Total Contract Value (TCV)

The total value of the contract’s Subscription Revenue measured over the life of the contract regardless of the Billings terms. As an example, a 2-year contract has a TCV that is twice the amount of its ACV. Billing terms do not impact the TCV. In this 2-year contract example, Billing terms can require an upfront payment for the first year or an upfront payment for the two years. Regardless, the TCV will be the same in both scenarios. Note that the calculation may change slightly if the contract includes annual price increases. If, in our example, the price for second year of the contract increases by 20%, then the TCV will be 2.2x the ACV. For reporting purposes, a useful metric is the ratio of TCV to ACV. The higher the ratio the “stickier” the customer base, leading to retention improvements and a more efficient sales cycle.

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