AWS currently offers two forms of billing for cloud services. The first is the standard where a customer has an AWS account that receives a monthly bill. The second is known as Consolidated Billing, which is meant for larger organizations that operate under multiple (linked) accounts. Consolidated Billing designates one account (out of all linked accounts) to be the payer account, receiving the total bill for all purchases and owed payments. While each linked account has its own references and usage, all billing is consolidated and paid for under the payer account.
In order to report each account’s costs, as well as the overall enterprise cloud bill, it’s important to consider the different packages and discounts that apply to each account separately. For that matter, there are two ways to show billing under consolidated accounts – using blended and unblended rates. This article will highlight the difference between blended and unblended rates, as well as discuss the two real life blended rates use cases – Enterprise and Managed Service Provider.
Blended vs. Unblended Rates
Before we begin, let’s first define a blended rate. A blended rate represents a unified rate that the bill-payer pays for a given service. It takes services such as S3, EC2, RDS, and several others into account. In comparison, an unblended rate represents a non-unified rate in which each type of usage with a specific rate gets its own line on the bill.
Some resources have different rates according to their pricing levels and usage tiers. Take S3 for example; if a customer uses 50 terabytes of S3 capacity, he or she pays a certain rate for the first terabyte of storage, followed by a different rate for the next 49 terabytes, and so on.
For a blended rate, this expense would appear as a single line on the bill – or a “blended” rate for a total of 50GB. However, with an unblended rate, two lines would appear on the bill – one for the first terabyte rate followed by one for the rate of the next 49 terabytes.
Some of the features that blended rates offer include simplifying a consolidated bill, maximizing tiered discounts, and maximizing the utilization of Reserved Instancess bought at the consolidated level.
Two Use Cases
Let’s look at the following use cases under blended rates for consolidated billing – Enterprise and Managed Service Providers (MSPs). Below are the details for each of the two types, along with the appropriate usage conditions.
Showback/Chargeback – all linked accounts are shown in a unified price:
- The blended rate method is preferred if we’re talking about tiered discounts (like with S3). One linked account shouldn’t be penalized because it used the 999th GB of S3 while the next used the 1001st GB for a lower rate.
- It’s less preferred if one linked account provisioned an instance that was covered by an RI that was bought at the consolidated level. If we want to promote accountability, enterprise IT should showback the business units to an on-demand rate, which can encourage users to plan their capacity and reserve accordingly.
Aside from their great added value of system integration and expertise, MSPs also create margins by leveraging volume discounts – playing the cloud broker role. Because of their position, they can create these margins on top of resources by taking on a higher risk of volume committing to purchase large resource capacity volumes.
- For tiered discounts: If 100 linked accounts (MSP customers) each used 1TB of S3 capacity, MSPs could charge each account with the highest-priced tier of $0.03 per GB, while the MSP enjoys a tiered discount for 100TB and pays AWS an ”average” blended rate of $0.0292 per GB.
- For RIs: By intelligently buying RI capacity at the consolidated level, MSPs can gain RI discounts as margins while charging customers an on-demand price with a smaller discount, so both sides win.
In both cases, blended rates are helpful in understanding MSPs’ actual cost and in using unblended rates to chargeback customers.
As we explained above, there are some cases in which we would like to see an AWS bill with blended rates, while, in other cases, we would like to see it with unblended rates. Cloudyn AWS cloud monitoring solution supports both of these options so that users can easily toggle between the two according to their specific uses.
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