Simple, Automatic Amortization Tracking for Prepaid AWS Reserved Instances and Savings Plans
AWS Reserved Instances (RIs) and Savings Plans (SPs) have three payment models:
- No Upfront: where you pay a discounted hourly rate over the term of the commitment,
- Partial Upfront: where you pay a portion (generally half) of the total value of the commitment upfront and the remaining portion hourly over the term, and
- All Upfront: where you pay the full amount of the commitment at the time of purchase
With Partial and All Upfront commitments, you are prepaying for future usage to increase your discount rate. This decouples the timing of when usage is paid for from when it’s consumed, which for customers using accrual vs. cash accounting (most large companies), results in a need to amortize the prepayment.
Amortization Tracking is Complex in the Cloud, Particularly for Dynamic Environments
When environments are small and static, tracking amortization for prepaid RIs and SPs is relatively simple. If you prepay for a 12-month Compute Savings Plan, you simply straight-line amortize the cost over 12 months—done.
But, what happens when you have hundreds, or thousands, of RIs and SPs with staggered start and end dates? And, what happens in a dynamic environment when prepaid Convertible RIs are exchanged (increasing the prepaid value and potentially extending the term) or prepaid Standard RIs are sold on the AWS RI Marketplace (stopping the amortization schedule early)?
These scenarios (and more) make accurate amortization tracking for any large and reasonably dynamic environment extremely complex.
An Automated Approach to Amortization Tracking with ProsperOps
We’re on a mission to automate and simplify savings for cloud customers. This includes streamlining complex cloud financial management (FinOps) processes, which is why I am excited to announce our latest feature, Dynamic Prepay Amortization Tracking.
The ProsperOps platform autonomously manages an optimal portfolio of Reserved Instances and Savings Plans to maximize savings. With Flex Boost, this includes Standard RIs, and with Advanced Cyclical Optimization, savings are maximized in environments with volatile usage patterns.
Now, with Dynamic Prepay Amortization Tracking, all changes to commitments with prepayment are automatically tracked and summarized in a simple chart that finance and accounting teams can use to properly account for their cloud spend. Multiple enterprise customers, currently using this feature in beta, rely on it to close their monthly books. In reviewing this feature with another large customer (a global media company with $15M+ per month in AWS compute usage), the cloud finance and accounting lead commented on how much they struggle with proper amortization tracking today and how valuable this feature is.
Daily Updates on Four Key Data Points
The ProsperOps Console reports on the following monthly values, updated on a daily basis:
- Beginning prepayment balance: the total of all compute prepayments made in prior months that have not yet been consumed. This value is carried forward from the ending balance of the prior month and is typically reflected on a company’s balance sheet.
- New prepayment deployed: new SP and RI prepayment deployed during the month. This value is typically reflected as an outflow on a company’s cash flow statement and adds to the prepayment balance.
- Prepayment consumed: prepayment that was used this month based on the commitment term. This value is typically reflected on a company’s income statement and reduces the prepayment balance.
- Ending prepayment balance: remaining compute prepayments that will be consumed in future periods. This value is typically reflected on a company’s balance sheet.
We believe helping cloud customers prosper means not only saving them more money on their cloud bill, but also simplifying the work necessary to account for and understand the savings we generate.
Dynamic Prepay Amortization Tracking is available immediately for all ProsperOps customers at no additional cost.
Prosper On! 🖖
– Erik and the ProsperOps Team