal burned. That cost has no future benefit, so it’s going to be an expense that is directly traceable to revenue in that period, making it a COGS expense. The test of COGS is: are they directly expensed and directly related to revenues in the same period?

For a company that uses cloud, the COGS are the monthly cloud bill to operate its cloud workloads, salesperson commissions, and support costs. Notably, cloud has the most variable spend model and has a high potential for optimization. You can’t usually materially turn down your sales commissions or terminate your support people, which leaves optimizing your cloud spend without reducing revenue.