{"id":19178,"date":"2022-11-27T23:50:26","date_gmt":"2022-11-27T23:50:26","guid":{"rendered":"https:\/\/mailinvest.blog\/index.php\/2022\/11\/27\/cloud-marketplaces-transform-how-business-software-is-bought-and-sold\/"},"modified":"2022-11-27T23:50:26","modified_gmt":"2022-11-27T23:50:26","slug":"cloud-marketplaces-transform-how-business-software-is-bought-and-sold","status":"publish","type":"post","link":"https:\/\/mailinvest.blog\/index.php\/2022\/11\/27\/cloud-marketplaces-transform-how-business-software-is-bought-and-sold\/","title":{"rendered":"Cloud marketplaces transform how business software is bought and sold"},"content":{"rendered":"

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Palo Alto Networks Inc. has seen the future and it is in marketplaces.<\/p>\n

Although it won\u2019t provide a lot of details, the cybersecurity giant, with nearly $7 billion in annual revenue, believes that the marketplaces operated by the big hyperscale cloud platform providers will be its biggest source of revenue growth going forward.<\/p>\n

\u201cIt\u2019s not just where the puck is headed,\u201d said Prem Iyer, the company\u2019s vice president of ecosystems. \u201cIt\u2019s where the puck is now.\u201d<\/p>\n

It\u2019s hard to argue with the numbers. Iyer said revenue from cloud marketplaces is growing at nearly triple-digit percentages and has been for the last several years. \u201cIf we don\u2019t put another dollar into what we go do with these cloud providers, customers are still going there and they\u2019re buying there first,\u201d he said. \u201cCloud marketplaces are making it more cost-efficient for us to distribute to our customers seamlessly and easily.\u201d<\/p>\n

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Palo Alto Networks\u2019 Ayer says marketplaces are \u201cwhere the puck is now.\u201d Photo: Palo Alto Networks<\/p>\n<\/div>\n

Customers apparently agree. Cloud marketplaces, which are listings of complementary products and services that buyers can purchase from companies they do business with \u2013 grew at more than seven times<\/a> the rate of total business-to-business e-commerce sales in 2021, according to Vertical Web Media LLC. B2B marketplace sales are expected to make up 14% of all online sales<\/a> by 2025, growing at a compound annual rate of 32% during that time, according to Finextra Research Ltd.<\/p>\n

Cloud marketplaces are growing at triple-digit rates and are on track to generate $15 billion in sales<\/a> by the end of 2023 and $50 billion by the end of 2025, according to Tackle.io Inc. Bessemer Venture Partners LP estimates that transactions in those venues grew 70%, to $4 billion<\/a>, in 2021, or three times as fast as the growth of the public cloud overall.<\/p>\n

All roads<\/h3>\n

Microsoft Corp.\u2019s Vice President of Commercial Marketplace Jake Swenson is just as bullish. The company\u2019s Azure and AppSource marketplaces \u201cdid about $8 billion in global billed sales in 2022. That will scale to $50 billion by 2025,\u201d he told CRN<\/a> earlier this month. \u201cAll roads lead to marketplace.\u201d<\/p>\n

Digital marketplaces aren\u2019t new \u2014 Apple Inc. launched its App Store in 2008 \u2014 but they have been slow to gain traction in the business software arena, where visits from sales representatives, long negotiations and protracted installation and test cycles have been the norm for decades.<\/p>\n

But cloud computing \u2013 and software-as-a-service in particular \u2013 have rewired expectations. Buyers now expect even complex software to be up and running in hours without large capital expenditures. And the growing ranks of digital-native business buyers have accelerated the demand for one-button simplicity.<\/p>\n

Millennials increasingly are in charge of buying decisions and \u201cthe last thing they want to do is talk to a salesperson,\u201d said Jake Zborowski, general manager of product management at Microsoft.<\/p>\n

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AWS\u2019 Grusz says marketplace deals close 40% faster and are 80% larger. Photo: SiliconANGLE<\/p>\n<\/div>\n

Amazon Inc. has been a trendsetter both in retail and in the cloud. Way back in 2000 it began allowing businesses of all sizes to sell products through its e-commerce site, collecting a commission for each sale while embellishing the reputation it hoped to build as a one-stop shop for everything. Third parties now account for about 60%<\/a> of Amazon\u2019s overall retail sales.<\/p>\n

Amazon Web Services Inc. set up the first cloud marketplace in 2012 initially to provide machine images of the nuts-and-bolts infrastructure software needed to run cloud instances. \u201cWe have since branched out dramatically from Amazon Machine Images,\u201d which are virtual machines specific to AWS, Chris Grusz, AWS\u2019 general manager of worldwide ISV alliances and marketplace, told SiliconANGLE in an interview.<\/p>\n

At AWS\u2019 big re:Invent conference in Las Vegas this week (pictured), the cloud giant is expected to announce that its marketplace now lists 13,000 offerings from 3,000 independent software vendors. Amazon has said the marketplace does \u201cbillions of dollars\u201d of business, although it won\u2019t be more specific. The company likely will announce a number of partner initiatives that could grow that business even more.<\/p>\n

Means to an end<\/h3>\n

Cloud providers have shifted from viewing marketplaces as a source of commissions to a source of greater use of their platforms and they are actively courting independent software vendors \u2014 even competitors \u2014 to join them. \u201cAt the end of the day the primary objective of the hyperscalers is to drive infrastructure consumption,\u201d said Maryam Zand, vice president of cloud partners at IBM Corp. subsidiary Red Hat Inc. \u201cAll else is a means to that end.\u201d<\/p>\n

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Red Hat\u2019s Zand: Hyperscalers see marketplaces as a way to drive infrastructure consumption. Photo: Red Hat<\/p>\n<\/div>\n

AWS simplified its pricing structure<\/a> and lowered fees to marketplace partners three years ago. Google dropped the fees<\/a> it charges marketplace sellers from 20% to 3% last year and Microsoft followed suit<\/a>. Microsoft also launched the ISV Success Program<\/a>, which is currently in public preview, to provide developers with cloud credits, developer tools, demand generation services and even architectural engineering guidance. \u201cIt helps them build an app, figure out which category to seat it in and helps with listing optimization so they\u2019ll do well when customers are searching for applications,\u201d said Anthony Joseph, vice president of Microsoft Cloud Marketplace & ISV Journey.<\/p>\n

Marketplaces have the potential to upend traditional software sales models by streamlining transactions and lowering overall costs for both buyers and sellers. Their appeal spans multiple phases of the buying process.<\/p>\n

\u201cA successful cloud marketplace is a trifecta of value,\u201d said Dai Vu, managing director for marketplace & ISV go-to-market programs at Google LLC\u2019s Cloud Platform. \u201cCustomers can more easily manage and procure products; software and app vendors gain a very efficient route to market and scale and cloud providers drive more consumption.\u201d<\/p>\n

One bill for all<\/h3>\n

Integrated billing is one of the strongest appeals. Enterprises are increasingly signing up for multiyear cloud commitments that can run to $100 million or more but at the risk of forfeiting unused credits at the end of the contract. In response, cloud platform providers have been rejiggering their billing terms to allow marketplace purchases to count against those commitments.<\/p>\n

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Microsoft\u2019s Swenson: \u201cAll roads lead to marketplace.\u201d Photo: Microsoft<\/p>\n<\/div>\n

\u201cAs customers increase the volume of their SaaS subscriptions, they need to centralize how they find, try and buy solutions,\u201d said Microsoft\u2019s Joseph. \u201cCustomers can count every dollar of their purchases toward their cloud commitment when they buy eligible solutions.\u201d<\/p>\n

That greases the skids for marketplace sellers. \u201cIf you already have an account with one of these cloud providers, then suddenly our stuff becomes easier to use and faster to deploy and that definitely bodes well for us,\u201d said Dan Rosanova, head of product management for Confluent Cloud<\/a>, a managed service from Confluent Inc. What\u2019s more, \u201cusers from marketplaces activate at a higher rate.\u201d<\/p>\n

AWS has said deals in its marketplace close at a 24% higher rate and are 80% larger on average. \u201cMoreover, ISVs are closing deals 40% faster,\u201d Grusz said.<\/p>\n

Buyers can also rely on cloud providers to do much of the vetting that\u2019s typically involved in working with new vendors. AWS\u2019 recently launched Vendor Insights<\/a> program compiles security and compliance information that it says can save up to 10 weeks of time buyers typically spend assessing prospective vendors. \u201cNo more 200-questionnaire packets for each vendor,\u201d Grusz said. \u201cBuyers no longer have to do outside-in things like penetration testing\u201d because AWS does that up-front work for them.<\/p>\n

\u201cThe big motivator for customers is the confidence that it will definitely work because it\u2019s being bought through the cloud marketplace,\u201d said Dan Garfield, co-founder and chief open-source officer at DevOps platform developer Codefresh Inc.<\/a><\/p>\n

Enabling complex deals<\/h3>\n

While touting the simplicity of doing business in their marketplaces, hyperscalers have also accommodated buyers\u2019 interest in negotiating custom arrangements to garner a bigger share of their pocketbooks.<\/p>\n

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Confluent\u2019s Rosanova: For customers who already have cloud provider accounts, \u201csuddenly our stuff becomes easier to use.\u201d Photo: LinkedIn<\/p>\n<\/div>\n

When AWS launched Private Offers, a program that lets buyers and sellers negotiate their own prices and licensing agreement agreements five years ago, \u201cthe size of the subscriptions went through the roof,\u201d Grusz said. \u201cWe saw seven-figure, eight-figure deals. Our customers are now saying now, \u2018I want to buy everything here.\u2019\u201d<\/p>\n

ISVs are increasingly coming to see marketplaces as primary sales drivers. Clumio Inc., a developer of software that protects AWS applications from ransomware and other threats, routes its entire business through AWS Marketplace, Chief Executive Poojan Kumar said\u00a0in an interview with SiliconANGLE<\/a>. It estimates that its cloud annual run rate grew 450% in 2021 on 400% growth in its AWS customer base. \u201cWe let [customers] self-onboard themselves, and we allow AWS billing automatically so you don\u2019t need to talk to us,\u201d Kumar said<\/p>\n

Red Hat is in the process of making the full range of its products and even professional services available on all major cloud platforms. \u201cWe see a big shift toward marketplaces as transaction places,\u201d Zand said.<\/p>\n

Basics still matter<\/h3>\n

But for all the upside platform providers promise, marketplaces don\u2019t obviate the need for sellers to do the basic blocking and tackling. When she started working on the VMware Inc. cloud marketplace a decade ago, \u201cthe thinking was that if you put it there the customer will come but it doesn\u2019t work that way,\u201d Zand said. \u201cISVs have to create preferences, drive demand, provide differentiation and optimize for specific clouds. That\u2019s all on them to do.\u201d<\/p>\n

There are also limitations to being tied to a third party\u2019s customer relationship management and accounting systems. \u201cWe don\u2019t have a lot of visibility into the sites,\u201d said Confluent\u2019s Rosanova. \u201cIt\u2019s hard for us to justify marketing spend that takes you to a site that we don\u2019t own and we can\u2019t tell how successful it is.\u201d<\/p>\n

Marketplace platforms are evolving and \u201cthe process [of listing and maintaining them] is not very seamless at this point,\u201d Zand said. \u201cIt\u2019s still very manual.\u201d<\/p>\n

But overall, cloud marketplaces get high marks from vendors and, judging by sales, from buyers as well. In the long run, they may be the tip of the spear for a bigger trend that will sweep across other industries.<\/p>\n

Beyond cloud<\/h3>\n

Mirakl Inc.<\/a> is one of about a dozen companies that facilitate marketplaces in industries such as manufacturing, food and beverage, fashion and hospitality. Its value proposition is similar to that of the cloud: Diversify the range of products a company offers, improve customer experience, keep people on site longer and generate revenue without the burden of inventory and fulfillment costs.<\/p>\n

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Clumio relies on the AWS marketplace to fuel its entire business, says CEO Kumar. Photo: SiliconANGLE<\/p>\n<\/div>\n

\u201cPeople expect things anytime, anywhere,\u201d said Maya Pattison, Mirakl\u2019s vice president of corporate marketing. \u201cHow do you satisfy that with the old model of warehousing and inventories?\u201d<\/p>\n

Marketplaces are a complement to e-commerce platforms that \u201corchestrate the cart, manage the customer experience and facilitate the purchase,\u201d Pattison said. The host takes care of vendor onboarding, manages the catalog and ensures the appropriate placement of product data.<\/p>\n

The idea is to \u201csell alongside complementary solutions your market would think to buy when they buy from you,\u201d said Angela Troccoli, senior director of global product marketing. \u201cIf you\u2019re searching for a backpack, you might also be searching for a Thermos,\u201d so listing insulated food and beverage containers from other companies would be a natural brand extension.<\/p>\n

All that translates neatly to cloud marketplaces as well. And the appeal isn\u2019t lost on ISVs. Two years ago, Palo Alto Networks launched its own marketplace to complement its Cortex XSOAR security platform. The hosted ecosystem<\/a> now encompasses more than 850 product integrations.<\/p>\n

It just goes to show that, in the fast-evolving world of business software marketplaces, anyone can still play.<\/p>\n

With reporting from Kyt Dotson and Robert Hof<\/em><\/p>\n

Photo: Wikimedia Commons<\/a><\/h5>\n
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