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Revenue RecognitionWe generate revenue by providing software as a serv +ice ("SaaS") solutions through on-demand subscription, on-premise per +petual and term licenses and related software maintenance, and servic +es. Amounts that have been invoiced are recorded in accounts receivab +le and in deferred revenue or revenue, depending on whether the reven +ue recognition criteria have been met. Recurring Revenue. Recurring r +evenue, which includes SaaS revenue and maintenance revenue, is recog +nized ratably over the stated contractual period. SaaS revenue consis +ts of subscription fees from customers accessing our cloud-based serv +ice offerings. Maintenance revenue consists of fees from customers pu +rchasing licenses and receiving support for such on-premise solutions +. We also recognize SaaS and maintenance revenue associated with cust +omers using our solutions in excess of contracted usage ("Overages"). + Overages are primarily attributed to SaaS products and are recorded +in SaaS revenue in the period incurred. Revenue related to Overages w +as immaterial for all years presented.Service and License Revenue. Se +rvice and license revenue primarily consists of services revenue rela +ted to training, integration and configuration services. Our professi +onal services arrangements are generally billed on a time-and-materia +ls basis. Time and material services are recognized as the services a +re rendered based on inputs to the project, such as billable hours in +curred. For fixed-fee professional services arrangements, we recogniz +e revenue under the proportional performance method of accounting and + estimates the proportional performance on a monthly basis, utilizing + hours incurred to date as a percentage of total estimated hours to c +omplete the project. If we do not have a sufficient basis to measure +progress toward completion, revenue is recognized upon completion. Se +rvice and license revenue also includes revenue from perpetual licens +es, which is recognized upon delivery of the product, using the resid +ual method, assuming all the other conditions for revenue recognition + have been met. Revenue related to perpetual licenses was immaterial + for all the years presented.In a limited number of arrangements with + non-standard acceptance criteria, we defer the revenue until the acc +eptance criteria are satisfied. Reimbursements, including those relat +ed to travel and out-of-pocket expenses, are included in services and + license revenue, and an equivalent amount of reimbursable expenses i +s included in cost of services and license revenue. In general, recur +ring revenue agreements are entered into for 12 to 36 months, and the + professional services are performed within nine months of entering i +nto a contract with the customer, depending on the size of integratio +n.Our SaaS agreements provide specified service level commitments, ex +cluding scheduled maintenance. The failure to meet this level of serv +ice availability may require us to credit qualifying customers a port +ion of their subscription and support fees. Based on our historical e +xperience meeting its service level commitments, we do not currently +have any liabilities on our consolidated balance sheets for these com +mitments.31We recognize revenue when all of the following conditions +are met: * Persuasive evidence of an arrangement exists;* Deli +very has occurred or services have been rendered;* The fees are fixed + or determinable; and * Collection of the fees is reasonably assur +ed. If we determine that any one of the four criteria is not met, we +will defer recognition of revenue until all the criteria are met.Mult +iple-deliverable arrangements with on-demand subscription. For on-dem +and subscription agreements with multiple deliverables, we evaluate e +ach element to determine whether it represents a separate unit of acc +ounting. We determine the best estimated selling price of each delive +rable in an arrangement based on a selling price hierarchy of methods + contained in Finance Accounting Standards Board ("FASB") Accounting +Standards Update ("ASU") No. 2009-13, Revenue Recognition (Accounting + Standards Codification ("ASC") Topic 605)-Multiple-Deliverable Reven +ue Arrangements. The best estimated selling price for a deliverable i +s based on its vendor-specific objective evidence ("VSOE"), if availa +ble, third-party evidence ("TPE"), if VSOE is not available, or estim +ated selling price ("ESP"), if neither VSOE nor TPE is available. Tot +al arrangement fees are allocated to each element using the relative +selling price method. We have currently established VSOE for most del +iverables, except for fixed fee service arrangements and on-premise s +oftware licenses. We considered all of the following factors to e +stablish the ESP for fixed fee service arrangements when sold with it +s on-demand services: the weighted average actual sales prices of pro +fessional services sold on a stand-alone basis for on-demand services +; average billing rates for fixed fee service agreements when sold wi +th on-demand services, cost plus a reasonable mark-up and other facto +rs such as gross margin objectives, pricing practices and growth stra +tegy. Multiple-deliverable arrangements with on-premise licen +se.
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