What are pricing benchmarks?
In SaaS, price benchmarking often refers to the process of comparing the cost of software to that of an alternative provider. Using this insight, buyers may be able to leverage a more favorable counteroffer from their vendor of choice. The most effective approach to benchmarking prices and securing the best possible deal on any subscription, however, is to find out what other similar companies are actually paying for the software.
Related Definitions
FinOps
What is FinOps?
FinOps refers to financial operations. In relation to cloud technology, Cloud Financial Operations is a practice that focuses on aligning cloud costs with business objectives and improving overall financial management in the cloud. When implemented correctly, it can provide you with a better understanding of your cloud spending patterns, enabling you to make more informed decisions on how to allocate and manage your costs.
Reduction Clause
What is a reduction clause?
A reduction clause refers to a provision in a software agreement that allows customers to reduce the number of licenses or users covered by their subscription during the term of an agreement. This provides customers with flexibility to adjust their plan to meet evolving business needs, while avoiding paying for licenses or users they no longer require or needing to terminate the contract. The specific terms and requirements of a reduction clause may vary depending on the SaaS provider and the subscription agreement, for example it may be subject to a minimum number of licenses or users.
Reserved Instances
What are reserved instances?
Reserved Instances (RIs) are a pricing and capacity reservation offering provided by AWS for their EC2 (Elastic Compute Cloud) and RDS (Relational Database Service) services.
They specifically allow users to commit to using a specific instance type in the same region for either a one or three-year term, in exchange for discounts of up to 72% – the exact discount is ultimately dependent on the commitment term, instance type, availability zone and region.
There are various types of Reserved Instances available, each with different terms and levels of flexibility. Standard Reserved Instances provide the highest cost savings but are the least flexible, whereas Convertible Reserved Instances offer more flexibility by allowing you to change instance families within the same instance type.
In contrast, Scheduled Reserved Instances offer a lower discount, but allow you to reserve capacity for specific time windows, such as business hours or weekends, providing cost savings for predictable workloads.
Cloud Unit Economics
What is cloud unit economics?
By definition, cloud unit economics refers to the financial analysis and evaluation of both the costs and revenue associated with operating a cloud-based business.
In other words, it’s a way of looking at how much it costs to run your business on the cloud, as well as how much it brings in.
Auto-Renewal
What is an auto-renewal clause?
Auto-renewal is a term often used in SaaS agreements referring to the automatic renewal of a user’s subscription plan at the end of their contract term. These auto-renewal clauses will automatically extend the user’s subscription for another period, typically the same duration as the initial term, unless the customer explicitly cancels or modifies their subscription by a specified date. This is often referred to as a termination window and is typically either 30, 60 or 90 days prior to the renewal date.
Maverick Buying
What is maverick buying?
Maverick spending, also known as rogue spending, can be defined as any purchasing that takes place within an organization, outside of an established procurement process.
In the context of SaaS, maverick spending refers to the acquisition of cloud-based software solutions that are purchased unbeknownst to the finance, IT or procurement teams, and in a way that does not comply with the organization’s formal IT procurement process — and so may not be approved, vetted, or appropriately documented.