Software Buyer Glossary

SaaS pricing models are the ways software vendors charge for access, consumption or results. The main models are per seat, usage based, tiered, flat rate and outcome based, and a single contract can combine several of them.

Usage-based pricing charges for measured consumption, such as API calls, stored data, compute hours or messages sent. Instead of relying only on a flat subscription or user count, the bill changes with the amount of a defined resource consumed.

Outcome-based pricing charges for a defined result rather than simply providing access or measuring raw consumption. A support product might bill for an automated resolution, while a sales agreement might bill for a qualified meeting, with the contract specifying what counts.

A true-up is a bill a software vendor sends when actual seats or usage exceed what a contract covers. The vendor compares the agreed allowance with measured consumption and charges the difference under the contract’s counting and billing rules.

Vendor lock-in is when leaving a software vendor becomes so difficult or costly that a business stays despite preferring another option. It can come from contracts, proprietary data formats, integrations and the habits built around a tool.

Annual contract value (ACV) is the recurring value of a software contract expressed on a yearly basis, excluding one-time fees in our buyer comparisons. Vendors use it to track sales, while buyers can use it to compare commitments with different contract lengths.

A forward deployed engineer (FDE) is an engineer who works closely with a customer to build or adapt software around how that business runs. The role combines production engineering with direct discovery of workflows, usually through small releases tested with the people doing the work.

Composable software is a setup assembled from smaller components connected through defined interfaces, rather than one large suite. Each component has a focused job and is designed to be replaceable without rebuilding the entire system, although data and integration work can still make replacement difficult.

Software bloat means paying for more software than a business needs, including unused features, inactive seats and overlapping tools. In engineering, the same phrase can describe an application that has become unnecessarily large or slow as features accumulate.

Rip and replace means removing an existing system and putting a new one in its place through a single main cutover, rather than transferring live functions piece by piece. Preparation can still include testing, data migration and a temporary overlap before the new system becomes authoritative.

Shadow IT is software that people buy or use for work without the knowledge or approval of the teams responsible for IT and spending. It can begin with a card-paid subscription, a free account or a browser extension that colleagues start using together.

SaaS sprawl is the accumulation of more software subscriptions than a company needs or can reliably track. It appears as overlapping tools, unused access and recurring bills without clear owners, whether or not the purchases were approved.

SaaS churn measures the customers or recurring revenue a software vendor loses during a defined period. Customer churn tracks departing accounts, while revenue churn tracks lost subscription revenue, including downgrades. For buyers, evidence of departures can prompt questions about value and service, but it does not establish why customers left.

Switching costs are the money, time and risk involved in moving from one software tool to another. They include migration work, retraining, lost data, broken integrations and overlap months paying for both tools.

Software migration is moving your data, users and workflows from one system to another, for example from one CRM to a new one or from a rented tool to one you own. It includes preparing records, rebuilding connections, testing the destination and helping people work in the new system.