# How your supermarket and AWS price in the same way Have you ever been confused by an AWS bill (or invoice whatever you call that lonnnng piece of paper)? Then let me go back to basics. # Summary (for you coming back again, and again, and again) In Cloud, like in most complicated things like accounting, there is a simple equation, that once understood makes all the remaining pieces fit better together. Here we are going to discuss the basic equation of Cloud pricing. This equation is used by all cloud vendors, and you are very familiar with it, but you might not know it...yet. Cost = Usage x Price, for both cloud and milk. - Cost is what you end up seeing on the invoice and should match what you pay AWS - Usage is the amount of AWS resources that you use. This is purely technical. Using the right amount of resources is an engineer's responsibility. - Rate is the price set by the Cloud vendors. Changing the price is a financial negotiation based on risk and reward: the more you remove risk from the cloud vendor, the more discount you get. # How your supermarket and AWS price in the same way At the end of a trip to the supermarket, you might have bought some milk. How much did you pay for the milk? Well, it depends on two factors: - the price of a bottle of milk (the rate for the resource) is set by the Supermarket (AWS) - the number of bottles you got (that's up to you). As a parent, the quantity of milk to buy depends on your family's needs, so you control it. You can change the brand (instance type) and the quantity (size), and decide to stop using milk altogether (turning things off). Checking that your 3yo is not spilling all the milk on the floor is also in your control (security). This is usage and the supermarket selling milk (AWS) has no way to influence your breakfast. The rate is the cost of a pint of milk and is normally standard and public, yet, the supermarket has influence over the rate, and will use it to try to keep you from stopping buying milk, or (heaven forbid) going to the competition. The supermarket (AWS) proposes vouchers (commitments) to buy a certain amount of milk and other stuff, by a certain time, to incentive you to: - continue buying milk from them, by offering reduced rates on specific products, - buy more, or less of certain products by having product-specific vouchers, and - continue to buy often, by putting a time limit on the voucher I hope this helps. Frank - [[FinOps - index]] - [[CUR - index]] - [[Size Flexible Reserved instances]]