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If done right, cloud marketplaces can drive nearly 20% of your ARR pipeline at six to seven times cheaper than traditional channels. If done thoughtfully, they can even drive $1 billion in software sales, as they did for Splunk, Palo Alto Networks, or Snowflake. But without careful planning, it can result in spiraling interest, extended sales cycles, and disappointed glares from your leadership team.
Director of Alliances at Own Company, Pete Goldberg, argues that the difference in where you stand is often that of – context.
Before you can onboard AWS sellers to co-sell on deals, build a strong cloud sales motion, or even present your cloud marketplace proposal, you must understand their priorities.
In this blog, we will cover hyperscaler motivations, how to put an early cloud alliance motion into action, and the strategic tactics used to build symbiotic relationships with your hyperscaler partner. We will also help ourselves to a generous serving of insider information from Pete Goldberg’s experiences.
How the AWS marketplace evolved from a value-added service into a new sales channel
AWS pioneered cloud GTM in 2012 to offer customers more ways to use cloud commits. Initially, customers could only buy AWS solutions through their marketplace, but it wouldn’t be until a few years later that it truly became a sales conduit for third-party independent software vendors (ISVs).
Note on AWS cloud commits: Cloud providers like AWS, Google Cloud, and Microsoft Azure tend to attract customers on long-term contracts with discounts. In such cases, customers “commit” to spending an agreed amount with the hyperscaler over a mutually defined period. For AWS customers, this committed spend with the hyperscaler is known as an AWS commit or the AWS cloud commit.
Much of that early resistance was owed to SaaS commerce's (then) existing status quo. Software sales were still highly negotiated, involved multiple stakeholders, and depended on the sales rep’s ability to build strong interpersonal relationships with the buyer.
The implementation of any software was also traditionally pretty hands-on, either as on-premise deployments or through a complex implementation process that involves several remote sessions between the seller and customer dev teams.
This was a problem since cloud marketplaces weren’t equipped to handle prevalent pricing models like subscriptions or support in software deployment.
Buying/selling behaviors and software deployment have changed nearly a decade later. Software commerce went from sales-driven to buyer-controlled. A majority of software solutions are now being built and deployed in public clouds. And the big three—AWS, Google Cloud, and Microsoft—now command 68% of the market.
AWS also built new competencies like a single AMI (Amazon Machine Image) delivery system and support for more pricing/billing methods than their previous hourly-billing format.
Suddenly, the marketplaces were no longer a simple prosthetic that made AWS commits more consumable. They became full-fledged solutions where AWS customers could find, buy, and deploy software in the same cloud environment they already used.
By 2028, Canalys expects cloud marketplaces to drive $85 billion in software sales.
How AWS thinks about value-creation and partnerships
Pricing for most AWS products “is similar to how you pay for utilities like water and electricity.” This brings down the total cost of ownership (TCO) for its customers but also creates an upward pressure to constantly drive consumption.
AWS realized that third-party solutions could also contribute to consumption growth in two ways:
- Customers increase consumption by adding new software solutions to their AWS workloads
- By deploying more software within AWS environments, third-party sellers also increase their own cloud consumption
By 2015, Pete had moved to AWS Marketplace to “recruit and build the original sellers on the platform.” It is within the AWS ecosystem that he best understood that even as onboarding and partnering with ISVs on the marketplace was a strategic priority, some partners would always be worth more than others.
"We were looking at it [marketplaces] differently. We were looking at how much compute we can drive on AWS through selling pre-built software packages."
Many businesses falter in their marketplace strategy because they don't view hyperscalers as equal partners. Pete notes that a common misconception is believing that sharing 3–15% of deal value with the platform entitles ISVs to active support from the cloud provider's sellers. Instead, leaders must reframe their approach to recognize the mutual value in the partnership.
Cloud marketplaces are more cost-effective than partner-sourced or even direct deals. Credit cards and payment processors charge a standard fee for every transaction, and other channel partners also operate on a commission basis.
Compared to that, a nominal 3% charge on marketplace transactions while providing the benefits of listing, transaction processing, and partnerships is far more economical.
To get more value out of this relationship on the AWS marketplace, ISVs must also treat it as a symbiosis. Instead of expecting AWS sellers to be an extension of your own sales team or the marketplace to be a lead-generation engine, they must introspect on how they can prove their merit as partners.
To become a valuable partner to AWS, consider these questions
- Value Addition: How does partnering with us help AWS sellers meet their quotas by attracting new customers or increasing cloud consumption?
- Solution Synergy: Can integrating our software with AWS's first-party solutions create a compelling package for customers?
- Reciprocal Support: Are our sales and partnership teams proactively supporting AWS sellers, or are we expecting support without first offering value?
Starting out with an effective sales partnership on the AWS Marketplace
During his tenure as Director of Alliances at GitLab, Pete started from scratch and eventually drove 20% of the company's revenue through marketplaces. Rather than forcing a marketplace strategy, he developed a system of incremental progressions.
It starts with the understanding that deal referrals and co-sell support from the marketplace were earned, not gotten.
Instead, Pete recommends that ISVs start using the marketplace to accelerate deals that are already in their pipeline and gain a series of early wins.
Once you close a significant number of early customers through the marketplace, field sellers start noticing your contributions and find more interest in partnering with you.
How you can build a strong co-sell partnership with AWS sellers
For AWS, the marketplace is a conduit through which they drive the dual goals of:
- Adding new customers to AWS
- Driving up AWS cloud consumption
As a result, AWS field sellers are incentivized to partner with high-performing ISVs on the marketplace. However, to achieve a preferred partner status with the field sellers, an ISV has to qualify the following criteria:
- Prove their marketplace motion by closing a few early deals independently
- Build a strong ‘better together’ story with the marketplace
- Sharing the right opportunities with AWS to build a co-sell motion
How to close early deals on the marketplaces independently
The average $20-50K SaaS deal takes two to three months, with deal durations dramatically lengthening as contract value grows. This is because selling your product to the user isn’t the only selling you do as a vendor.
Even when you are the favored vendor to your potential customer, there is budgetary restraint and the matter of ‘unblocking funds for the procurement’ from the IT or Finance department within your buyer account.
This is a great early pain point that cloud marketplaces can take advantage of. If your customer already has cloud commits with a provider that you are partnered with, it is imperative that they utilize the entire sum within the predefined period. Since cloud commits also come pre-approved by the IT or procurement department, your buyers can simply use them to procure your solution through the AWS marketplace without having to negotiate on a new budget from their finance team.
Rerouting stalled deals through the AWS marketplace allows sales reps to leverage pre-approved cloud commits, enabling faster procurement without requiring customers to negotiate new budgets with their finance teams.
How to arrive at the right ‘better-together’ story
The right better-together story for any ISV is heavily dependent on how their product aligns to that of AWS. For example, Datadog built deeper AWS integrations, supported 75+ AWS integrations, and offered better cloud application monitoring with AWS making both products more appealing to customers as a package.
This helps AWS find solution completeness. By selling together, Datadog and AWS can serve customers whose cloud buying decisions depend on strong application monitoring capabilities.
Product alignment is the lowest common denominator in building a ‘better together’ story, but it does not have to be the determining factor.
In fact, despite offering competing solutions to AWS, businesses like Elastic have managed to build mutually beneficial value propositions. They do this by focusing on deployments within the AWS cloud environment and through their own usage of AWS, which drives up consumption revenue for the cloud provider.
Building a co-sell pipeline through mutual opportunity sharing
With thousands of ISV partners seeking co-sell support from AWS field sellers, standing out requires a different approach. Offering valuable context on challenging opportunities or introducing potential customers from your network demonstrates your investment in AWS's success.
In return, AWS field sellers are more likely to support your deals where they have insights.
An important consideration in opportunity sharing is data governance and accuracy. Sharing opportunities in bulk, only to feed your hyperscaler partners unmanaged data can make you appear untrustworthy.
This is why ensuring strong integrations between your CRM and ACE portal and building workflows to automate and regulate data-sharing become critical.
Scaling credibility through AWS partner programs and certifications
Today, 40,000+ listed products and services are competing for customer attention and field seller support through the AWS marketplace. Pete advises joining AWS partner programs, specifically the AWS Competency Program.
Earning a ‘competency’ and obtaining AWS certifications signal strong hyperscaler endorsement. According to Canalys, these are among the top three criteria customers consider when selecting partners. Additionally, certifications build trust with AWS field sellers, reinforcing your status as an approved and reliable partner.
AWS also launches several partner initiatives, incentives, commit reliefs, and support motions that are dependent upon ISVs enrolling themselves in several other programs.
As a catalyst for ISV sales on cloud marketplaces, Clazar collaborates closely with AWS to equip businesses with automation tools, expertise, and strategic insights necessary to develop robust sales motions.
Our solutions include an intuitive portal to manage listings, enhance marketplace presence, automate opportunity sharing and approvals, and fully leverage marketplace capabilities. Interested in learning more?
