On a recent client engagement I was asked to provide a simple set of definitions for basic terms and concepts around Software-as-a-Service and Cloud Computing (which I often use inter-changeably).   What was interesting is that there is a lot of buzz out there but I can see why people get confused because there isn’t a standard set of definitions.

So my Friday contribution to the SaaS industry I am publishing the Montclair Advisors’ SaaS Glossary of Terms.  I would be interested in your feedback on the definitions and if I miss any key ones.

Term Definition
ACV Annual Contract Value of a subscription software agreement.
API Application Programming Interface.
ARR Annual Recurring Revenue.
ASP Application Service Provider.  Typically associated with a hosted single tenant software solution.
CAC Customer Acquisition Costs.  A key -SaaS metric that measures sales effectiveness based on how long it takes to pay back Sales and Marketing investments.
Churn A SaaS measure of customers who do not renew their annual or monthly subscription agreement.
Cloud Computing A utility computing method that shares many types of computer resources through virtualization and delivers an elastic computing environment over the Internet.
CLTV Customer Lifetime Value.  A key SaaS metric that is used to measure customer value, usually over 3 to 5 years.
CMRR Contracted Monthly Recurring Revenue.  A key SaaS metric that is calculated for new customers, up-sells, cross-sells and removing churning customers.
CoLo Co-Location facility. A term for leasing a third party’s physical data center infrastructure, which usually includes the building, power, Internet connectivity and security.
Cross-Sell A key SaaS metric measuring new software functionality or modules added to an existing software subscription agreement.
Down-Sell A key SaaS metric that measures when customers remove of functionality, users or capability that lowers the CMRR.
Freemium A business model in which the SaaS or Cloud Computing provider offers basic features to users at no cost and charges a premium for supplemental or advanced features.
Hosted Software Single tenant software that is delivered over the Internet from either the Software vendors own data center or through a third party hosting company.
IaaS Infrastructure-as-a-Service refers to a combination of hosting, hardware, provisioning and basic services needed to run a SaaS or Cloud application that is delivered on a pay-as-you-go basis.
Mashup It is a web application that combines data or functionality from two or more external sources to create a new service. The term implies easy, fast integration, frequently using open APIs and data sources to produce results that were not the original reason for producing the raw source data.
MRE Monthly Recurring Expenses.
MRR Monthly Recurring Revenues.
MSP Managed Services Provider.  Usually a hosting or CoLo provider who provides a higher level of application management services (App management, monitoring, reporting, billing and call center support).
Multi-tenancy Refers to a software architecture where a single instance of the software runs on a server, serving multiple client organizations (tenants). Multi-tenancy is contrasted with a multi-instance architecture where separate software instances (or hardware systems) are set up for different client organizations.
On-Demand Is often used as an interchangeable term along with SaaS.
On-Premise Traditional method of installing and customizing software on the customer’s own computers that reside inside of their own data center.
Platform-as-a-Service (PaaS) Platform-as-a-Service solutions are development platforms for which the development tool itself is hosted in the Cloud and accessed through a browser. With PaaS, developers can build web applications without installing any tools and then they can deploy their applications and services (reporting, integration, security) without any specialized systems administration skills.
Private Cloud Employs Cloud Computing principles within a customer’s own internal networks. The term implies that the same virtualization and highly flexible and scalable methods used in huge Internet-based enterprise datacenters.
Public Cloud Cloud Computing conducted using the public Internet outside of any enterprise firewall.
Renewal Agreeing to extend an existing software subscription agreement beyond the initial term.
SLA Service Level Agreement. The contractual terms of service associated with SaaS provider’s offerings.
SOA Service Oriented Architecture.
SaaS Software-as-a-Service refers to multi-tenant software delivered over the Internet and customers consume the product as a subscription service that is delivered on a pay-as-you-go basis.
Subscription SaaS licensing method where customers rent their software from the provider usually over a 1-3 year period.
TCV Total Contract Value.  Total value of a transaction as measured over the term of the agreement.
Up-Sell A key SaaS metric measuring additional software functionality, users, or capacity that is sold onto an existing software subscription agreement.
Virtualization The creation of a virtual (rather than actual) version of an operating system, a server, a storage device or other network resources.