The annual value of a customer’s Subscription Revenue only. It does not include non-recurring activities. The SaaS business model relies on Subscription Revenue because it is recurring revenue delivered at a very high gross margin. Providing software as a service generates value for the company over a much more extended period than perpetual software. This is the principal value of the SaaS model. Therefore, nearly all SaaS metrics use Subscription-related terms. Recurring revenue such as maintenance and customer support should not be included in ACV; these are low-margin activities that do not add significant value to the business model.
The annual value of a customer’s Subscription Revenue only. It does not include non-recurring activities. The SaaS business model relies on Subscription Revenue because it is recurring revenue delivered at a very high gross margin. Providing software as a service generates value for the company over a much more extended period than perpetual software. This is the principal value of the SaaS model. Therefore, nearly all SaaS metrics use Subscription-related terms. Recurring revenue such as maintenance and customer support should not be included in ACV; these are low-margin activities that do not add significant value to the business model.
