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Revenue, deferred revenue, and deferred commissions
 9 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue, deferred revenue, and deferred commissions Revenue, deferred revenue and deferred commissions
Disaggregation of Revenue
A typical sales arrangement involves multiple arrangements, such as the sales of the Company’s proprietary communication devices (“Vocera Badge” or “Smartbadge”), perpetual software licenses, professional services and subscription and support services which entitle customers to unspecified upgrades, patch releases and telephone-based support. The following table depicts the disaggregation of revenue according to revenue type and is consistent with how the Company evaluates its financial performance:
Three months ended September 30,Nine months ended September 30,
(in thousands)2020201920202019
Product revenue
Device$17,027 $19,002 $48,030 $43,566 
Software11,483 9,509 22,281 22,080 
Total product28,510 28,511 70,311 65,646 
Service revenue
Subscription and support20,387 17,538 57,450 50,859 
Professional services and training4,918 4,732 14,074 14,344 
Total service25,305 22,270 71,524 65,203 
Total revenue$53,815 $50,781 $141,835 $130,849 
Contract balances
The timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable are recorded at the invoiced amount and in the period the Company delivers goods or provides services or when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are typically 30 days. The balance of accounts receivable, net of allowance for doubtful accounts, as of September 30, 2020 and December 31, 2019 is presented in the accompanying condensed consolidated balance sheets. In situations where revenue recognition occurs before invoicing, an unbilled receivable is created, which represents a contract asset. As of September 30, 2020 and December 31, 2019, contract assets totaling $4.5 million and $4.3 million, respectively, were included in other receivables in the condensed consolidated balance sheets.

Costs to obtain and fulfill a contract
The Company capitalizes certain incremental contract acquisition costs consisting primarily of commissions paid and the related payroll taxes when customer contracts are signed. The Company determines whether costs should be deferred based on its sales compensation plans, if the commissions are incremental and would not have been incurred absent the execution of the customer contract. Sales commissions for renewals of customer contracts are not commensurate with the commissions paid for the acquisition of the initial contract given the substantive difference in commission rates in proportion to their respective contract values. Commissions paid upon the initial acquisition of a contract are amortized over the estimated period of benefit, which may exceed the term of the initial contract. Accordingly, amortization of deferred costs is recognized on a systematic basis that is consistent with the pattern of revenue recognition allocated to each performance obligation and is included in sales and marketing expense in the condensed consolidated statements of operations. The Company determines its estimated period of benefit by evaluating the expected renewals of its customer contracts, the duration of its relationships with its customers and other factors. Deferred costs are periodically reviewed for impairment. Changes in the balance of total deferred commissions (contract asset) during the three and nine months ended September 30, 2020 are as follows:
(in thousands)June 30, 2020AdditionsCommissions RecognizedSeptember 30, 2020
Deferred commissions$11,118 $2,064 $(1,857)$11,325 
(in thousands)December 31, 2019AdditionsCommissions RecognizedSeptember 30, 2020
Deferred commissions$10,477 $7,180 $(6,332)$11,325 
Of the $11.3 million total deferred commissions balance as of September 30, 2020, the Company expects to recognize approximately 49% as commission expense over the next 12 months and the remainder thereafter.
Deferred revenue
The Company records deferred revenue when cash payments are received in advance of the performance under the contract. The current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the condensed consolidated balance sheet date. Changes in the balance of total deferred revenue (contract liability) during the three and nine months ended September 30, 2020 are as follows:
(in thousands)June 30, 2020AdditionsRevenue RecognizedSeptember 30, 2020
Deferred revenue$54,014 $25,866 $(22,472)$57,408 
(in thousands)December 31, 2019AdditionsRevenue RecognizedSeptember 30, 2020
Deferred revenue$61,475 $58,197 $(62,264)$57,408 
Revenue recognized during the three and nine months ended September 30, 2020 from deferred revenue balances at the beginning of the period was $18.5 million and $46.0 million, respectively. Revenue recognized during the three and nine months ended September 30, 2019 from deferred revenue balances at the beginning of the period was $17.2 million and $40.0 million.
The “contracted but not recognized” performance obligations represent the Company’s deferred revenue and non-cancelable backlog amounts. This balance as of September 30, 2020 was $139.4 million, of which the Company expects to recognize approximately 70% as revenue over the next 12 months and the remainder thereafter.