How does saving plan works?

Question

Hello team, 
Suppose in a particular hour we have two services running which have different savings plans discounts. The first, A,  has a discount of 33.3% and we spend $6 on-demand. The second, B, has a 25% savings plan discount and we spend $8 on-demand in the hour.
If we had make a savings plan commitment of $7, what will be the residual on-demand spend?
I calculate it this way. Start with the service with highest discount.
$6 - $6 * 33.3% = $4 (discounted cost)
So, $4 of the commitment fully covers the cost of service A. That leaves $7 - $4 = $3 of savings plan commitment remaining.
Service B, discounted is $8 - $8 * 25% = $6. So we don't have enough savings plan commitment left to cover all of service B. In fact we can only cover 50% of service B ($3/$6). Therefore there will be a residual on-demand cost of 50% * $8 (the undiscounted cost of service B) = $4.
Thus, for the hour, we will have spent $7 on the savings plan, a residual $4 on demand for a total spend of $11.
With no savings plan the on-demand cost would have been $6 + $8 = $14.
So we have saved $3 over the hour.
Is that correct? Can we get some example to understand how saving plan works if the above understanding is not right?

Accepted Answer

Your logic is right in terms of SP application (SP will apply to resources that get highest % discount first, and any remaining SP $ will partially apply to any remaining running resources). The math looks somewhat right, too :) Though, I'd calculate it a bit differently... I still get the similar result with your example. The point is that purchasing SP should reduce your overall bill.

I'll just write it up once again, with slightly modified numbers. Taking your scenario as example. Let's say, you spend $14 per hour on-demand. Let's say, Resource A takes $6 of this hourly spend, and Resource B takes the remaining $8 (on-demand). Resource A could get 33% discount from Savings Plan, and Resource B only 25% discount.

If you wanted to make Savings Plan commitment to cover 100% of your running on-demand usage, then you would have to commit to $10.02 worth of hourly SP commitment (67% from $6 + 75% from $8). This way, instead of paying $14 on-demand, you would EFFECTIVELY pay only $10.02 for the Savings Plan.

Now, let's say you want to make a Savings Plans hourly commitment for $7:

* Every hour, the SP will fully cover Resource A (if running continuously), which would consume $4.02 of the SP hourly commitment
* Then, the remaining $2.98 of SP commitment, will apply to Resource B, and based of its 25% discount, it will cover approx. $3.973 of its on-demand usage.
* As a result, you will end up paying remaining $4.027 of on-demand for the Resource B, which will be $11.027 in total for both resources, compared with the original $14

Answer

Thanks for the help :)

How does saving plan works?

Relevant content