The opportunity and economics of Google Cloud Marketplace with Dai Vu

Google Cloud marketplace brings a trifecta of value for the seller and the sold-to

(03:46) “There is a percentage of the gross transaction value that flows through the marketplace. But more importantly, the partner solutions on the marketplace drive significant GCP consumption in the form of compute, storage, data, and analytics. And over time, you can imagine that the economics become even more compelling because the marketplace will increasingly lead to a lower cost distribution channel.”

Dai speaks of the synthesis of marketplace-led value creation for a trifecta of stakeholders.

It starts at the platform layer to help hyperscalers create a growth flywheel where – listed ISVs act as a surrogate lead-generation and consumption growth engine, and marketplace-enabled transactions drive attached commissions.

The supply chain (i.e., ISVs) is incentivized to engage in marketplaces because of their promise to deliver cost-efficiency in sourcing, qualifying, and converting prospects to customers, all through a seamlessly managed transaction interface that automates order handling, invoicing, billing, and transaction automation.

The demand side finds faster access to vendors who – natively work with their preferred cloud infrastructure, come pre-validated with security and compliance checks from the hyperscalers, and help them burn through their reserved cloud commits.

The rapid-scale strategy of the Google Cloud marketplace

(05:27) “Both gross transaction value as well as total deal contract value of our co-sell activities experienced pretty unbelievable growth. We've been comfortably north of triple digits for a couple of years now.”

Google Cloud saw a 140% YoY growth in third-party solution GTV and a 200% growth in co-sell bookings in H1 of 2023.

This is underlined by what Dai believes is a “great acceleration, not only in terms of the breadth of adoption but also the depth of adoption.” From field-seller alignment to drive diversity of selection for buyers as they 10X-ed the number of partner listings since 2020 to seeing a 6X increase in customers spending >$1 million in procurement contracts.

True ecosystem-led growth is driven by unilateral resource alignment. Google Cloud continues to – invest in marketplace ISV programs, align field sellers to improve ISV onboarding across regions and build product efficiencies.

In turn, they see improved marketplace engagement as a direct contributor to compute consumption. “We have data that suggests that once customers start using Marketplace, and after they get a couple of deals under their belt, they increase their usage pretty significantly,” Dai adds.

Beyond that, Google is also accelerating their investments to be more inclusive of suppliers and their channel partners “to be able to resell marketplace solutions.”

Spearheading adoption through seller education and incentivization

(07:20) “We do have most marketplace solutions eligible for attainment through their [sales] quota … our field reps are very motivated to work with ISVs and, of course, the marketplace is the preferred route-to-market for a lot of those co-sell engagements.”

Google’s marketplace billings grew 10X in three years from 2020, thanks not only to their program and workforce investments but also to how they incentivized their field sellers from activators to value creators with solid compensation plans and thoughtful competitive philosophy.

ISVs offer solution-completeness for GCP customers looking to procure through the marketplace. This makes them a key component in packaging the marketplace as a single pane of glass supply-side unifier.

They realize that limiting or deprioritizing ISV solutions against their own first-party solutions does not allow them to continue operating as an unbiased procurement platform; and hence, “have very much a first-party equals third-party approach because we give customers choice.”

Sellers are trained along the same principles to help them effectively drive compute growth via co-selling ISV solutions.

Allowing them to drive quota attainment through co-sell deals and attaching SPIFFs on closed co-sell deals further incentivizes them to stay engaged in a symbiotic relationship with their partners.

Innovation roadmap for Google’s cloud marketplace proposition

(10:37) “In terms of the purchase flow, we're trying to remove friction as much as possible, make it an automated flow from lead all the way to the transaction.”

Changing transaction dynamics from on-premise licensing to recurring subscriptions and now to product-led sales have been the supply side’s response to changing buyer needs and a reflection of a key commercial principle: the market rewards players for solving their customers’ needs, not just asks.

Google realizes that and is acting quickly to address changing behaviors in the marketplace proactively.

“[We are] investing in a bunch of different areas regarding comprehensive billing and pricing models, you know, multi-subs under a single billing ID, the ability to offer sort of multi-vendor private offers,” says Dai.

The attempt is to become a complete discovery-to-transaction facilitation layer, making it a strong procurement and GTM ally for end customers and ISVs alike. Some key initiatives include:

• Ensuring end-customers can view the usage of a solution across individual projects v/s cumulative usage across their billing tenure
• Making the GCP marketplace a storefront for data exchange and sharing through the “availability of commercial data sets, integrating with Analytics Hub and BigQuery”
• Allowing ML customers to discover, access, and leverage first/third-party and even open-source ML models
• Distribution certification and accreditation for select ISVs’ professional services to help them offer premium support, training, etc.
• Further investments in PLG through self-serve enablement

The hyperscaler perspective on achieving Cloud GTM scale

(17:11) “One of the biggest mistakes, as you may know, is they hear a lot of hype and discussions around the marketplace, but just getting listed is not going to be enough to drive pipeline and deals.”

Your cloud marketplace listing isn’t supposed to automatically bias your prospects towards you, primarily because they play the role of a commercial equalizer. Every viable, secure, and stable software solution has an equal chance of being listed and finding new deals on the marketplace. This is as true for your customers as it is for you.

Finding success in your Cloud GTM motion therefore involves a “combination of … the right people, the right process, the right technology in place to enable sort of that effective sort of Co-Sell motion.”

This means first validating a product-marketplace fit—understanding if your target audience typically procures through the marketplace by checking for marketplace-led procurement interests in your existing pipeline.

Once you establish that cloud marketplaces are a good fit for your sales momentum, or ease of conversions, you need to assign the right owners, build out a deal-desk for operations and integration with the marketplace, and setting “multi-horizon goals.”

At the bottom of it all, Dai believes in driving conscious, concerted, and periodically evaluated investments and effort on cloud marketplaces; “because frankly, there's a lot of investment from both the startup side and the cloud side to invest in a Cloud GTM motion through the marketplace.”

Future opportunities for cloud marketplace transformation

(29:24) “Historically, when you think about marketplace, it's all ISV product and SKU-centric, but gradually, we’re thinking more about customer and business outcomes. And it really takes a number of different partners. Not just the number of partners involved in deals and go-lives, but also different partner business models.”

With multiple hands on deck – between cloud providers, customers, sellers, resellers, services, and more – success in the marketplace no longer has a lateral ‘list-and-sell’ definition. Instead, it is now about creating shared value across all players so they can continue investing in relationships and mutual success.

For marketplaces to stay competitive, Dai believes a reimagination of how they view commercial dynamics could be well underway.

“I think the opportunity is how we can enable the marketplace to become this unifying platform and digital collaboration platform for all of these different partner business types,” and beyond that, make marketplaces that layer of digital collaboration that typically happens offline, between sellers and their channel partners.

This could include a spectrum of solutions from multi-vendor private offers to a blended ‘product + professional services’ package.

At an enablement layer, the principle of building solution diversity and giving a wide range of ISVs the ability to list, sell, and build commercial relationships on cloud will ultimately help end-customers solve a range of problems through procurement while burning through their commit faster.