Commitments can save real money. They can also create real risk.
This playbook helps beginners install a safe commitment strategy:
- understand what commitments are in plain English
- decide when to buy commitments and how much
- set guardrails to avoid lock-in and overcommitment
- manage coverage as usage changes
Beginner-safe definitions
Commitment: a promise to spend or use a service level for a fixed term in exchange for a discount.
Coverage: how much of your eligible usage is under commitment discounts.
Overcommitment: buying more commitment than you can use, turning discounts into waste.
The core principle
Commitments should follow visibility.
If you cannot explain your baseline and usage trend, you are not ready to buy commitments at scale.
Step-by-step strategy
Step 1: Define what is eligible
Not all spend should be committed. Start with stable, predictable usage:
- steady production workloads
- long-lived databases
- baseline traffic services
Avoid committing on:
- experimental workloads
- seasonal or highly volatile usage
- unknown product launches
Step 2: Define your guardrails
Beginner-safe guardrails:
- start with a conservative target coverage
- review coverage monthly
- require approval for large increases
Example guardrails:
- target 50 percent coverage for eligible spend in v1
- do not exceed 70 percent until you have a stable operating cadence
- treat commitments as a portfolio, not one-time purchases
Step 3: Define the decision owners
You need clear ownership:
- finance owns budget impact and forecast
- engineering owns workload stability and risk
- procurement supports terms, marketplaces, and governance
Step 4: Create a monthly commitment review cadence
Monthly agenda:
- eligible spend trend
- current coverage percent
- underutilized commitments
- upcoming renewals or term expirations
- recommendation for adjust up or down
Step 5: Document the decision in a memo
Every commitment change should produce a short memo:
- why now
- how much coverage you target
- what guardrails apply
- what risks exist and how you mitigate them
Common pitfalls
- buying commitments without stable ownership and tagging
- chasing maximum discount and ignoring flexibility
- treating commitments as “set and forget”
- not monitoring underutilization
Copyable memo template
Copyable template (TEXT)
Cloud Commitment Decision Memo
Decision date:
Scope:
Eligible spend definition:
Current coverage:
Target coverage:
Expected discount rate:
Expected monthly savings:
Guardrails:
- Max coverage:
- Review cadence:
- Approval threshold:
Risks and mitigations:
- Volatility risk:
- Lock-in risk:
- Underutilization risk:
Owners:
- Finance:
- Engineering:
- Procurement: