AWS

What is an AWS Private Pricing Term Sheet?

What is an AWS Private Pricing Term Sheet?

  • A customized agreement between AWS and high-spending customers.
  • Offers tailored discounts based on usage patterns and commitments.
  • Includes multi-year spending commitments for predictable costs.
  • It may feature enhanced support and service flexibility provisions.
  • Negotiated primarily for large-scale enterprises or rapid-growth businesses.

What is an AWS Private Pricing Term Sheet?

What is an AWS Private Pricing Term Sheet

An AWS Private Pricing Term Sheet (PPTS) is a specialized contractual agreement between an organization and Amazon Web Services (AWS). It outlines custom pricing, discounts, and spending commitments tailored to customers’ cloud usage patterns and requirements.

A PPTS designed primarily for large-scale customers enables organizations to optimize their AWS costs while aligning the agreement with their operational goals and strategic plans. This document goes beyond AWS’s standard pay-as-you-go model, offering flexibility and cost predictability through negotiated terms.

Key Features of an AWS Private Pricing Term Sheet

1. Custom Pricing and Discounts

  • Negotiated Discounts: The PPTS includes pre-negotiated discounts for services such as EC2, S3, and RDS, allowing organizations to reduce costs on high-usage services.
  • Volume-Based Discounts: Discounts are typically structured around the customer’s usage volume or spending commitment.
  • Service-Specific Discounts: Certain agreements may offer unique discounts on specialized services like AWS Lambda, SageMaker, or MediaConvert.
  • Example: A company committing to $10 million annually in AWS services might receive a 20% discount on EC2 and a 15% discount on S3 storage.

2. Spend Commitments

  • Annual or Multi-Year Commitments: Customers agree to a minimum annual spend or multi-year contract, ensuring predictable revenue for AWS and cost benefits for the customer.
  • Flexible Thresholds: Organizations can negotiate spending thresholds across different AWS regions or services to meet evolving business needs.
  • Penalty Clauses: If the spending commitment is unmet, the contract may include penalties or adjusted discounts for the following period.
  • Example: A global retail company agrees to spend $50 million over three years, securing substantial discounts and locked-in rates.

3. Service-Specific Terms

  • Customized Agreements: The PPTS often includes specific terms for high-priority services or workloads critical to the customer.
  • Enhanced Support Provisions: Organizations can negotiate additional support levels, such as priority resource access or faster response times.
  • Example: A media company negotiates priority access to AWS Elemental services during major events to ensure uninterrupted streaming.

4. Flexibility Options

  • Reallocation of Commitments: Some agreements allow customers to redistribute their spending commitments across different services or regions as their usage evolves.
  • Growth Provisions: PPTS contracts may include terms for business growth or workload changes, such as scaling compute resources.
  • Example: A logistics company secures flexibility by allocating resources between North America and Europe to support seasonal demand shifts.

5. Support and Service Level Agreements (SLAs)

  • Enhanced Support Levels: PPTS agreements often provide access to dedicated Technical Account Managers (TAMs) and 24/7 premium support.
  • Custom SLAs: While AWS’s standard SLAs remain in place, organizations can negotiate additional guarantees or faster response times for mission-critical services.
  • Example: A financial services firm secures a 15-minute response time for critical transactional system incidents.

When Do Organizations Use a PPTS?

1. Large-Scale Cloud Users

  • High Cloud Spending: Enterprises with significant AWS usage (hundreds of thousands to millions annually) leverage PPTS to reduce costs and gain additional benefits.
  • Example: A global e-commerce platform negotiates discounted rates for EC2 instances and S3 storage used during peak sales events.

2. Strategic Long-Term Planning

  • Predictable Costs: Organizations with multi-year projects requiring consistent cloud performance benefit from fixed pricing and predictable spending.
  • Example: A healthcare company migrating patient data to AWS negotiates a multi-year contract with discounts for storage and analytics.

3. High-Growth Startups

  • Scaling Efficiently: Startups anticipating rapid growth can secure favorable pricing to manage costs as usage scales.
  • Example: A SaaS provider secures discounted compute and database resources to support user base expansion.

Benefits of an AWS Private Pricing Term Sheet

1. Cost Predictability

  • Fixed pricing and discounts help organizations forecast expenses and maintain budgetary control.

2. Optimized Costs

  • Tailored discounts and pricing structures result in significant savings compared to standard pay-as-you-go rates.

3. Tailored Solutions

  • PPTS agreements align pricing and service commitments with the organization’s unique needs.

4. Enhanced Support

  • Organizations gain access to premium support levels, ensuring quick resolution of issues and better service reliability.

5. Competitive Advantage

  • Lower cloud costs allow businesses to reinvest in innovation, expansion, or operational improvements.

Key Considerations When Negotiating a PPTS

Key Considerations When Negotiating a PPTS

1. Accurately Forecast Usage

  • Data-Driven Projections: Use tools like AWS Cost Explorer and trusted third-party platforms to analyze historical usage and forecast future needs.
  • Avoid Overcommitment: Ensure spending commitments align with realistic growth projections to avoid penalties.

2. Define Business Priorities

  • Critical Services: Identify key services where discounts will have the greatest financial impact.
  • Example: A biotech company prioritizes storage and analytics discounts for processing genomic data.

3. Plan for Flexibility

  • Adapt to Change: Negotiate provisions for reallocating resources or adjusting commitments to accommodate unexpected growth or new workloads.

4. Leverage Third-Party Expertise

  • Consultants and Advisors: Engage AWS experts to benchmark pricing and identify opportunities for additional savings.
  • Example: A manufacturing firm uses a consultant to negotiate multi-service discounts across EC2, S3, and IoT services.

5. Start Negotiations Early

  • Ample Time for Review: Begin discussions before the contract expires to allow thorough analysis and negotiation.
  • Example: A telecom company initiates PPTS discussions nine months before their renewal date, securing improved terms.

Conclusion

An AWS Private Pricing Term Sheet is a valuable tool for optimizing cloud spending and securing tailored terms that align with your organization’s unique needs.

Negotiating customized discounts, planning for flexibility, and leveraging expert insights can help organizations achieve significant cost savings and enhanced support. A proactive approach to PPTS negotiation ensures that AWS services remain a strategic asset for driving business success.

FAQ: What is an AWS Private Pricing Term Sheet?

What is an AWS Private Pricing Term Sheet?
An AWS Private Pricing Term Sheet (PPTS) is a contract that outlines custom pricing, discounts, and spending commitments tailored to a customer’s AWS usage.

Who qualifies for a Private Pricing Term Sheet?
Organizations with significant AWS spending or strategic long-term projects are typically eligible for PPTS agreements.

What services are included in a PPTS?
PPTS agreements often include discounts for services like EC2, S3, RDS, and other high-usage AWS resources.

How does spending commitment affect PPTS discounts?
The more an organization commits to spending annually or over multiple years, the greater the discounts they can negotiate.

Can a PPTS include flexibility in resource usage?
Yes, some agreements allow reallocation of spending across services or regions as usage patterns change.

What kind of support is included in a PPTS?
Enhanced support options, such as priority response times and dedicated Technical Account Managers (TAMs), may be included.

Can startups negotiate a PPTS?
High-growth startups with predictable scaling needs can negotiate favorable terms to manage costs as they expand.

What are the benefits of a PPTS?
Organizations gain cost predictability, optimized pricing, and tailored terms for their workloads and operational needs.

What happens if spending commitments are not met?
Failure to meet spending commitments may result in penalties, reduced discounts, or adjusted terms for future contracts.

How do I forecast usage for a PPTS?
Use AWS Cost Explorer, Trusted Advisor, or third-party tools to analyze past usage and predict future needs.

Can I negotiate service-level guarantees in a PPTS?
While core SLAs remain standard, enhanced response times or support guarantees can be included for critical workloads.

What are common exclusions in a PPTS?
Discounts may not apply to third-party marketplace purchases or specific AWS services not included in the agreement.

How long does a PPTS typically last?
PPTS agreements are usually multi-year contracts, ranging from one to three years or longer.

What’s the role of third-party consultants in PPTS negotiations?
Consultants provide insights into AWS pricing benchmarks, identify savings opportunities, and support effective negotiations.

When should I start negotiating a PPTS?
Start discussions at least six months before your current agreement expires to allow time for thorough review and adjustments.

Author
  • Fredrik Filipsson has 20 years of experience in Oracle license management, including nine years working at Oracle and 11 years as a consultant, assisting major global clients with complex Oracle licensing issues. Before his work in Oracle licensing, he gained valuable expertise in IBM, SAP, and Salesforce licensing through his time at IBM. In addition, Fredrik has played a leading role in AI initiatives and is a successful entrepreneur, co-founding Redress Compliance and several other companies.

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