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In the late 90s, soon after digital marketplaces took off with Amazon (and a few others), Barron’s published “Amazon.Bomb,” a dramatically titled cover story predicting imminent failure for the company and its business model.

He’s just another middleman, and the stock market is beginning to catch on to the fact.” In the two years following that report, Amazon shares slid 72%.

Today, Amazon is a $1.9T+ company, and global sales from marketplaces (both B2B and B2C) is expected to touch $8.8 trillion by 2025.

Barron’s prediction tanked because marketplaces were designed to be seller-friendly, not seller-first. Yes, they helped vendors reach a wide range of customers. But their real value was in the ability to also improve the buyer-side status quo with more means to discover, qualify, and procure from a wide catalog of products. With discovery, transaction, and fulfillment happening on a single platform, commerce happens faster with less busywork involved.

A histogram showing the rise of the B2C and B2B marketplace business model
The rise of the marketplace business model

Three decades later, millennials and Gen Z, who’ve grown up buying everything from coffee to houses on these marketplaces, have not only formed a habit but are also craving the same degree of convenience in their software buying process.

And they’re finding the solution in a source that looks eerily familiar yet entirely different — cloud marketplaces.

Cloud marketplaces are powerful tripartite commercial conduits for buyers, sellers, and channel partners (service providers, SIs, GSIs, resellers, and more). They are also expected to route more than $45B in software sales by 2025.

Why are cloud marketplaces different from traditional B2B marketplaces?

B2B marketplaces aren’t new, but most of them don’t solve for the entire value chain for software commerce.

For starters, most B2B marketplaces fail to consider that – unlike B2C transactions, software buying is polygamous. They involve multiple layers of approvals, are influenced by a host of channel players(e.g., partners, resellers, SIs, and more), and are highly negotiated. Naturally, the discovery-to-deal lifecycle is far longer and needs to accommodate multiple parties in a transaction.

An infographic explaining how cloud marketplaces have evolved over other B2B marketplaces
Cloud marketplaces are an evolution of the marketplace business model

Cloud marketplaces realized that simple buyer-seller enablement wouldn’t be enough. By focusing on ‘across the deck’ enablement, cloud marketplaces are solving for the entire commercial value chain by tackling  all three parts of the commerce problem:

  1. Meeting buyer needs
  2. Ensuring more efficient go-to-market for sellers
  3. Building natural partnerships to reduce indirect channel friction
Traditional B2B Marketplace Capabilities
Additional Cloud Marketplace Capabilities
A searchable inventory of vendors/solutions in one space
Instant compatibility with the buyer’s technical ecosystem
The ability to review, compare, and evaluate
The ability to involve multiple partners, resellers, and SIs in the deal
The ability to purchase/transact from one place
The ability to incentivize involvement through platform credits and support programs
Seamless fulfillment
The ability to quicken procurement cycles by reducing budgeting strain
The ability to accommodate deal and term negotiations
Standardized contracting and deal mechanics

Why cloud marketplaces are different from traditional B2B marketplaces

How are cloud marketplaces solving for the modern buyer’s priorities?

As of 2024, the U.S. same-day delivery market is estimated at $9.25 billion, and expected to hit $13.15 billion by 2030. In fact, McKinsey also found that most customers are willing to pay a reasonable premium for faster access to products. We’re living in a world of rapid commerce.

For businesses, the response is an indication. Convenience is no longer just about price and access.

Convenience = Access + Velocity

In B2B buying, this takes the form of:

  1. Faster evaluation
  2. Faster vendor onboarding, and
  3. Faster deployment

This lends a significant advantage to the proposition of cloud marketplaces.

1. Faster evaluation for software procured through cloud marketplaces

Like any other marketplace, cloud marketplaces also equip their users with the means to discover and review solutions. At the same time, they also go the added mile of pre-qualifying ISVs against multiple factors like – technical compatibility, security, and compliance standards – ensuring procuring organizations can save significant time in the post-selection stage of vendor authentication.

Vendor qualification is also one of the top priorities in vendor evaluation for software buyers, according to a Gartner study.

A histogram showing the top procurement priorities of software buyers
Top procurement priorities of software buyers

More available means to evaluate software implies that buyers are qualifying/disqualifying solutions even before their first interaction with a supplier representative.

2. Faster vendor onboarding through cloud marketplaces

Not only do cloud marketplaces govern the simplicity of commercial transactions between the buyer and the seller, they also ensure faster vendor onboarding with standardized contracts while allowing customers to reduce back-and-forth on finance by allowing them to use their committed budget with the cloud provider.

A simple quote-to-cash process in AWS Marketplace helps buyers save 66% of the time in processing invoices, according to a Forrester report.

Quick deployments for software procured through cloud marketplaces

“We’re actually hearing buyers tell us that they would buy a product 80% as good as the next if it worked better in their environment.”
Jay McBain

Cloud marketplaces act as the infrastructural layer for customers to build and scale their businesses. By that virtue, any ISVs listing on their marketplaces must natively operate within the same environment.

Customers no longer need to repaint their fences or rewire their houses to accommodate a new solution. Instead, they can immediately start using software procured through cloud marketplaces within their native environments with one-click deployment.

By offering a confluence of simpler evaluation, immediate infrastructural compatibility, and easier procurement logistics, AWS is able to deliver >$2 million in efficiency savings over a three-year period (for an enterprise buyer), according to a Forrester report.

How are cloud marketplaces equipping ISVs to respond to changing market stimuli?

As digital enablement drives up awareness and competition, the balance of power in software commerce is increasingly shifting from vendors to buyers. In response, vendors have had to work harder to outshine their competitors and appeal to changing buyer needs.

To ensure they remain a sustainable commercial solution, cloud marketplaces are also promoting the supply-side with capabilities that help them keep pace with demand:

1. Conversion rate improvement through partner-influenced deals

Most modern methods of procurement (cloud marketplaces included), offer buyers greater means to qualify solutions without ever speaking with a direct seller. And as competition intensifies, most push methodologies of selling are gradually offering diminishing returns.

To stay relevant, ISVs are increasingly leveraging partners for warmer introductions with prospects and to help drive conviction across a prospect’s buying cycle. In fact, 92.9% of sales leaders now report that their reps are collaborating with partners to close deals. Partner-attached deals are also at least 26-50% more likely to be won than average.

To unify on cloud marketplaces, partner-led selling finds renewed momentum through a symbiotic system of incentivization.

Firstly, using the services of an ISV procured through cloud marketplaces also drives up compute consumption for the cloud platform. This means that the cloud provider is invested in the success of ISVs listed on their marketplace because of the symbiotic revenue relationship they share.In order to promote sales, cloud providers align field sellers to high-value partners to swing deals in their favor, offer more context about a prospect, and/or provide access to a more powerful economic buyer within the prospect-org.

Secondly, sellers can also onboard channel partners, offer subsidized rates for them to distribute their product, and engage the full force of their partnership distribution network through private offer customization.

Instead of the marketplace acting as a competing force against indirect sales, it becomes a facilitator for indirect sales to happen faster, with the same added sales operation benefits.

As a result, ISV transactions on the AWS Marketplace have a 27% greater win-rate than deals transacted outside.

2. Greater COGS efficiency with sales process optimization

Heightened customer awareness, a cautious market, and inflated competition have also made it more difficult to acquire new customers. This makes the economics of customer acquisition on direct (marketing-assisted) channels less lucrative than before.

On the other hand, AWS alone has hundreds of thousands of active customers (growing by 28% every year), with an intent to exercise their procurement benefits on transacting through the marketplace.

Couple that with the credibility ISVs earn by associating with AWS, and customers’ locked-in cloud commits with the provider, and sellers find themselves closing high-intent deals 40% faster than direct channels.

These efficiencies not only offer compounding benefits over time, they have already resulted in over 2.5 million active subscriptions on the AWS marketplace.

3. More comprehensive solution packaging

“Our value proposition is that everything works so well together [that] being in the top three … doesn’t matter as much as the ‘all-in-one.’”
Dharmesh Shah,
on HubSpot’s business approach

Buyers procure solutions to solve a business problem, not plug a feature gap. Because of complex business use cases, this often takes the form of building a mesh of multiple solutions.

On cloud marketplaces, the barriers to ISV partnerships are negligible. Any ISV can effectively use their relationship with the hyperscaler to identify complementary software and build a comprehensive solution packaging to tackle a high-value customer more meaningfully.

Ultimately, this helps sellers cut closer to the buyer’s needs even in instances where a standalone product might not have been recognized.At the same time, sellers (whether individual or partnered) can charge their customers across a myriad of dimensions like subscriptions, usage-based pricing, free-trials, and more.

Millennial B2B buying preferences and modern seller enablement are converging on cloud marketplaces

Contrary to Barron’s “middleman” hypothesis, cloud marketplaces are no longer a layer where buyers and sellers interact. They are, in their own right, a living breathing ecosystem. Cloud marketplaces are where seller capabilities meet buyer needs and are enriched by rich two-way interactions with channel/partners.

A flow-chart of buyer, seller, and channel partner relationships on cloud marketplaces
How cloud marketplaces bring buyers, sellers, and channel partners together

For buyers, procurement is made faster, more cost-effective, and less litigious through:

  1. Vendor insights: The ability to discover, evaluate and qualify software through on-platform review tools and filtering
  2. Purchase order management: Or the complete visibility of software license and seats library to reduce the chances of duplicate expenses across the organization
  3. Standard contracting: With contract standardization, buying teams can accelerate time-to-approval by minimizing legal back-and-forth between legal teams
  4. One-click deployments: Boosting time-to-value by deploying third-party solutions instantaneously in native environments
  5. Compliance pre-qualification: By re-qualifying listed vendors, cloud marketplaces are further reducing approval workflows and saving time for the buying organization

For sellers, software go-to-market becomes faster, more cost-effective, and delivers more value by:

  1. Unlocking buyer procurement budgets: With buyers now able to use a portion of their contractually committed revenue with the hyperscaler, securing budget for solutions becomes easier. Correspondingly, sellers are able to accelerate sales cycles while making decision-making easier for their buyers
  2. SalesOps standardization: By removing the need to facilitate payments, billing, and more lead-to-cash orchestration, ISVs can complete transactions faster
  3. Partner-led selling: A slew of selling options across public pricing, highly negotiable private offers, and custom offers for channel partners helps ISVs transact across both direct and indirect channels while building stronger relationships

Today, ISV partners are closing at 80% richer deal sizes with AWSMarketplace than in their traditional direct sales processes.

Building retail-like convenience in software transactions is hard because of the particularly sensitive nature of high-ticket transactions. But as more customers demand to meet their needs digitally and seek more avenues to reduce procurement strain, simpler deal mechanics on cloud marketplaces and the ability to address their needs without intrusion are the new status quo for software sellers.

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