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specification/appendix/commitment_discounts.md

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+# Commitment Discounts
+
+A commitment discount is a billing discount that offers reduced rates on preselected SKUs in exchange for an obligated usage or spend amount over a predefined term. Within cost and usage datasets, commitment discounts typically consist of a set of purchases and usage records.
+
+# Commitment Breakdown
+
+## Purchases
+
+While customers are bound to the term of a commitment discount, cloud-service providers, or CSPs, offer various payment options before and/or during the term:
+
+* In-Advance - The commitment discount is paid in full before the term begins
+* Monthly - The commitment discount is paid monthly over the term.
+* Hybrid (In-Advance & Monthly) - Half of the commitment discount is paid in-advance and half is paid monthly over the term.
+
+For example, if a customer buys a spend-based commitment discount for 1 year, with a $1 hourly commitment, and pays with the hybrid option, their purchase schedule is:
+
+* In-Advance: $4,380 (24 hours * 365 days * $1 * 0.5)
+* Monthly: $182.50 (24 hours * 365 days * $1 / 12 months)
+
+## Usage
+
+Commitment discounts follow a "use-it-or-lose-it" model where the amortization of a commitment discount's purchase applies evenly over each charge period (typically hourly) over the term.
+
+For example, if a customer buys a spend-based commitment with a $1 hourly commitment in January (31 days), only $1 is eligible for amortization for each hourly charge period. This means that if I have eligible resources running during this charge period, some or all of the $1 allocated to the charge period will be also be allocated to one or more resources. Conversely, if I don't have eligible resources running during this charge period, the $1 allocated to the charge period is wasted.
+
+# FOCUS
+
+Within the FOCUS spec, the following examples demonstrate how a commitment discount would appear across various payment and amortization scenarios.
+
+## Purchases
+
+While a one-time purchase has 1 row, recurring purchases are spread out evenly over all charge periods of the term. Using the same example as above, a one-year, spend-based commitment discount with a $1 hourly commitment purchased on Jan 1, 2023 can be the following.
+
+## In-Advance
+
+The entire commitment is billed _once_ during the first charge period of the term for $8,670 (24 hours * 365 days * $1).
+
+```
+[{ 
+ "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+ "BillingPeriodEndDate": "2024-01-01 00:00:00Z",
+ "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+ "ChargePeriodEndDate": "2024-01-01 00:00:00Z",
+ "ChargeCategory": "Purchase",
+ "ChargeFrequency": "One-Time",
+ "PricingCategory": "Committed",
+ "ResourceId": "<commitment-discount-id>",
+ "BilledCost": 8760.00,
+ "EffectiveCost": 0.00,
+ "CommitmentDiscountId": "<commitment-discount-id>",
+ "CommitmentDiscountPurchasedQuantity": 1.00,
+ "CommitmentDiscountUnit": "USD"
+}]
+```
+
+## Monthly
+
+The commitment is billed across all 8,760 charge periods of the term.
+
+```
+[
+ {
+ "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+ "BillingPeriodEndDate": "2024-01-01 00:00:00Z",
+ "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+ "ChargePeriodEndDate": "2023-01-01 01:00:00Z",
+ "ChargeCategory": "Purchase",
+ "ChargeFrequency": "Recurring",
+ "PricingCategory": "Committed",
+ "ResourceId": "<commitment-discount-id>",
+ "BilledCost": 1.00,
+ "EffectiveCost": 0.00,
+ "CommitmentDiscountId": "<commitment-discount-id>",
+ "CommitmentDiscountPurchasedQuantity": 1.00,
+ "CommitmentDiscountUnit": "USD"
+ },
+ ...
+]
+```
+
+## Hybrid (In-Advance & Monthly)
+
+Half of the commitment is billed _once_ during the first charge period of the term _and_ the other half is billed across all 8,760 charge periods of the term.
+
+```
+[
+ {
+ "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+ "BillingPeriodEndDate": "2024-01-01 00:00:00Z",
+ "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+ "ChargePeriodEndDate": "2024-01-01 00:00:00Z",
+ "ChargeCategory": "Purchase",
+ "ChargeFrequency": "One-Time",
+ "PricingCategory": "Committed",
+ "ResourceId": "<commitment-discount-id>",
+ "BilledCost": 1.00,
+ "EffectiveCost": 0.00,
+ "CommitmentDiscountId": "<commitment-discount-id>",
+ "CommitmentDiscountPurchasedQuantity": 0.50,
+ "CommitmentDiscountUnit": "USD"
+ },
+ {
+ "BillingPeriodStartDate": "2023-01-01 00:00:00Z",
+ "BillingPeriodEndDate": "2024-01-01 00:00:00Z",
+ "ChargePeriodStartDate": "2023-01-01 00:00:00Z",
+ "ChargePeriodEndDate": "2024-01-01 00:00:00Z",
+ "ChargeCategory": "Purchase",
+ "ChargeFrequency": "Recurring",
+ "PricingCategory": "Committed",
+ "ResourceId": "<commitment-discount-id>",
+ "BilledCost": 1.00,
+ "EffectiveCost": 0.00,
+ "CommitmentDiscountId": "<commitment-discount-id>",
+ "CommitmentDiscountPurchasedQuantity": 0.50,
+ "CommitmentDiscountUnit": "USD"
+ },
+ ...
+]
+```
+
+## Usage
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