Trunal Bhanse: Welcome to the Clazar podcast, everyone. Clazar podcast is where we talk about modern GTM motions that are transforming sales and partnerships across SaaS businesses. And we do this by inviting fantastic leaders across the industry. And today, we have one such phenomenal leader with us, Pete. Welcome to the show.
Pete Goldberg: Thanks, I appreciate it. I'm excited to be here, Trunal.
Trunal: Pete, you have an interesting background. You were a solution architect before, and now you're leading tech alliances and partnerships. So, walk us through what that journey has been for you.
Pete: Sure. I was a solution architect—or what we used to call back in the day—the sales engineer. I was the guy who brought the technical value out to the business and explained it. And I could make it work, but I couldn't build it. But I actually found a role doing that a long time ago after I'd been in direct sales, which had been a struggle. And just found a really good match for me. I actually loved learning about products, breaking them down, and learning about different industries and how people applied them. And I did that for about 15 years.
At some point in my last role, Amazon found and recruited me. And they actually pulled me into a business development role. In Amazon—and this is back in 2012—business development was different there. They really wanted people with a technical background who could go talk to customers about solving problems. You know - pay as you go, no contracts, like it's not really selling, it's changed. But back in the original days of AWS and Amazon, it was all about self-service.
So I spent a couple of years doing payments there, which is kind of where I came out of a security company and doing PCI solutions into one of the payment services. It's now called Amazon Pay.
After a couple of years of doing that, I learned about the AWS marketplace. I worked with the third-party marketplace and was like, “Oh, I'll go sell software.” It was a really good fit.
Eventually, I figured that out and launched the DevOps category back in early 2015. I tried to recruit and build the original sellers in that category on that platform. It was a tough slog because we didn't have all the great stuff they have today.
After doing that for a couple of years, I went to the Partner Award side because I wanted to manage the bigger relationship. And I feel like AWS followed me when they merged the two of them together a couple of years ago into a single award, which makes a lot of sense, especially for the ISVs.
Four and a half to five years ago, I left AWS and went to GitLab, where I ran their Alliance function. They were a partner I managed. And so I went and did the work from the other side. Earlier this year, I made the jump to Own Company, where I'm building out the AWS relationship in the Americas.
Trunal: So Pete, AWS was the first one to launch the marketplaces back in 2012. By the time you moved in to handle ISV enablement in 2014, they had already had some notable names on the marketplaces and a handful of listings as well. What did the early days of marketplace initiations look like?
Pete: It was definitely a different world, right? Nobody really understood it then. Most software companies had big sales forces or big channel relationships and sold through the channel for commodity goods or for networking. Eventually, more complicated software—like in the DevOps category—started to be built. How do you think someone's just going to click and download it? We ran into technical challenges: It all had to be on a single machine image, right? On the AMI. Which was tough because we billed hourly, and that was tough.
Back then, we had lots of things that didn't really totally make sense. But what I saw and thought was super exciting about—and I feel like we're closer to it now, 10 years later—is the pay-as-you-go model or the consumption-based model for software.
We sort of made half a leap with subscriptions in SaaS, where in a year, if you don't do a good job with your customer, there's a chance they can churn. And while that's everyone's biggest fear these days, if you provide a good product and people use it, they don't turn it off. They don't cancel their subscription unless they go out of business.
So you have to prove yourself. And I just always felt that was a better way to buy than when we sold perpetual licenses and then these giant maintenance contracts. Customers never deployed them, and then they didn't know how to get out of them. There's just a lot of waste.
And I think Marketplace was trying to remove that waste. But we were looking at it differently. We were looking at how much compute we could drive on AWS by selling pre-built software packages, which is a little different.
Trunal: And that's such a good point! There's a huge push these days to go towards a usage-based model. Jay Kreps, the CEO of Confluent, said earlier that usage-based pricing is the most ethical way of charging customers because it aligns what value you provide with what value your customers are getting.
In terms of the AWS marketplace itself, it didn't have a metering service before 2016, the AMIs, SaaS, and CPPOs until 2018. And even now, things are constantly evolving. How does that, in your experience, impact the growth of the entire digital supply chain?
Pete: Yeah. So I think part of it is like a lot of those are hard problems to solve. I remember them starting the narrative on CPPO in 2015.
You have to remember that Amazon has a certain way of billing AWS. For example, all data around billing is feeding into a certain billing system. And then, all of a sudden, you started changing that. Even beyond these two different internal systems within AWS, a customer or an ISV then goes on to build something on top of it. So, making those changes is kind of hard and takes a while.
The market also evolved. From selling SaaS as a subscription [to usage-based pricing] took a while for them. The way that they had been doing things with the AMIs was completely different than how it is done today.
And I think they looked at it. I think David McCann, who ran AWS Marketplace for a very long time, you know, was all about trying to understand what the market wanted, what customers wanted, and how we built for that. I think it's just catching up. A lot of the things that we talked about back then have finally come to life.
Trunal: As someone who has significant experience in empowering ISVs to sell through the marketplaces and digital-first channels… someone who has been on the inside as well as outside, both at the same time, for the past decade… what do you recommend as the first course of action when evaluating a cloud GTM strategy?
Pete: To be honest, the first course of action is having executive buy-in within the ISV. You have to have leadership that's willing to kind of—well, at least there's data now, there used to not really be data—believe in this and be patient with it.
I always used to use it, and I still use it today. I used to tell ISVs when I was recruiting that this isn't Field of Dreams. It's not like you build [your marketplace presence], and the buyers come and show up on day one. It's not like people are buying things on the retail Amazon third-party platform. You're still gonna have to drive customers here.
Right now, it's a great transaction alternative payment engine for customers. It's not a discovery engine—or at least for the vendors I've been a part of and worked with—we struggled with discovery and marketplaces being like a new source of business.
However, in my last role, I used to get a regular flow of new business. You just have to set the perception that, “We're going to build this. We're going to use it to accelerate deals for the customers and reps who ask for it at the beginning.” And then we sort of have to grow into—" How do we look at the rest of our pipeline and identify that it aligns with one of the major clouds that we work with, and then how do we bring them involved in it and leverage them to make those deals close faster?” This is the basic premise, but it's a process, and it takes time.
Trunal: I know there is no silver bullet or a single answer to this, but if, as a leader, you were to say, “Hey, you must give X amount of time before you start questioning this channel. What would that be?”
Pete: Part of it depends on where you are in your maturity as a company. Where are you at in your direct sales? One of the things I did in my previous job on the outside was build a bottoms-up analysis, kind of using what I did in the payments world.
We were an alternative payment method, I would go to some e-commerce site and say, "Let me embed this button because we'll probably drive through 10 or 12 or 15%." There's some sort of cart-share concept.
If I were going into a new operation where they hadn't done marketplace and I was discussing it, I'd probably say, "Let's set a goal of somewhere between 10 and 20% of the total revenue to drive through this channel to get it going." Because that's sort of, we'll have enough customers there unless there are some other things that maybe go faster.
I think coming in and saying that we want to try to work towards a percentage of the overall business to go through it is probably a better way than saying it's going to be this net-new thing.
Marketplaces are not your traditional channel partners. We're not going to go enable them. They don't have a sales force that's outselling your solution, and we're not paying them to sell it.
Marketplace fees are now like credit card fees. Channels are like seven times more expensive. You pay a lot of money for them to go hunt. The marketplaces aren't hunters. They're accelerants.
So it's a lot of that type of positioning at the beginning, that if the rest of the organization understands, they're a little more patient. It's when they think it's just a channel, and they're like, "Oh, well, we're paying fees. So they should be driving all kinds of deals…" that's when it goes wrong. So, I think once you get that alignment done, the journey becomes easier for an alliance director or an alliance team.
Trunal: Today, anywhere around 13% of all SaaS tools get purchased via either reseller or hyperscaler marketplaces. How fast do you think the market is evolving? And where do you see a) partnerships influencing this? And b) where do you think we'll land eventually from that 13% number, let's say, in the next five to 10 years?
Pete: It's dependent on a couple of things. It'll be interesting to see how the hyperscalers continue to want to create value for the customer. Right now, with the burndown of commit, you choose the one you're on. I use the analogy of credit card ‘rewards.’ I have a Delta American Express card, and I have Alaska because I live in Seattle.
I'm paying with the one that's giving me some sort of value-prop that I want. As the merchant who's taking my credit card, I just want you to buy something. But Delta and Alaska are incentivizing me to pick theirs. They're giving me [discounts and incentives]. And so I think depending on the hyperscalers' appetite to continue those incentives for customers is going to have a lot to do with it.
Hopefully, they're also going to make procurement that much easier. The customers may at some point be like, “Alright, well, it's just easier than us processing deals.”
So I think it'll grow. I bet it doubles over the next three to five years to 25% or 30%. Going with my alternate payment theories, it probably seems right that 25 to 30% of transactions will go that way. And there are a lot of companies that like to see all the invoicing with the same names across their purchase orders. If all of a sudden your invoice comes from AWS, but your deal is with these [businesses], it just breaks their processes today.
It'll be interesting to see how some of that evolves. Are those companies going to think about changing procurement methods? We still have to deal with how big companies want to buy. They still like to be in control of that and dictate it.
I think those are the ones most ripe for disruption in the AWS marketplace and the other marketplaces. However, they may be hard to disrupt because they are big companies.
Trunal: Some of these companies are still (waiting) to jump on the procurement bandwagon. However, some of the very upper mid-market companies have started aligning their procurement teams to procure via the marketplaces, especially the ones that have committed to spending across all three, and they are big enough to have a commitment across all three. So that could be a foreshadowing of what we are about to see in the market in the next five to ten years.
Pete: I think the other part about that number growing is that the cloud providers have to be a little bit flexible about where your software runs. It's really hard to do multi-cloud. And if you are a small to mid-size ISV and you're running your product on one… it's not really easy to run it on two [cloud providers]. Part of the workload overruns one of the other ones. That's always a challenge.
And I remember that when AWS launched it, Andy Jassy believed that was how he was going to get all these SaaS platforms to move to AWS. But you hit a certain point as an ISV where it's too hard to move, and there’s too much opportunity cost to re-platform just so you can sell through a marketplace. So it'll be interesting to see how they manage that as well.
I think that will become the crux when somebody says... 'I want to buy through cloud C because that's my primary cloud. But as an ISV, I run on cloud B,” and cloud C says, “you have to run on us to sell through [the marketplace].” At some point, it's going to come back to the cloud providers. It makes it hard as a smaller ISV; you can't appease all the hyperscalers at once.
So it's good you are seeing some [ISVs] have all three [hyperscalers] because that definitely helps some of the vendors who haven't figured out how to make the product run across all three natively to make them all happy.
Trunal: Now, with K8s and some of the new technology, you could easily—in theory at least—replicate your software across all three with minimal effort.
Since we are almost towards the end, do you have any parting thoughts for our audience and listeners?
Pete:
We didn't get to discuss the second-level or third-level problem today. How do you figure out how to bring marketplace transactions into your back office?
When I handled payments at Amazon, you know, a big part of what we detected was how you inject things into the accounting and fulfillment systems. You took the order, and you processed it. The charge went through. And [then you think about] how you’ll fulfill it.
And I feel like with software, once we get that order and it's complete, how do we make that part of the flow into the booking process? How do you think about doing fulfillment, renewals, upsells, and adds? It's not the easiest thing.
And what I found is that many companies ended up launching their marketplace listing without thinking it through.
Fast forward three or four years, and you're doing a few hundred transactions—and that could be a few million through a lot of millions of dollars depending on size, or getting up to 10% of your revenue or 20% of your revenue—all of a sudden, your back office hits a bandwidth problem.
They're trying to figure out how to reconcile 500 transactions, right? And they're not really staffed... cause they didn't care earlier.
I think it's changing for newer vendors starting now because they're hearing about it. But I've watched it happen in a couple of places where, all of a sudden, this huge wrench gets thrown in the back office process because they didn't really plan for it at the beginning. They didn't really believe it was actually going to work. And then it does. And now they're looking at it like... “Well, wait, what?!” And I think it's a bigger problem that doesn't get talked about in general.
But I think it's super important for your finance and your deal desk teams to get on board early. They don't have to build everything early, but they have to understand it early, and they have to put it into their roadmaps of the things that they're going to build over the next two to three years. But you need to be able to deal with it because collecting the money is important to the business, right? It's not just a transaction.
I'd like to hear more people talk about this topic sometimes. It's kind of boring and ugly, but it's so important to the long-term health of using payment systems like this and making them a part of [your workflow].
And I'd love to see the cloud providers give us better connectivity coming out, where there was a feed that fed into the top, you know, subscription services or put in so that it could be more ingested, more automation put into place. And I just feel like it's missing… It's sort of that topic that's off in the corner nobody wants to talk about.
Trunal: Yeah, Pete, that's such a good point. Thank you so much for coming on the Clazar podcast again. It was wonderful having you. Thank you so much for sharing your wisdom with our listeners.
Pete: Thank you.
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