Cloud Pricing Vocabulary | Cloud FinOps Exercises

1 / 5

An architect is choosing between on-demand, reserved, and spot pricing models for a new platform.

What is on-demand pricing?

On-demand is the baseline pricing model — no commitment, maximum flexibility, highest per-unit cost.

Model	Commitment	Discount
On-demand	None	—
Reserved/Savings	1–3 year	40–72%
Spot	None (can be interrupted)	Up to 90%

Key vocabulary: "on-demand pricing", "pay-per-use", "no commitment", "variable workload pricing".

2 / 5

A GCP engineer mentions: "We benefit from Sustained Use Discounts on these VMs."

What is a sustained use discount?

GCP Sustained Use Discounts (SUDs) are unique: they apply automatically with no commitment required.

Cloud provider	Auto-discount model
GCP	Sustained Use Discount — automatic, up to ~30%, no commitment needed
AWS	No auto-discount — must purchase RI or Savings Plan explicitly
Azure	Azure Hybrid Benefit (bring your own Windows/SQL license)

GCP also offers Committed Use Discounts (CUDs) for deeper savings with a 1- or 3-year commitment. Key vocabulary: "sustained use discount", "automatic discount", "GCP pricing model", "committed use discount (CUD)", "no action required".

3 / 5

The cloud bill shows unexpectedly high inter-AZ data transfer costs.

What most commonly drives unexpected inter-AZ transfer charges in a microservices architecture?

Microservices chat is the most common and easily overlooked source of inter-AZ costs — individually tiny per request, but enormous at scale.

Transfer path	AWS cost (approx.)
Cross-AZ (same region)	$0.01/GB each direction
Cross-region	$0.02/GB+
Same AZ	Free

Solutions: topology-aware routing (route to same-AZ replica), service mesh traffic management, co-locate frequently communicating services. Key vocabulary: "inter-AZ data transfer", "cross-AZ charges", "topology-aware routing", "data transfer architecture".

4 / 5

The team is evaluating a 3-year No Upfront Reserved Instance.

What does "No Upfront" mean in the context of Reserved Instance payment options?

Three payment options trade cash flow against discount depth. All three still represent a binding commitment for the full term.

Payment option	How you pay	Discount level
No Upfront	Monthly payments for the full term	Lowest (of the three)
Partial Upfront	Upfront payment + lower monthly rate	Medium
All Upfront	Full payment now, nothing monthly	Maximum

Key vocabulary: "no upfront", "partial upfront", "all upfront", "effective hourly rate", "break-even analysis".

5 / 5

The pricing calculator shows a TCO (Total Cost of Ownership) analysis comparing cloud to on-premises.

What does TCO analysis include beyond the raw cloud bill?

TCO is a complete picture of what it truly costs to run a workload — the cloud bill is only one component.

TCO component	Often underestimated
Cloud infrastructure	Compute, storage, networking (the invoice)
Licensing	Managed databases, third-party SaaS tools on top of cloud
Operations (FTE time)	Engineering hours managing infrastructure, incident response
Support plan	AWS Business/Enterprise Support: 3–10% of monthly cloud spend
Data transfer / egress	Often forgotten until first large bill

Key vocabulary: "total cost of ownership", "TCO calculator", "operations overhead in TCO", "cloud migration TCO", "hidden costs".