Lately, many of our AWS customers (especially those purchasing through the AWS marketplace) have mentioned that they are using an AWS EDP, which stands for Amazon Web Services Enterprise Discount Program. Essentially, this is AWS’s way to provide enterprises a discount off its services based on a volume (consumption) commitment. In the most recent Flexera State of the Cloud Report, 37% of respondents using AWS reported using an EDP.
How does an AWS EDP work?
A simple example of how an AWS EDP or “AWS Enterprise Agreement” might work is as follows: for the next 3 years, you commit to spend $5MM on AWS services, and receive a 13% discount. Even if you don’t spend $5MM you would still owe them $5MM, and of course if you go over you would get billed for the overage. Of course, the terms and amounts are all up to negotiation with AWS.
AWS’s website does not provide a lot of information about these agreements, which is perhaps to be expected considering they will customize the terms for any given customer. Here’s what they say: “Customers also have the option to enroll in an Enterprise Agreement with AWS. Enterprise Agreements give customers the option to tailor agreements that best suit their needs. For additional information on Enterprise Agreements please contact your sales representative.”
There are a few things you should consider about the EDP contract terms you agree upon with AWS. For example, the agreement may be limited to certain accounts, services, and/or regions.
You’ll see big numbers in the news, such as Apple’s $30 million monthly on AWS or Pinterest’s $750 million multi-year deal – but even if you’re not a tech giant or a unicorn startup, an Amazon EDP can still be on the table and a way to get an across-the-board discount.
What Other Agreements Compare to an AWS EDP?
Going back to my days at IBM, we used to generally refer to discount contracts as Enterprise License Agreements (ELAs). An ELA is a software site license that is sold to large enterprises. It typically allows for unlimited use of single or multiple software products throughout the organization, although there were often some restrictions and limitations. During my time at IBM, these were sold upfront for a set dollar amount and term, generally 3 to 5 years and usually had a cap on usage, so at some point overages could kick in – which would help with the renegotiation, of course.
Other terms used with a similar concept include Site License, Enterprise Agreement (this is a common Microsoft term – EA), Volume Purchase Agreement (VPA) and All You Can Eat (AYCE). What all of these have in common is that the vendor gets a large revenue/spend commit, and the enterprise gets discounting and flexibility.
How Else can you Get an AWS Discount?
AWS provides enterprises with multiple ways to consume its services based on their business needs and get volume discounts. Traditional on-demand instances allow you to pay for capacity by the hour without any long-term commitments or upfront payments. AWS Savings Plans are a way to save by committing to use at a micro scale: you commit to a certain amount of spend per hour, and in return get a discount on the VMs you’re already running. The less flexible reserved instances are another option for applications with steady-state or predictable usage and can provide up to a 75% discount compared to on-demand pricing. Especially for smaller organizations, there are a number of ways to get AWS credits to ease the burden. And of course they promote scale groups, spot instances, and other optimization efforts to reduce spend and waste but those are more cost control opportunities then they are discounts. Plus, you can always wait for better pricing.
Should You Use an AWS EDP?
Whether you participate in this program is somewhat predicated on your existing partner relationship and amount of spend with AWS, but you can always reach out to your AWS representative. Before committing to an AWS EDP, ensure that you are confident your organization will consume the amount of resources you are committing to. Keep in mind that this can also include the AWS Marketplace. The third party solutions you can buy on the AWS Marketplace also count toward your AWS EDP, and leverage that discount structure — so before completing a third-party transaction, make sure you check the Marketplace to see if the cloud solution you buy is listed there.