From a billing mechanism to a sales channel: Nadav Tzuker on the evolution of cloud marketplaces

Within a mere four years of its existence, Wiz grew into a >$350 million ARR business, saw its valuation increase to a staggering $10 billion, rejected an acquisition offer from Alphabet Inc. at a 2.3X valuation multiple, and saw their CEO, Assaf Rappaport profess new milestones – “$1 billion in ARR and an IPO.”

In much less time than that, the company had already been named “AWS Marketplace Partner of the Year – EMEA, 2023” and “Microsoft Commercial Marketplace Partner of the Year, 2024,” making them a true cloud marketplace erudite. Wiz has also hired several new members to senior management (including President Dali Rajic) to ensure that it makes channel strategy a top priority for the coming years.

This strategic focus on channel partnerships naturally positions cloud marketplaces at the center of their strategy. In our conversation with Nadav Tzuker, their alliance and partnerships expert, it became clear that cloud marketplaces are fundamental to their revenue and partnerships strategy.

"Cloud marketplaces are inevitable. Companies have to adopt a go-to-market strategy with cloud marketplaces; they need to have listings; and they have to know how to operate them because customers are asking for cloud as a procurement channel. More and more companies are signing commitment agreements with cloud providers today. And these accounts will become your future customers. "

Nadav Tzuker

Senior Product Partnerships Manager  |  Wiz

For an organization of Wiz’s scale, this intense focus on marketplace strategy illustrates how hyperscalers have transformed their marketplaces from simple software deployment platforms into comprehensive sales channels.

Nadav shared several key insights about this evolution:

The growth of cloud marketplaces as a billing mechanism

When asked why any business would consider divesting resources from traditional sales channels into cloud marketplaces, Nadav responded intuitively. ‘Why not?’ he asked, explaining that cloud marketplaces presented no downsides. To him – even in its most rudimentary form, cloud marketplaces were a complete billing mechanism.

"It's starting to become the second-largest billing mechanism, trending to become the largest billing mechanism in the short term, in today’s SaaS B2B world."

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What began as cloud service providers’ (CSPs) exploration to allow their own customers to procure first-party services through a single interface has evolved into a sophisticated platform. Today, third-party software providers can not only reach broader audiences and deploy solutions in familiar cloud infrastructures but also accelerate sales by delegating billing, invoicing, and collections to CSPs.

Growing customer needs and a step change in cloud marketplace philosophy

Modern cloud marketplaces have evolved far beyond their initial promise of quick deployments and simple hands-off billing that many companies gravitated to them for. Instead, they are far more mature, supporting complex buyer and seller-side requirements. They did so by first identifying the core issues plaguing both parties involved in a transaction – the buyer, and the seller.

Customers don’t want procurement to be a drudgery, yet they need security and insurance against lapses in compliance. In that case, the easiest way for them is to utilize a wallet already earmarked as a business expense and procure it from a network of organizations or providers they trust.

On the other hand, for a new channel to work for sellers, it needs to support all their existing sales motions, partnerships, and pricing methods. To drive adoption, marketplaces needed to improve, not challenge the existing modus operandi for independent software vendor (ISV) sales and alliances teams.

Ultimately, cloud marketplaces now sit in the middle of a complex commercial ecosystem involving buyers, sellers, partners, and the technology to support and enable a seamless exchange for all.

As a result, the entire ecosystem benefits. Improvements range from up to 75% less effort required in the procurement process for buyers to nearly 50% faster sales cycles for ISVs.

An evolving cloud marketplace requires an evolving go-to-market strategy

Today, cloud marketplace innovation operates almost as a self-fulfilling cycle. Significant improvements to marketplace features and commercial capabilities have invited several businesses to discover and sell solutions through the channel. This rising interest in cloud marketplaces, in turn, keeps CSPs invested in devising more ways to make sure they support all sales and procurement edge cases.

“Today, you have way more knowledge, way more resources, and way more enablement,” says Nadav. In turn, it requires ISVs to apply a more concerted approach to how they use marketplaces.

“The core premise, which I believe should be reiterated, is that companies need to adopt a cloud go-to-market strategy as early as possible … you can’t expect multiple requests for purchase just because you have set up your cloud marketplace listing. Instead, you want to master cloud marketplaces as a revenue channel. You want to understand the business value it brings for your customers – especially the ones with cloud commits.”‍

This happens by setting up private and reseller offers so your entire network of distributors can be involved in expanding your marketplace reach and build a steady inflow of leads. Just as you would for your public website. Once you have that lead-generation channel up and running, your focus shifts to enabling deal conversions.

Nadav recommends that businesses start with AE-led sales and gradually invest incremental time and resources in partnering with hyperscalers. This partnership helps drive up conviction and conversion for your solution since your end-customers inherently trust their CSPs (AWS, Azure, or GCP) and are predisposed to prefer your solution if it comes recommended or endorsed by them.

The final piece of the puzzle is figuring out the right operational setup for your cloud GTM team.

"You want to build an entire operation to support private offers. When a customer expresses their intent to procure your solution through the AWS marketplace, it should take two hours, not two weeks, to support their request, leverage the right relationships, and convert that deal. You also want to create win-wires for sustained relationships and open up future possibilities with the cloud provider’s marketplaces team."

This is critical because, according to Nadav, cloud marketplaces aren’t a linear channel. If anything, cloud channel relationships are at least a triangle. “You have the cloud partners, your resell partners, and ultimately, your customer. So, you must know how to leverage the multiple programs and facilities – like CPPOs for AWS or MPOs at Microsoft – to be able to drive deals efficiently.”

Where do cloud marketplaces go from here?

Nadav believes that cloud marketplaces' growth from a new channel in 2012 to a top-two billing mechanism and the fastest-growing revenue channel for businesses in 2024 is only the beginning.

“At a certain point, it will be inevitable. The earlier you enter marketplaces both as an ISV and as a procurer yourself, the better the processes become when the entire ecosystem matures further.”

Today, 51% of CSP customers also use their marketplace to buy or sell software. As more businesses join the cloud marketplace, the window of opportunity to be true disruptors on the channel is also diminishing.

What will separate ISV leaders from laggards is their ability to build strong channel relationships with CSPs and their field selling teams through the marketplace, find new customer pains to resolve through co-built, co-marketed solutions, and maintain a marketplace presence that automatically supports new features and backend updates as soon as the CSPs roll them out.

If you need help setting up your cloud sales motion, speak with an expert or write to our cloud marketplace experts at – hello@clazar.io.