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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.

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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, such as AWS Savings Plans, AWS Reserved Instances, and GCP Committed Use Discounts.

How to calculate your ESR

calculation of effective savings rate
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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.

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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.

Coverage

The percentage of cloud resources “covered” with a discount instrument in your environment.

Utilization

The percentage of your discount commitments being “used” to reduce the cost of your cloud resources.

Discount Rate

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, such as AWS Reserved Instances, AWS Savings Plans, and GCP Committed Use Discounts.

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.

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.

Request a Free Savings Analysis

3 out of 4 customers see at least a 50% increase in savings.

Get a deeper understanding of your current cloud spend and savings, and find out how much more you can save with ProsperOps!

Submit this form to request your free cloud savings analysis.

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