From Sales Ops to SaaS Metrics (A Simplified Business Case)

- Donald F, Nagaraj P and Team

2015

SaaS Metrics Defined MRR The Monthly Recurring Revenue at the end of each month. Computed by taking the MRR

from the previous month and adding Net New MRR. ARR Annualized Run Rate = MRR x 12ARR is annual run-rate of recurring revenue from the

current installed base. ACV Annual Contract Value of a subscription agreement. This is very close to ARR above. Churned MRR/ACV The lost MRR from churning customers in the current month. Expansion MRR/ACV The increase in MRR from expansion in your installed base in the current month. Net New MRR/ACV Net New MRR = New MRR + Expansion MRR – Churned MRR

This is the sum of the three different components that will change MRR during each month. Billings Billings is the amount that you have invoiced that is due for payment shortly. Revenue Revenue is amount of money that can be recognized according to accounting policy. Even if it

is paid for upfront, usually subscription revenue can only be recognized ratably over time as the service is delivered. If more money has been paid than can be recognized, the difference goes into a balance sheet item called Deferred Revenue.

Avg Contract Length Assuming a mix of different contract lengths, this gives you the average duration in months or years.

Months Up Front Average of months (or years) of payment received in-advance with new bookings. Getting paid in advance has a big positive impact on cash flow. This metric has been used as a way to incent sales people to get more paid up front when a new customer is signed.

ARPA – Average monthly recurring Revenue per Account

This number is tells you the average monthly revenue per customer. It is useful to look at this for just the new customers booked in the month. Plot a trend line to show you the average price point that your new customers have chosen.

Current Scope Next Phase Out of Scope

Reporting Matrix

Current Scope Next Phase Out of Scope

Presentation Mockups (MRR)

Presentation Mockups (ARR)

Presentation Mockups (Activity)

Architectural Framework

Business Assumptions/ Limitations

1 All Amounts to be computed/displayed in USD only

2 Service Duration attribute is maintained at the individual SKU level

3 Renewal Contract does not have the Original Contract Linkage.

4 Service Durations are for whole months only

5 Revenue Waterfall Report is the mutually agreed data source. Additional Metrics may be possible after extending ETL to other data sources like Bookings, Billings etc.

6 Static GL Account Mapping for Term License and Data Subscription Revenue Groups is accurate enough to slice the “SaaS” component of the business.

7 Parent-Child SKU relationship within a Bundling arrangement is not currently available, thereby limiting the Product-level reporting

8 SaaS Metrics are non-GAAP reports, and cannot be reconciled 1:1 with GAAP Reports

POC Conclusions POC Accomplishments (actual Q2-2015 Waterfall)

Gap from POC to Production Post-Production

Capability to source data from ERP Revenue Data (revStream) into Hadoop AWS stack

Increase the columns made available for reporting (Ship To Customer, Product, as present on the source) to maximize Self-Service capabilities

Perform MRR calculation based on Day Unit (use 1/365 Day Unit instead of 1/12 Month Unit)

Self-Service capability in Visualization to create custom reports

Fine-tune SaaS data selection rule to exclude Purchase Accounting Entries

Pull in additional required data sources (SFDC, Oracle) to get Contracts + Renewals Data, in order to compute Churn, Renewals Metrics

Capability to dynamically compute and display SaaS Metrics (ARR, MRR)

Fine-tune Product-Account mapping to exclude non-SaaS transactions (example GFY)

Pull in additional required data sources (Excel, Oracle) to get SaaS Customer Acquisition Cost, etc to enable perform Break-Even Analysis

Report-level and Role-level security to segregate data sets based on business requirement

Provide additional AS-OF-DATE user parameter, to allow for dynamic selection of data set

Additional Reports and Metrics: Monthly Activity, Top 10 Customers, Customer Lifetime Value, ETC

Acceptable overall Query Performance to retrieve data

Change the data source type from File to MV, to eliminate staging storage area and manual step

Revisit process for Maintenance-to-Term Conversions, for more accuracy

Publish/Excel Export/Distribution capabilities

Re-engineer operational process for Prepayments and Adjustments

Data Reconciliation (upto 98% accuracy) for Q2-2015