Commitment Discount Appendix

specification/appendix/appendix.mdpp

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 *This section is non-normative.*
 
+!INCLUDE "commitment_discounts.md",1
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specification/appendix/commitment_discounts.md

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+# Commitment Discounts
+
+A commitment discount is a billing discount that offers reduced rates on preselected SKUs in exchange for an obligated usage or spend amount over a predefined term. Commitment discounts typically consist of a set of purchase and usage records within cost and usage datasets.
+
+## Purchasing
+
+While customers are bound to the term of a commitment discount, cloud-service providers, or CSPs, offer various payment options before and/or during the term:
+
+* *Upfront* - The commitment discount is paid in full before the term begins
+* *Monthly* - The commitment discount is paid monthly over the term.
+* *Hybrid* (1/2 Upfront & 1/2 Monthly) - Half of the commitment discount is paid in advance and half is paid monthly over the term.
+
+For example, if a customer buys a spend-based commitment discount for 1 year, with a $1.00 hourly commitment, and pays with the hybrid option, the commitment discount's payment consists of both:
+
+1. *Upfront* - $4,380 (`24 hours * 365 days * $1.00 * 0.5`)
+2. *Monthly* - $182.50 (`24 hours * 365 days * $1.00 / 12 months`)
+
+## Usage
+
+Commitment discounts follow a "use-it-or-lose-it" model where the amortization of a commitment discount's purchase applies evenly over each charge period of eligible resources over the term.
+
+For example, if a customer buys a spend-based commitment with a $1.00 hourly commitment in January (31 days), only $1.00 is eligible for amortization for each hourly charge period.  This means that if a customer have eligible resources running during this charge period, some or all of the $1.00 that is allocated to the charge period will be also be allocated to some or all of these resources.  Conversely, if a customer does not have eligible resources running during this charge period, the $1.00 allocated to the charge period is wasted.
+
+## Commitment Discounts in FOCUS
+
+Within the FOCUS specification, the following examples demonstrate how a commitment discount would appear across various payment and amortization scenarios.
+
+### Purchase Rows
+
+All commitment discount purchases appear with a positive `BilledCost`, `PricingCategory` as "Committed", and the commitment discount's id populating both the `ResourceId` and `CommitmentDiscountId` value. Upfront purchases appear as a single record also with `ChargeCategory` as "Purchase", `ChargeFrequency` as "One-Time", and the total quantity and units for commitment discount's term as `CommitmentDiscountPurchasedQuantity` and `CommitmentDiscountUnit`, respectively.
+
+Monthly purchases are allocated across all corresponding charge periods of the term when `ChargeCateogry` is "Purchase", `ChargeFrequency` is "One-Time". and the commitment discount's purchase quantity, `CommitmentDiscountPurchasedQuantity`, and units, `CommitmentDiscountUnit` are reflected only for that charge period.
+
+Using the same commitment discount example as above, a one-year, spend-based commitment discount with a $1.00 hourly commitment purchased on Jan 1, 2023, various purchase options can occur:
+
+#### Scenario #1: Upfront
+
+The entire commitment is billed _once_ during the first charge period of the term for $8,670 (derived as `24 hours * 365 days * $1.00`).
+
+```json
+[
+    {   
+        "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+        "BillingPeriodEndDate": "2023-02-01 00:00:00Z",
+        "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+        "ChargePeriodEndDate": "2024-01-01 00:00:00Z",
+        "ChargeCategory": "Purchase",
+        "ChargeFrequency": "One-Time",
+        "PricingCategory": "Committed",
+        "ResourceId": "<commitment-discount-id>",
+        "BilledCost": 8760.00,
+        "EffectiveCost": 0.00,
+        "CommitmentDiscountId": "<commitment-discount-id>",
+        "CommitmentDiscountPurchasedQuantity": 8760.00,
+        "CommitmentDiscountUnit": "USD"
+    }
+]
+```
+
+#### Scenario #2: Monthly
+
+The commitment is billed across all 8,760 charge periods of the term with $1.00 allocated to each charge period over the term.
+
+```json
+[
+    {
+        "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+        "BillingPeriodEndDate": "2023-02-01 00:00:00Z",
+        "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+        "ChargePeriodEndDate": "2023-01-01 01:00:00Z",
+        "ChargeCategory": "Purchase",
+        "ChargeFrequency": "Recurring",
+        "PricingCategory": "Committed",
+        "ResourceId": "<commitment-discount-id>",
+        "BilledCost": 1.00,
+        "EffectiveCost": 0.00,
+        "CommitmentDiscountId": "<commitment-discount-id>",
+        "CommitmentDiscountPurchasedQuantity": 1.00,
+        "CommitmentDiscountUnit": "USD"
+    },
+
+    /* ... more recurring purchase records ... */
+]
+```
+
+#### Scenario #3: Hybrid (1/2 Upfront & 1/2 Monthly)
+
+Half of the commitment is billed _once_ during the first charge period of the term for $4,380 (derived as `24 hours * 182.5 days * $1.00`), and the other half is billed across each charge period over the term, derived as (`$1.00 * 8,760 hours * 0.5`). Amortized costs incur half of the amount (i.e. $0.50) from the upfront purchase and the other half from the monthly purchase.
+
+```json
+[
+    {
+        "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+        "BillingPeriodEndDate": "2023-02-01 00:00:00Z",
+        "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+        "ChargePeriodEndDate": "2024-01-01 00:00:00Z",
+        "ChargeCategory": "Purchase",
+        "ChargeFrequency": "One-Time",
+        "PricingCategory": "Committed",
+        "ResourceId": "<commitment-discount-id>",
+        "BilledCost": 4380.00,
+        "EffectiveCost": 0.00,
+        "CommitmentDiscountId": "<commitment-discount-id>",
+        "CommitmentDiscountPurchasedQuantity": 4380.00,
+        "CommitmentDiscountUnit": "USD"
+    },
+    {
+        "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+        "BillingPeriodEndDate": "2023-02-01 00:00:00Z",
+        "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+        "ChargePeriodEndDate": "2023-01-01 01:00:00Z",
+        "ChargeCategory": "Purchase",
+        "ChargeFrequency": "Recurring",
+        "PricingCategory": "Committed",
+        "ResourceId": "<commitment-discount-id>",
+        "BilledCost": 0.50,
+        "EffectiveCost": 0.00,
+        "CommitmentDiscountId": "<commitment-discount-id>",
+        "CommitmentDiscountPurchasedQuantity": 0.50,
+        "CommitmentDiscountUnit": "USD"
+    },
+
+    /* ... more recurring purchase records ... */
+]
+```
+
+### Usage Rows
+
+Amortization of commitment discounts occur the same way regardless of how one or more purchases are made.  The same usage-based or spend-based amount is applied evenly across all charge periods and potentially allocated to eligible resources.  Continuing with the same commitment discount example, a one-year, spend-based commitment discount with a $1.00 hourly commitment, 4 types of scenarios can occur during a charge period:
+
+* Scenario #1: Eligible resource(s) runs for $1.00 (100% utilization)
+* Scenario #2: No eligible resources run (0% utilization)
+* Scenario #3: Eligible resource(s) runs for $0.75 (75% utilization)
+* Scenario #4: Eligible resource(s) runs for over the $1.00 hourly commitment (100% utilization + overage)
+
+#### Scenario #1: Eligible resource(s) runs for $1.00 (100% utilization)
+
+In this scenario, one eligible resource runs for the full hour, so one row allocated to the resource is produced.
+
+```json
+[
+    {
+        "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+        "BillingPeriodEndDate": "2023-02-01 00:00:00Z",
+        "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+        "ChargePeriodEndDate": "2023-01-01 01:00:00Z",
+        "ChargeCategory": "Usage",
+        "ChargeFrequency": "Usage-Based",
+        "PricingCategory": "Committed",
+        "ResourceId": "<resource-id>",
+        "ConsumedQuantity": 1,
+        "ConsumedUnit": "Hour"
+        "BilledCost": 0.00,
+        "EffectiveCost": 1.00,
+        "CommitmentDiscountId": "<commitment-discount-id>",
+        "CommitmentDiscountStatus": "Used",
+        "CommitmentDiscountConsumedQuantity": 1.00,
+        "CommitmentDiscountUnit": "USD"
+    }
+]
+```
+
+#### Scenario #2: No eligible resources run (0% utilization)
+
+In this scenario, the entire, eligible amount was unused, so one unused row, allocated to the commitment discount, was produced.
+
+```json
+[
+    {
+        "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+        "BillingPeriodEndDate": "2023-02-01 00:00:00Z",
+        "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+        "ChargePeriodEndDate": "2023-01-01 01:00:00Z",
+        "ChargeCategory": "Usage",
+        "ChargeFrequency": "Usage-Based",
+        "PricingCategory": "Committed",
+        "ResourceId": "<commitment-discount-id>",
+        "ConsumedQuantity": null,
+        "ConsumedUnit": null,
+        "BilledCost": 0.00,
+        "EffectiveCost": 1.00,
+        "CommitmentDiscountId": "<commitment-discount-id>",
+        "CommitmentDiscountStatus": "Unused",
+        "CommitmentDiscountConsumedQuantity": 1.00,
+        "CommitmentDiscountUnit": "USD"
+    }
+]
+```
+
+#### Scenario #3: Eligible resource(s) runs for $0.75 (75% utilization)
+
+In this scenario, one eligible resource runs for the full hour. One row shows $0.75 to a resource, and the other shows that $0.25 remained unused.
+
+```json
+[
+    {
+        "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+        "BillingPeriodEndDate": "2023-02-01 00:00:00Z",
+        "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+        "ChargePeriodEndDate": "2023-01-01 01:00:00Z",
+        "ChargeCategory": "Usage",
+        "ChargeFrequency": "Usage-Based",
+        "PricingCategory": "Committed",
+        "ResourceId": "<resource-id>",
+        "ConsumedQuantity": 1,
+        "ConsumedUnit": "Hour",
+        "BilledCost": 0.00,
+        "EffectiveCost": 0.75,
+        "CommitmentDiscountId": "<commitment-discount-id>",
+        "CommitmentDiscountStatus": "Used",
+        "CommitmentDiscountConsumedQuantity": 0.75,
+        "CommitmentDiscountUnit": "USD"
+    },
+    {
+        "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+        "BillingPeriodEndDate": "2023-02-01 00:00:00Z",
+        "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+        "ChargePeriodEndDate": "2023-01-01 01:00:00Z",
+        "ChargeCategory": "Usage",
+        "ChargeFrequency": "Usage-Based",
+        "PricingCategory": "Committed",
+        "ResourceId": "<commitment-discount-id>",
+        "ConsumedQuantity": null,
+        "ConsumedUnit": null,
+        "BilledCost": 0.00,
+        "EffectiveCost": 0.25,
+        "CommitmentDiscountId": "<commitment-discount-id>",
+        "CommitmentDiscountStatus": "Unused",
+        "CommitmentDiscountConsumedQuantity": 0.25,
+        "CommitmentDiscountUnit": "USD"
+    }
+]
+```
+
+#### Scenario #4: Eligible resource(s) runs for over the $1.00 hourly commitment (100% utilization + overage)
+
+In this scenario, one eligible resource runs for the full hour and costs $1.50. One row shows that $1.00 was amortized from the commitment discount, and the other shows that $0.50 was charged as standard, on-demand spend.
+
+```json
+[
+    {
+        "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+        "BillingPeriodEndDate": "2023-02-01 00:00:00Z",
+        "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+        "ChargePeriodEndDate": "2023-01-01 01:00:00Z",
+        "ChargeCategory": "Usage",
+        "ChargeFrequency": "Usage-Based",
+        "PricingCategory": "Committed",
+        "ResourceId": "<resource-id>",
+        "ConsumedQuantity": 1,
+        "ConsumedUnit": "Hour",
+        "BilledCost": 0.00,
+        "EffectiveCost": 1.00,
+        "CommitmentDiscountId": "<commitment-discount-id>",
+        "CommitmentDiscountStatus": "Used",
+        "CommitmentDiscountConsumedQuantity": 1.00,
+        "CommitmentDiscountUnit": "USD"
+    },
+    {
+        "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+        "BillingPeriodEndDate": "2023-02-01 00:00:00Z",
+        "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+        "ChargePeriodEndDate": "2023-01-01 01:00:00Z",
+        "ChargeCategory": "Usage",
+        "ChargeFrequency": "Usage-Based",
+        "PricingCategory": "Standard",
+        "ResourceId": "<resource-id>",
+        "ConsumedQuantity": 1,
+        "ConsumedUnit": "Hour",
+        "BilledCost": 0.50,
+        "EffectiveCost": 0.00
+    }
+]
+```