Almost Everything About Google Cloud’s Committed Use Discount Part 1

As the landscape of cloud services has evolved, Google Cloud Platform (GCP) has expanded its pricing strategies beyond just the traditional pay-as-you-go model. GCP offers Committed Use Discounts (CUDs), a scheme that encourages customers to commit to certain levels of resource usage or spending over time in exchange for significant discounts on these services. These discounts can be substantial, often reducing the costs up to 57% compared to on-demand pricing. This post focuses on these publicly available discount options provided by GCP, highlighting how commitment to resource usage can lead to reduced cloud expenditure.

The reason for commitment based discounts are available is that Google Cloud, like other Cloud Service Providers, constructs data centers and provides services, charging customers based on the time and usage of these resources. Google faces the operational challenge of balancing server availability — having too many or too few at any time. This risk factor contributes to the pricing structure of their on-demand cloud services, often reflected in a risk premium included in these rates.

In GCP there are two types of commitments available: resource based or spend based.

• In spend-based or flexible commitment models, customers receive a discount by agreeing to a predetermined expenditure on specific GCP products. This arrangement essentially involves committing a certain amount to the use of these offerings in exchange for reduced rates.
• Resource-based commitments offer discounts in exchange for a commitment to a specified level of Compute Engine usage.

Not all of these commitments are available for all services in GCP. For Compute Engine both types of discounts are available but for?

• AlloyDB for PostgreSQL
• Cloud Bigtable
• Cloud Run
• Cloud Spanner
• Cloud SQL
• Google Cloud VMware Engine
• Google Kubernetes Engine
• Memorystore

only spend based is available.

Because both types of discounts are available for Compute Engine there is a priority order for these commitments if a customer chooses to apply both:

1. Resource based is going to be applied
2. Spend based is going to be applied

In general we can say that resource based commitments are more strict, because you will be restricted to a specific machine type and a specific location but with spend based none of them are restricted. In exchange for that you can get a higher discount for resource-based commitments. The best practice is that if you are confident that you don't want to change the machine type and the location in the next 1 or 3 years, then use resource-based commitments, if you know that you might change it in the future then commit with spend-based commitment. The good news is that you can mix it as well, you cover only the 50% of your resources with resource-based commitment and use spend-based for the rest.

Both of the commitment types are available for 1 or 3 years. Due to the risk factored in as discussed above the discounts are different for 1 and for 3 years. The discount is bigger if the commitment is longer.

Here is a short video to summarize the post: