Amortized cost
Amortized cost spreads each commitment fee across the period it covers, so a one-year Reserved Instance or Savings Plan paid up front shows up as a share of the fee every day of the term instead of one large charge on the day you buy it.
In plain English
Think of paying a year of rent in advance. Your bank statement shows one big payment in January, but your housing cost is one twelfth of it each month. Amortized cost is the monthly view.
Formula and worked example
Amortized cost = usage cost + share of commitment fees
- Share of commitment fees
- = upfront fee × (days in the period ÷ days in the term) + recurring fees for the period
| Upfront fee, charged in January | $12,000 |
|---|---|
| Length of the term | 12 months |
| January cost of the plan, as billed (unblended) | $12,000 |
| February cost of the plan, as billed | $0 |
| Cost of the plan per month, amortized | about $1,000 |
Billed cost makes January look $11,000 more expensive than it was and every other month too cheap. Amortized cost shows what each month's usage actually consumed, a little more in 31-day months, since the fee is spread by day.
Why amortized cost matters
Billed cost swings with every commitment purchase; amortized cost shows what each day's usage really cost. It is the view to use for unit economics, showback and chargeback, and for comparing one month with the next, because a team that bought a year of commitment in January shouldn't look twelve times as expensive in January.
It is also the fair way to judge a commitment. Effective savings rate, coverage and utilization all compare usage with the share of commitment fees that belongs to the same period.
Common mistakes
- Mixing bases in one report. A budget tracked on billed cost and a showback report on amortized cost will never agree. Choose one basis per report and say which it is.
- Expecting the monthly totals to match. Over the full term, amortized and billed cost add up to the same amount. In any one month they don't, and they aren't supposed to.
- Thinking amortization hides waste. Amortized cost still includes the part of a commitment you didn't use; it just spreads it over the term. Look for the unused commitment rather than assuming every amortized dollar did work.
- Using it for cash planning. Amortized cost answers what usage cost, not when money leaves the bank. Cash forecasts need billed cost, including upfront payments.
Where to find it in AWS, Azure and Google Cloud
| Cloud | What it is called | Where to find it |
|---|---|---|
 AWS | Amortized costs | Cost Explorer → Advanced options → Amortized costs. By default, Cost Explorer shows Reserved Instance fees as a spike on the day you are charged. In CUR 2.0, the amortized columns include savings_plan_savings_plan_effective_cost and reservation_effective_cost. |
 Azure | Amortized cost | Cost Management → Cost analysis → switch from Actual cost to Amortized cost. In amortized cost data, usage covered by a reservation or savings plan carries its prorated share of the purchase in EffectivePrice. |
 Google Cloud | Monthly commitment fees | Google Cloud bills CUD commitment fees monthly over the term, so there is no large upfront charge to spread. The billing export shows the fees and the discounts applied to covered usage. |
How CloudYali helps
CloudYali shows AWS cost as billed (unblended) everywhere except Financial Commitments, which uses amortized commitment cost so coverage, utilization and savings line up with the period they belong to. The docs explain how each cost type is counted per provider.
Related terms
Billing & cost types
Unblended cost
Unblended cost is AWS cost as billed: each line priced at the rate actually charged for it, on the day the charge occurs. Upfront commitment fees appear in full on the day you pay them and discounts can show as separate lines, which makes unblended cost the view that matches the invoice.
Billing & cost types
Blended cost
Blended cost is AWS cost priced at a blended rate: the average of the Reserved Instance and on-demand rates that accounts in an AWS Organization paid for the same usage. It spreads the benefit of reservations evenly across accounts, so it rarely matches what any one account was actually charged.
Commitments & rates
Savings Plan (SP)
A Savings Plan is an AWS or Azure commitment to spend a fixed amount per hour on eligible compute for one or three years. Usage up to that amount is billed at lower rates, and the discount follows your usage across instance sizes and, with the most flexible plans, instance families and regions.
Commitments & rates
Reserved Instance (RI)
A Reserved Instance (RI) is a one- or three-year commitment to a specific kind of capacity, such as an EC2 instance type in a region or an RDS database, in exchange for a lower hourly price. It's a billing discount, not a server, and you pay for every hour of the term whether the capacity runs or not.
Commitments & rates
Effective savings rate (ESR)
Effective savings rate (ESR) is net savings as a share of what all commitment-eligible usage would have cost at on-demand prices. Because it subtracts commitment you paid for but didn't use, it is the one rate-optimization number that buying too many Reserved Instances, Savings Plans or committed use discounts can't inflate.
Billing & cost types
Cost and Usage Report (CUR)
The Cost and Usage Report (CUR) is AWS's most detailed billing dataset: every charge, down to the hour and the resource, with its usage, rates, discounts and commitment details, delivered as files to an S3 bucket you own. CUR 2.0, created through AWS Data Exports, has a fixed set of columns.
Frequently asked questions
What is the difference between amortized and unblended cost?
Unblended cost is cost as billed: an upfront commitment fee appears in full on the day you're charged. Amortized cost spreads that fee across the days it covers. Over the whole term they add up to the same amount.
When should you use amortized cost?
For anything about what usage cost: unit economics, showback and chargeback, month-over-month comparisons and commitment performance. Use billed (unblended) cost for cash planning and for reconciling with the invoice.
Does amortized cost include unused commitment?
Yes. The fee for commitment you didn't use is spread over the term like the rest. Azure's amortized data lists it as UnusedReservation or UnusedSavingsPlan charges; AWS's Cost and Usage Report records total and used Savings Plan commitment, so the difference is the unused part.
