For companies operating on a cash basis with a standard Jan-Dec fiscal calendar (e.g. most small businesses), this would allow you to deduct future spending by prepurchasing AWS credits. It locks away whatever money you dedicate to it but that’d be peanuts compared to paying income tax on it in order to carry it forward as retained earnings.
I don't think that works the way you suggest, but I also admit the guidance is unclear.
Reg. Section 1.461-1(a)(1) provides the following:
If an expenditure results in the creation of an asset having a useful life which extends substantially beyond the close of the taxable year, such an expenditure may not be deductible, or may be deductible only in part, for the taxable year in which made.
If you buy 10+ months of AWS credits in December and have a Jan-Dec fiscal year, I'd argue that you bought "an asset having a useful life which extends substantially beyond the close of your taxable year"
I worked on this feature when I was at Amazon—and the demographic we were after were mostly government & some non-profit organizations. The biggest thing with these orgs were that they _needed_ to have a clear and structured per-month budget over a long period (~year) OR they had to use up their funds before their grants “expired”
Also on a technical note, this allowed for some nice internal data models/patterns that could be utilized in further use-cases
I work at AWS, but I wasn't involved in this feature, so this isn't anything more than speculation on my part. I've certainly talked to customers who would time their reserved instances and savings plan purchases based on the USD exchange rate for their local currency. This could make sense for those customers too, who often don't have USD denominated bank accounts.
Other comments have covered cases like departments having money left over in their quarterly budgets, or companies looking to spend in a particular quarter for earnings/tax deduction reasons, or reducing currency risk by hedging forex prices. But the biggest use by far that I've seen for this is government/public orgs that are prevented by outdated laws/auditing regulations/processes from using pay-as-you-go models. They are forced by their accounting department/government grant to treat infra expenses as capex and have zero budget to expense them as opex (this model assumes an on-prem physical plant for an IT department). Previously AWS had a way to get around part of that with reserved instances, this solution is more comprehensive.
The pricing on reserved instances is so appealing over on-demand instances, though, that people are using it for more than just opex vs. capex accounting. You legitimately save money by buying in advance.
> What's the point, if there isn't a discount for paying upfront?
In a past life, I did some work with government clients who preferred to be charged up-front in a lump sum, because it was much easier for them to get funding for that than a recurring subscription.
I like those kinds of services for personal projects. I don't always have enough money on my bank card and I'm lazy to go to ATM to fill my card with cash, so those monthly payments could be missed very easily. If that leads to service disruption, it's very annoying. It's much easier to load a balance for year and forget about it until next year.
Our bank recently started charging us negative interest on any balance over €150K in our checking account. So I wouldn't mind pre-paying a bit if the balance gets too high. Alas, it seems this is US only for now.