Effective Savings Rate
Effective Savings Rate (ESR) is an objective FinOps metric that measures the actual ROI of cloud discount instruments. ESR is the most important measure of success when it comes to cloud cost and rate optimization.
Request a Free Savings Analysis to learn your ESR and savings potential, or learn more about how to calculate your own ESR.
About Effective Savings Rate
ESR is a metric cloud FinOps teams can use to measure their actual savings rate, or the discount they are receiving on the list price for cloud services from using commitments, like AWS Reserved Instances and Savings Plans.
How to calculate your ESR
Cloud Savings Generated
The amount of dollars your organization saved on cloud costs. Cloud savings may be generated from rate, usage, or other cloud cost optimization strategies.
On-demand Equivalent (ODE) Spend
The amount your organization would have paid to the cloud provider if no discounts were applied. Think of this as the list price or on-demand rate for cloud services.
Components of ESR
Typical FinOps metrics used to measure savings performance from cloud cost optimizations, like coverage and utilization, are limited. Coverage and utilization together only measure two dimensions of a multidimensional formula. ESR takes into account commitment coverage, utilization, and discount rate to provide an accurate calculation of your ROI.
The percentage of cloud resources “covered” with a discount instrument (e.g., AWS Reserved Instances and Savings Plans) in your environment.
The percentage of your discount commitments (e.g., AWS RIs, Savings Plan) being “used” to reduce the cost of your cloud resources.
The percentage off the on-demand or “list price” of cloud resources you are receiving across every cloud resource in your environment.
When you calculate Effective Savings Rate, it is important to factor in all three of these components to truly understand the ROI you’re receiving from the use of discount instruments, like AWS RIs and Savings Plans.
Find out your ESR
Request a hassle-free Cloud Savings Analysis to quantify your Effective Savings Rate and potential savings with ProsperOps, or download our public ESR Google Sheet to calculate your own.
Learn more about ESR
Check out these helpful resources on Effective Savings Rate
Blogs on ESR
Watch our FinOps X ESR presentation
Join Erik and Eric for this lively session on cloud financial management and the one rate optimization metric you might not be using, but should: Effective Savings Rate.
Download our ESR eBook
Effective Savings Rate Ebook
Effective Savings Rate (ESR) is the ROI for savings instruments and is the one output metric you can use to measure true savings performance.