- Pricing & Cost Optimization
AWS EDP Negotiation Guide
What is an EDP in AWS?
Amazon Web Services Enterprise Discount Program (EDP) is a tailored AWS cloud services discount program for AWS account owners committed to high volume and long-term spending with AWS. The program is designed to help AWS customers achieve sustainable economies of scale as they grow their business operations on the cloud and aim to find better value from their AWS cloud investments.
In this post, we will demystify the AWS EDP (Enterprise Discounts Program) and discuss how to reduce your AWS cloud spend burden through this program. We will also look at alternative AWS discount programs and help you prepare for an effective negotiation discussion for EDP AWS discounts.
Lower AWS Cloud Cost with EDP
Cloud vendor pricing tiers are difficult to decipher and the discount options are not always clear. The AWS EDP program, however, offers a systematic approach to encourage long-term partnerships that reward predictable and high-volume AWS consumption. If your AWS bill exceeds $100k USD monthly (and less for some non-US regions), the AWS EDP might be a viable option for you.
AWS Enterprise Discount Program is a tailored discount agreement offered to AWS customers demonstrating a history of high spending commitment with the cloud vendor. The program incentivizes long-term partnerships with discounts on future spending commitments.
AWS customers who qualify for the EDP program have typically spent $1+ million annually on AWS services and project at least similar spending commitments over the coming years. The discount offer varies based on several factors but a baseline discount for a $1+ million annual commitment could be 6% (in this instance, 9 percent) on the standard AWS on-demand pricing model.
The discount typically scales as you commit to a higher spending amount and longer-term length. AWS EDP offers a steep increase in discount percentage starting from annual commitments of $1+M, reaching its highest discount bracket for annual commitments of $50M or more.
It’s important to note that any overconsumption of services beyond the EDP committed spending is charged at the prevailing EDP rate and the extra spending doesn’t count toward retiring future term EDP commitments.
Similarly, underconsumption of the committed spending doesn’t reduce the amount owed under the EDP program, or rollover credits to the next commitment term. The EDP AWS discount program generally covers most AWS solutions across all AWS regions.
With respect to these terms, the AWS EDP Program is most suitable for organizations that are confident in their future service consumption and spend requirements, with minimal chance of significant reductions in AWS cost.
AWS EDP Qualifications
- Annual Spending Commitment: Starts at $1+ million for US-based orgs.
- Term length: Usually a 1 to 5 year term is standard.
Customers who commit more, and for longer, will move up in discount tiers. Standard tiering starts at around $1m and gradually increases with commitments. Although precise discounts were not publically shared, deals such as $300m by Lyft would have enjoyed a significant discount
In terms of contract duration, AWS favors long-term commitments. A single 3-year term may be more viable than three 1-year terms for the same purchase commitment for EDP Customers in two ways.
First, the longer-term duration qualifies for a higher discount bracket. Secondly, the limitations associated with underspending/overspending EDP AWS commitments only apply with respect to the full term duration.
Consider a simple case example:
While the value of services consumed over the course of three years is the same in both cases, the shorter 1-year EDP AWS term of Case A causes the customer to pay the difference for the underspent amount, and purchase additional services for overspent consumption based on the expensive on-demand pricing model.
Other variables that may affect your AWS EDP contract include:
- Prepayment: While prepayment is no longer required, AWS may offer additional discounts for partial or full prepayment
- AWS Marketplace: Spend on the AWS Marketplace partially contributes towards your AWS EDP commitment value, but typically cannot be discounted by the EDP rate.
- Projected Future Spending: Do you have the ability to migrate existing on-premise services to AWS (or another cloud)? This can potentially give you better negotiation power for future contracts.
- Support Pricing and Services: AWS requires EDP customers to enroll in the AWS Enterprise Support program for the duration of the EDP contract. There may be opportunity to clarify and negotiate what is received through AWS support over the duration of the EDP contract period.
AWS EDP Negotiation Checklist
So how do you prepare for AWS EDP contract negotiations if you already qualify for the EDP program? Take the following considerations into account as you negotiate your way to a profitable partnership with AWS:
- Forecast Growth, Compute, and Usage Demands with Amazon S3, Amazon EC2, RDS, and other AWS Services: Your product and engineering growth plans may dramatically affect AWS costs on various services. It’s important to work with your finance and engineering teams to forecast accurately projected compute and usage demands over the next few years. Look back at your past AWS spending and account for the factors and variables that may impact your future user demands. These factors can include user and market trends, cost of cloud services, legal and compliance requirements, security concerns, and more.
- Understand Workloads and AWS Costs: Estimate the TCO (total cost of ownership) of AWS services under the EDP program. How do they compare with your alternatives: multiple vendors? On-prem/hybrid/multi-cloud alternatives?
- AWS Marketplace Apps: Review the apps your engineering team is using and check in the AWS Marketplace. As mentioned before, spending on AWS Marketplace apps can contribute to your overall committed spend.
- Maximize Leverage: Demonstrate the value your business will bring to AWS in terms of a long-term purchase commitment. Accurately forecast your AWS cloud needs and use this information when you’re negotiating for a specific EDP discount tier. Look at the alternatives: Can you find better offers from a competing vendor?
- Hitting the Thresholds: Optimize your EDP targets to avoid additional costs that may be incurred due to underspending or overspending on your EDP commitment. Set your commitment thresholds just below your forecasted usage demands to ensure that you don’t leave money on the table due to the underconsumption of the services.
- Understand the Markets: Finally, understand where the markets and your usage trends are headed. How do external factors affect your network traffic and usage demand spikes? What’s the ROI on your business plan to scale AWS EDP commitments?
- Consolidate spending: Check if there are others in your immediate organization, parent organization, or subsidiary who also consume AWS cloud. By consolidating this spend, you may be able to achieve higher discount tiers.
- Communicate your broader business requirements: EDPs can help you achieve broader business outcomes than just cost savings. Let your account or partner manager know what your business is trying to do with regards to go-to-market, training and skills, product strategy, and see how they may be able to help.
Getting the right answers to these questions and preparing yourself for negotiating on the AWS EDP is crucial to reducing your AWS bill. Strategically approaching the contract discussion improves your negotiation power and will help close a deal tailored for your cloud usage demands at a lower TCO.
How CloudForecast Can Help with EDP Prep
Trying to build the reports, and aggregate all the numbers from the billing dashboard to start forecasting your cost for EDP negotiations can be a very tedious task.
With information such as AWS Marketplace Purchases, Historical Amortized Cost, and other data that contribute to your overall AWS invoice, you’ll be able to do baseline cost forecasting and understanding quickly and accurately.
How Goldiserv Can Help with AWS EDP Contract Negotiations
CloudForecast has partnered up with an expert partner, Goldiserv, who can help you with:
- Maximizing all available discount levers
- Understanding what can happen on shortfall or over-spend against the EDP commits
- EDP discount spreadsheet modeling
- Understanding what’s more likely to be approved by AWS
- Free 90-day Free Trial of CloudForecast
Goldiserv’s founder, Peter, worked at AWS for 4 years, leading the APAC Cloud Financial Management Function, where he had the opportunity to work with hundreds of customers one-to-one.
In guiding customers on their commercial maturity journey, Peter provided tailored prescriptive guidance to C-level, finance, procurement, business, and IT teams via workshops and analysis;
resulting in millions in savings and net-new ability to budget and forecast cloud spend.
Founded in 2020, Goldiserv continues to deliver customer results as an independent consulting organisation.
Tony is a co-founder of CloudForecast and runs all the business operations: customer success, support, marketing and sales.
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