25th January, 2021
It is not unusual for companies with more than 1000 employees to have 200-500 SaaS applications from many vendors. That number keeps growing with increasing requirements and upcoming new technologies. Before the emergence of cloud marketplaces, each of these vendors should go through a review process to negotiate their pricing terms, licenses, vendor set-up, security, payments, etc. It is tedious and takes several months to onboard a new vendor or renew the old contract. The process includes back and forth emails, calls, and red lines, and that's when the cloud marketplace came in as a savior.
Initially, the cloud market just consisted of third-party apps. Now they have evolved bigger as a sophisticated distribution platform that offers its users the functionality to explore, procure, and deploy relevant SaaS applications at present. Marketplaces also come with strict protocols for listing, such as analysis for security and privacy. These are the same guardrails that apply for usual cloud services––User management, deployment process, and billing are included for using software through marketplaces. They also ask for additional certification if the particular application is for finance or government.
In February 2020, the public cloud marketplace was said to have surpassed the $1 trillion cap with an enormous 45% growth rate, as reported by Bessemer Venture Partners' in the 2020 state of Cloud report. In 2015 they predicted that it would reach $500 million by 2020, but the actual growth outpaced the optimistic projection and stands at $616 billion for the top five public cloud companies.
The happy consequence is that cloud marketplaces follow a similar trajectory for their growth and have opened up as a go-to-market area for many sellers who you haven't heard of yet.
With big players like AWS marketplace, Google Cloud, and Azure marketplace, a company can list their software for buyers to find, buy, and provision them. And these offer pretty incredible opportunities for doing business the cloud way. Scaling companies such as Snowflake, PagerDuty, and many more (more than 35%of Forbes cloud 100 companies), as well as plenty of startups like Astronomer, CloudZero, etc., have already started embarking their movement to the marketplace. This has now allowed them to tap into the $250B+ spend that flows into all major public cloud service providers.
Moreover, beyond access to this massive pool of cloud spend, B2B marketplaces also unlock larger buyer budgets, an accelerated deal velocity, and valuable co-selling opportunities with the cloud providers. Also, 73% of B2B buyers prefer the ease of buying through e-commerce, web direct, or marketplaces.
Visibility: Listing your product in the cloud marketplaces gives it superior visibility among the cloud users due to the high ranking of these cloud services in the market, which is a significant advantage. Also, these cloud marketplaces have got search tools for organically searching relevant products for potential customers.
Credibility: Those who purchase through cloud marketplace tend to be confident that they are listed on a trusted cloud service like AWS, Google Cloud, or Azure. Before getting listed, these SaaS applications would go through screening and reviewing levels, so the customers feel assured that they are buying from a trusted marketplace.
Deployment and Billing: These cloud marketplaces take care of deployment, invoice, and collection of SaaS products that are sold and pays the vendors every month on time. So vendors avoid hassle and cost associated with these activities, but their customers too experience a smooth and easy billing process they are already familiar with.
Flexible Pricing options: Products sold through the cloud marketplace can be billed on an hourly or monthly basis, which cuts the need for vendors to develop a software system and a billing infrastructure. In the cloud marketplace of AWS–– Big data applications that do huge computational workload prefer hourly pricing, so customers are charged based on the type and number of instances.
Access for free trials: Companies that give off hourly pricing are equipped to provide built-in free trials through the cloud marketplace instead of developing their own. Once the free trial expires, the customers are smoothly transitioned to the paid version.
Though selling through a marketplace is efficient, many startups listed in cloud marketplaces already have a separate go-to-market for sales, which can sometimes be at odds with each other. It is relatively essential to align incentives through the GTM engine so that your customers are directed towards the right channel. It can be an internal balancing act that can lead to more sales and happier customers.
Once you start running on a cloud marketplace, customers (hopefully) begin to emerge. But when this happens, you should eventually begin to gain visibility into who these customers are so that you can support them and make them use more features of your product. We have known from various independent software vendors (ISVs) that the individual users from more prominent companies might want large numbers of your unique product through a marketplace. Still, you might lose sales due to a lack of visibility. An example of losing visibility could be when your potential customer logs in through a personal mail address instead of their company's. You must develop analytic tooling to figure out the specific type of customer you get through marketplaces. The more you know about your base in the marketplace, the more you are equipped to serve customers and customize offerings to drive sales.
A cloud marketplace can be called a key platform through which your customers avail your services, but it shouldn't be the only way you interact with these cloud providers. As you list your product in a cloud marketplace, it is essential to develop a relationship with the company's product executives to get to know the cloud provider's own product agenda. Understanding how your product fits into the company's plans can help fine-tune your products and have a better chance of being picked by customers.
The listing way you pay to the cloud marketplace reduces when you sell more. For example, if you are a large cloud data integration company that has generated great sales on the cloud platform, your listing fees can be below 20%. For smaller ISVs who sell less, the pricing elasticity will be more limited.
Though it is vital to maintain relationships with product teams from the big cloud providers, getting to know other executives from marketing and sales teams who can collaborate with you on a marketing program is a great idea. The cloud providers would be more than happy to help you with marketing programs if you boost sales to their marketplace. Be it AWS, Google, Microsoft or Salesforce, or any emerging cloud marketplaces such as Snowflake and RapidAPI. All these organizations have dedicated teams who can help you identify and grow in their marketplace. Establishing a steady and productive relationship with them can go a long way in enabling your success.
When the transaction occurs through a cloud marketplace, it truly benefits the buyer and the seller. Buyers can use these cloud platform commitments to get a consolidated cloud solution in a single bill and contract, while the sellers gain access to new budgets and cut down on transaction time.
Cloud marketplaces present a massive opportunity for SaaS sellers as most buyers increase cloud usage and look for ways to simplify SaaS purchases.