Understanding the Importance of RPO in the Tech Industry
There’s a sleeper metric CFOs in tech are increasingly relying upon to tell their equity story - it's called Remaining Performance Obligation, or RPO for short. It's cool because it gives companies a way to show off the multi-year contracts they've landed with customers, and provide additional confidence on the company’s ability to deliver on revenue expectations.
It's particularly relevant for businesses that do a lot of long-term stuff in the form of multi year subscriptions. Instead of just looking at what's in the bank right now, RPO gives you the full picture of what's in the pipeline.
It's like seeing the whole iceberg, not just the tip.
RPO basically says,
"Look, we've got all this money coming our way, but we can't put it in the books just yet. But here’s a sneak peek at our contract backlog. That deserves some credit!”
Today we’ll dig into the crystal ball that is RPO. Here’s what you’ll learn:
What’s the Difference Between RPO and Deferred Revenue?
How It’s Calculated (with visual examples)
Where it shows up on the financial statements
Real life companies and their RPO
How RPO can help with resourcing decisions
RPO Trends and Benchmarking
Why Investors Love RPO
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