Three Ways to Save even if Your Azure Monetary Commit is Larger than you Need
The most obvious benefit of entering a Monetary Commit is, that it is often possible to get 3-5% discount on the commitment – meaning you get more Azure bang for the buck.
But what if you have made a commitment larger than your actual need?
For larger customers with a Microsoft EA (Enterprise Agreement) or SCE (Server Cloud Enrollment Agreement), there exists the option of agreeing to a Monetary Commitment for purchasing Azure Services.
#1: Your Azure Monetary Commit may be “True Down Eligible”
It is possible to elect for an annual commitment, that is true down eligible – meaning you can actually reduce it. If your agreement is true down eligible then just move on with that.
If not, make sure that Procurement is aware of this option next time they re-negotiate the EA or SCE.
#2: Buy Reservations for future use
If you have made a single Monetary Commitment, you’re on the hook for the whole amount.
This means that you have to pay Microsoft that amount. However just because you have to pay the full amount, it does not mean that you have to use the full amount during that period!
If you do not use the full commitment, make sure you use the remaining amount to buy reservations to cover future use. What you reserve at the end of year 3 will keep you covered for nearly 3 more years.
This doesn’t improve your cashflow, but it does improve your bottom line, as reservations can be activated and amortized over their full lifetime. This is critical for your CFO to know and understand.
#3: Continue saving
Don’t fall for the sunk cost fallacy, reduce your commitment going forward instead. I know it’s hard, but accept the fact that the commitment wasn’t well aligned with your needs and move on. Fight the tendency to give in to “well I’ve already paid, so I might as well find something to run there”.
There is no reason to just “use it up”, because in our experience, you’ll end up having those services for a lot longer than you planned – meaning you will have been throwing good money after bad, when you didn’t need to. This is most relevant for IT.
This last option will in itself not save you cashflow nor give you any bottom line effect this year – but it will certainly instill the financial prudence in the organization for long term cost efficiency.
You can read more about Monetary commitments in Microsoft’s thrilling 121 page Product Terms document (updated Monthly).
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