#05. Should you Always Share Your Commitment Base Discounts?

Typically, Reserved Instances (RIs) and Savings Plans are calculated and purchased by the centralized FinOps team (or a FinOps practitioner). This is because optimizing cloud rates is inherently a centralized function. Logically, purchasing cloud commitments in a centralized account and sharing them across the organization seems to be the most efficient approach. Doesn't it? Well… there is a bit more to that.

TL;DR

• Purchase commitments centrally and share them to maximise savings through higher utilisation.
• If calculating the total cost of ownership and implementing showbacks or chargebacks becomes challenging, it may be worthwhile to purchase commitments locally.

What Options are There?

There are

1. Sharing the Commitment Discounts:
   1. AWS: Purchase commitments in the management account (also called the payer account), and they'll automatically be shared with all accounts where RI Sharing is enabled. (Accounts with RI Sharing disabled won't inherit the commitment.)
   2. Azure: When purchasing a commitment, ensure you select the "Shared" scope option. This will automatically make the discount available to all eligible resources across your subscriptions.
2. Keep the commitment discounts within the specific account or subscription where they were purchased without sharing them across the organization. (this is default behavior for GCP CUDs, which are purchased and used within projects).

So, if RI sharing is turned off (or the scope is set to "local" in Azure), you'd utilize the Reserved Instance less, which would minimize the savings. Why would anyone choose this option?

Why you might not want to share a Commitment

Let's assume you'll utilize an RI commitment 100% on a local workload in an account (e.g., a production server running 24/7). In this case, purchasing the commitment locally or in the management account won't make much difference. However, the key distinction is that locally purchased RIs allow for a more transparent calculation of the Total Cost of Ownership (TCO) and simplify showbacks or chargebacks.

This is precisely why an organization might consider buying commitments locally. Showbacks and chargebacks are much easier to manage when commitments aren't shared.

Summary

In general, it's a best practice to purchase and utilize commitments in a shared fashion to maximize savings through higher utilization. However, the drawback is the difficulty in calculating the total cost of ownership and facilitating showbacks or chargebacks.

Thanks for reading! Share if you found it helpful. Have questions or suggestions for future topics? We'd love to hear from you!

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