AI Discussion: Expanding Pricing Category Scope

This article delves into the crucial discussion surrounding the expansion of pricing category scope within the FinOps-Open-Cost-and-Usage-Spec (FOCUS_Spec) framework. This discussion, stemming from TF-3 on 2025-11-21, highlights the necessity to broaden the scope of FR #982 to encompass revisions and expansions of pricing category values and definitions. The current limitations, primarily focused on Cloud Service Provider (CSP) models, struggle to accommodate Software as a Service (SaaS) contract commitment models, leading to implementation gaps for non-CSP providers. This article will explore the key points of this discussion, the definition of done, and the potential impact of this expansion.

The Need for Expansion: Addressing SaaS Pricing Challenges

The core of this discussion revolves around the inadequacy of current pricing category values in accommodating SaaS contract commitment models. During TF-3 on 2025-11-21, the realization dawned that FR #982 needed a broader scope. The existing framework is heavily CSP-centric, which presents significant challenges for SaaS providers like Datadog, Grafana, and Neos. These providers find it difficult to map their pricing structures into the current specification, leading to workarounds and potential inaccuracies in cost allocation and reporting. This issue underscores the evolving landscape of cloud services, where SaaS solutions play an increasingly vital role, and the pricing models associated with these services often diverge significantly from traditional CSP offerings. Therefore, addressing this gap is crucial for ensuring the FOCUS_Spec remains relevant and comprehensive. The inability to accurately categorize SaaS pricing not only complicates cost management for organizations utilizing these services but also hinders the development of standardized tools and methodologies for FinOps practices across diverse cloud environments. The current workaround of forcing SaaS providers to misuse existing categories or resort to generic labels like "other" is a temporary fix at best, and a long-term solution necessitates a fundamental reassessment and expansion of the pricing category scope.

Key Points of the Discussion: Contract Commitments and Implementation Gaps

Several key points emerged during the discussion, highlighting the urgency and importance of this scope expansion. Let's delve into these points to understand the nuances of the issue:

Commitment Discounts and Broader Contract Commitments

A primary focus was the understanding that commitment discounts, such as Reserved Instances (RIs) or Savings Plans, are merely a subset of more extensive contract commitments. This distinction is critical because SaaS contracts often involve various commitment structures beyond the traditional RI/Savings Plan model. These might include volume discounts, tiered pricing based on usage, or long-term agreements with specific service level objectives (SLOs). The existing framework, primarily designed for CSP-centric discounts, struggles to represent these diverse commitment models accurately. This limitation creates a significant hurdle for organizations trying to gain a clear understanding of their SaaS spending and optimize their cloud costs effectively. By recognizing that RIs and Savings Plans are just one facet of contract commitments, the discussion paves the way for a more holistic approach to pricing categorization. This broader perspective allows for the development of a framework that can encompass the wide array of pricing models prevalent in the SaaS landscape, fostering greater transparency and accuracy in cost management.

The Problematic Workaround for SaaS Providers

The current workaround, which forces SaaS providers to either "abuse" the committed value category or resort to using the "other" category, is far from ideal. This approach not only lacks precision but also undermines the integrity of the pricing data. Misusing categories leads to inaccurate cost allocation and can skew financial reports, making it difficult for organizations to make informed decisions about their cloud spending. The "other" category, while seemingly a catch-all solution, provides minimal insight into the nature of the pricing, hindering effective cost analysis and optimization. This situation highlights the urgent need for a more granular and relevant categorization system that accurately reflects the pricing structures of SaaS offerings. A robust pricing category framework should empower SaaS providers to represent their pricing models accurately, enabling organizations to gain a clear understanding of their SaaS costs and make data-driven decisions.

The Intertwined Nature of Pricing Category Definitions

The discussion also touched upon the fact that pricing category definitions feel tightly coupled to BilledCost/EffectiveCost definitions. This close relationship, while seemingly logical on the surface, can create rigidity and limit the framework's ability to adapt to evolving pricing models. The current definitions might not fully capture the complexities of SaaS pricing, where costs can be influenced by various factors such as usage tiers, feature sets, and support levels. Decoupling pricing categories from BilledCost/EffectiveCost definitions could provide greater flexibility and allow for a more nuanced representation of SaaS pricing structures. This separation would enable organizations to categorize their costs more accurately, leading to improved cost analysis and optimization. For instance, a SaaS provider might offer different pricing tiers based on the number of users or the level of support provided. A decoupled framework could capture these nuances, providing a more comprehensive view of the cost landscape.

The Implications of Inaction

The most crucial point is the potential for implementation gaps if this issue is not addressed. Failing to expand the pricing category scope will create significant challenges for non-CSP providers, hindering their ability to integrate seamlessly with the FOCUS_Spec framework. This could lead to fragmented data, inconsistent reporting, and ultimately, a less effective FinOps ecosystem. Organizations using a mix of CSP and SaaS services would struggle to gain a unified view of their cloud spending, making it difficult to identify cost optimization opportunities. The long-term viability and relevance of the FOCUS_Spec depend on its ability to accommodate the diverse pricing models prevalent in the cloud market. Addressing the pricing category scope is not just about resolving a technical challenge; it's about ensuring the framework remains a valuable tool for organizations navigating the complexities of cloud cost management. By embracing the evolving landscape of cloud services and adapting the framework accordingly, the FinOps community can foster a more transparent, efficient, and cost-effective cloud ecosystem.

Definition of Done: Approval, Documentation, and Potential for a Separate FR

The discussion outlined a clear "Definition of Done" to ensure tangible outcomes from this initiative. This definition encompasses three key elements:

Maintainer Approval or Rejection

The primary objective is to secure approval or rejection from the maintainers regarding the proposed scope expansion. This step is crucial for formally acknowledging the need for change and initiating the necessary steps for implementation. The maintainers' decision will set the direction for future actions, determining whether the scope of FR #982 will be broadened or if an alternative approach is required. Their decision will be based on a thorough assessment of the arguments presented, the potential impact on the framework, and the overall goals of the FinOps community.

Updated FR #982 Scope Documentation

If the scope expansion is approved, the next step involves updating the FR #982 documentation to reflect the changes. This documentation will serve as a comprehensive guide for developers, providers, and users of the FOCUS_Spec framework, ensuring everyone is aligned on the expanded scope and its implications. The updated documentation should clearly articulate the new pricing category values, definitions, and any related modifications to the framework. This documentation will be a critical resource for implementing the changes and ensuring consistency across the FinOps ecosystem.

Potential Creation of a Separate FR

In the event that the scope expansion is rejected, a separate FR may be created specifically for pricing category work. This approach acknowledges the importance of addressing the issue while allowing for a more focused and potentially tailored solution. A separate FR would enable the community to delve deeper into the intricacies of pricing categorization, explore alternative approaches, and develop a solution that best meets the needs of the evolving cloud landscape. This demonstrates a commitment to addressing the challenges of SaaS pricing within the FOCUS_Spec framework, even if the initial proposal is not adopted.

Conclusion: A Step Towards a More Comprehensive FinOps Framework

The discussion surrounding the expansion of pricing category scope represents a crucial step towards a more comprehensive and adaptable FinOps framework. By acknowledging the limitations of the current CSP-centric model and addressing the challenges of SaaS pricing, the FinOps community is demonstrating its commitment to fostering a transparent, efficient, and cost-effective cloud ecosystem. The outcome of this discussion will have a significant impact on the future of the FOCUS_Spec framework, shaping its ability to accommodate the diverse pricing models prevalent in the cloud market. Whether the scope of FR #982 is expanded or a separate FR is created, the focus remains on developing a robust and relevant pricing categorization system that empowers organizations to effectively manage their cloud costs. To learn more about FinOps best practices and cloud cost management, visit the FinOps Foundation website.