Essentially, when you buy in bulk you trade upfront commitment for a discounted price. Which isn’t a good deal unless you’re confident you’re going to use all the units/seats you bought.
This is the same logic as over buying at the grocery store. The unit cost of bulk items may be less, but if the surplus is just gonna spoil you’ve wasted money in the difference.
1.0 * N * discount_rate * price <= certainty * N * 1.0 * price
—> discount_rate / certainty <= 1.0
—> discount_rate <= certainty
In the event your confidence/usage is lower than the discounted rate - say discounted to 80% of sticker price but you expect 60% utilization - this might suggest you buy 60% of your capacity at the bulk rate and fill any further demand with on-demand full-price option.
This is the same logic as over buying at the grocery store. The unit cost of bulk items may be less, but if the surplus is just gonna spoil you’ve wasted money in the difference.
1.0 * N * discount_rate * price <= certainty * N * 1.0 * price
—> discount_rate / certainty <= 1.0
—> discount_rate <= certainty
In the event your confidence/usage is lower than the discounted rate - say discounted to 80% of sticker price but you expect 60% utilization - this might suggest you buy 60% of your capacity at the bulk rate and fill any further demand with on-demand full-price option.