- 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 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 monthly and is projected to grow in the future, AWS EDP discount is 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 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 a standard on-demand pricing model 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 all AWS solutions and professional services, across all AWS regions.
With respect to these terms, the AWS EDP Program is most suitable for organizations that can accurately forecast true service consumption requirements and expect limited variation from their projected spending commitment.
AWS EDP Qualifications
- Annual Spending Commitment: Starts at $1+ million.
- Term length: Usually a three-year term.
While the discount tier for annual spending commitment between $1-50 million annually is well defined, customers spending higher amounts may get an opportunity to negotiate better.
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 may qualify 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 offers additional discounts for the advance payment of the full or partial purchase commitment.
- Grace Period: You can negotiate with AWS to include a grace period that extends the EDP discount rate to cover additional consumption beyond the purchased commitment before the EDP term ends.
- AWS Marketplace: Spendings on the AWS Marketplace can also be partially covered within the EDP purchase commitment. We have also observed that prior spending on the Marketplace can count toward your committed spend for future EDP contracts.
- Projected Future Spending: Do you have a demonstrated history of committing to higher AWS investments and can accurately forecast growing usage requirements? 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. The support tiers vary based on the annual committed consumption so it’s important to carefully review and devise a support and Service Level Agreement (SLA) that guarantees a highly dependable cloud service.
AWS EDP Alternatives
If you don’t qualify for the AWS EDP program or are looking for an EDP alternative, you can still take advantage of a range of discount plans offered by AWS:
- AWS Private Pricing Term Sheet (PPTS): Similar to EDP, requires customers to qualify but lowers the barrier of entry at a commitment threshold of $500k annually.
- AWS Migration Acceleration Program (MAP): A comprehensive AWS program that facilitates customers to switch from another vendor or on-premise data centers to the AWS cloud. The company offers migration credits as part of the program to reduce the onboarding cost of new customers.
- AWS Savings plan, Volume Discount, Dedicated Hosts and Reserved Instances : AWS offers a range of upfront payment pricing models based on the frequency, volume and duration of commitment for cost-savings.
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 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.
- Negotiating: 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. On the other hand, review the higher discount tiers and see if you can improve your cloud TCO or generate more revenue by committing to more AWS spending at a higher discount.
- Support Plans and SLA: Evaluate how the support plans and SLA fit into your technical and business requirements. Your choice of AWS service commitments through the EDP and SLA should be optimized based on a careful tradeoff between cost, performance, and security of the services.
- Understand the Markets: Finally, understand where the markets and your usage trends are headed. How do the external factors affect your network traffic and usage demand spikes? What’s the ROI on your business plan to scale AWS EDP commitments?
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 can be a very tedious task.
CloudForecast users leverage our Monthly AWS Financial Report and Daily AWS Cost Management Report to prep for their EDP negotiations. 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.
Tony is a co-founder of CloudForecast and runs all the business operations: customer success, support, marketing and sales.
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