Confusion in the Cloud – What Is Really Happening with the Cloud Marketplaces?

I recently spoke with the CEO of a small regional VAR who is actively participating in Cloud Marketplace (CMP) transactions. Well, the sales people are participating. The CEO has just heard a bunch of noise, e.g., the cloud provider sales people are swooping in on deals, trying to push them through the CMP.

It’s creating chaos. He wasn’t sure they were getting paid. He figured there was a lot that needed sorting out.

Well, there is. And this type of confusion and misperception is widespread.

To many ISV sales teams and their channel partners, the AWS, Microsoft and Google cloud marketplaces are a big fat hairball of complexity mixed with misunderstanding. These are some of the most powerful companies in the world, and not just in the technology space. Their influence spans financial sectors, social issues, politics and even entertainment.

So this new development is clearly a hyperscaler land grab, right? Are the cloud providers eating the world, like Marc Andreessen so acutely put it in regard to software right around the turn of the century?

Here we are, 20 years after that prophetic statement and something similar is happening in the cloud. It’s far less pervasive than the idea of software running everything we know, but it’s also somehow more ominous.

Is this development in fact a threat to our selling world, as we know it? What does it mean to me, a seller working for an ISV? Even more confusing, what does it mean for VARs who are watching this new channel grow and expand, and wondering if it’s happening without them?

The reality is actually fairly simple: the Cloud Marketplaces are online catalogs full of software product listings where customers can procure enterprise SaaS solutions and immediately start to use them. That’s basically it.

But what is critical to understand is that from an ISV and channel partner perspective, the Cloud Marketplaces provide a new procurement method, which also means a new procurement option. A new procurement option means a change in the sales process and that is nearly as significant a development as the CMPs themselves.

It’s rare that the sales process changes. Being in technology sales for over 30 years now, I have not seen a substantiative change in the sales process my entire career. I’ve seen some shifts and adjustments and a wide variety of different approaches. But the process itself has remained the same — until now.

It’s very early, so not a lot of sales teams are recognizing the opportunity. Plus, I need to emphasize the fact that there is a lot of misunderstanding right now and that leads to fear. We all know that fear is paralyzing. In this case, it’s the fear of not understanding and looking stupid; the fear of not knowing where you fit in, and most importantly, the fear that you are being sidelined and set up to fail.

I’m sure a lot of sellers have a vague familiarity with the marketplace concept, and assume they are not in the loop because the build-it-and-they-will-come mentality is the expectation for the marketplaces. No salespeople required, right?

Wrong. Not only wrong, but thinking that way and not paying attention to why the marketplaces matter will be a disadvantage that you might not be able to overcome.

Only a tiny percentage of customers find a product in the marketplace “catalog” and buy it. That’s because, as we all know, enterprise software is very rarely purchased without some kind of negotiation. Even within the widely adopted product-led growth model, once customers start to scale and expand, discounts and/or “special pricing” is demanded.

But of the $750+ billion in software transactions annually, product-led revenue that is not negotiated is a small percentage. Once a deal is negotiated (outside of a CMP), the process then follows the traditional purchase order path. But if one of the CMPs is the procurement option of choice for the customer, then once the price is negotiated, the amount agreed upon is transacted in that CMP.

From a seller’s perspective, this is the only thing that is important to know about how the CMPs function. But how it functions is only a small part of why it matters. The main reason it matters–and you need to understand that this reason is truly a game changer–is because there are massive advantages available to you that can be built into the sales process.

I worked for Tackle, a thought-leader in the marketplace selling effort, for almost two years and that experience provided some profound insight into what is actually happening with CMPs. Tackle is a SaaS Software provider whose charter is to help ISVs sell through the CMPs. While there, I noticed a catastrophic fault in thinking that was apparent across the majority of the enterprise software providers.

This faulty logic led to what I began to think of as a false go-to-market. ISV Alliance and Product teams had recognized a massive new opportunity to build out a whole new channel. They rushed to get their products listed in these enterprise-power catalogs with a “build it and they will come” mentality. Tackle enabled and furthered this mentality by making it faster and easier for ISVs to get their products listed (which is an onerous and time consuming project).

The assumption from Tackle was that sales teams would pick this up and run with it. But many ISVs somehow did not consider that after becoming operationally ready, training and enabling the sales team was the next step — or at least a parallel step to getting a product listed.

Instead, they simply put up the listings and hoped for the best. To be fair, some certainly tried to engage sales, but found it challenging to get them to pay attention. Many ISVs expected the Cloud Providers to send them leads and hoped to offer that concept to the sales teams, only to find out there is some complexity to that as well.

In contrast to the false go-to-market, a true go-to-market would have been led by ISV sales teams. As we all clearly understand about the sales process, the transaction happens at the very end and then the deal is “closed won.” Because of this, the entire focus of Cloud Providers and ISVs has been on the operations surrounding the transaction.

Cloud providers are training ISV sales teams on how to transact. They are not being trained on how to build cloud marketplace selling into their sales process. This is partly because a huge selling point is being able to sell through multiple CMPs — the power of providing options! And of course the cloud providers are only motivated to help ISVs sell through their own marketplace.

The $15 billion or so in revenue that is going through the CMPs is also a tiny percentage of overall software spend. This is partly due to the nacency of the CMP channel.

But the main reason this is a tiny percentage of software spend is that the majority of transactions happening in the cloud marketplaces are happening because customers see the benefits and are asking to transact there. Paradoxically, the fact that $15 billion spend is a big number, in and of itself, perpetuates the build-it-and-they-will-come perception that is also dramatically limiting marketplace growth.

Here’s the typical scenario:

1. The customer tells the ISV sales team that they want to purchase through one of the CMPs.
2. The ISV sales team does not know how to go about this and is not familiar with the process or even how to address it.
3. So they go to the Alliances team to find out how to handle it. Sometimes the alliances team will know how to handle it; sometimes they will need to engage with the cloud providers to figure it out.
4. If the product they are selling is already listed in that marketplace, the focus moves to the private offer transaction. At this point, all the advantages that could have been useful in the sales process to add value are obfuscated. It is simply a transaction, the only beneficiary is the customer, and the build-it-and-they-will-come misperception is fortified. Wah, wah, wah…
5. If the product is not listed, the alliances team will go to the cloud provider and see how to get it done.
6. Tackle is a huge beneficiary of this process because the cloud providers know that Tackle can get the listing up faster than they can. Being more nimble and focused on that effort, Tackle can get a listing up in a month or less, which is typically months faster than the customer could do it on their own. This dynamic resulted in a very healthy sales funnel for Tackle and the false go to market felt real there, with revenue growing exponentially. But transactions were not increasing in proportion to the new ISVs that were listing products. Why? Because in most cases, sales teams were not involved until the end of the process. The sales teams were not driving a new private offer motion, they were simply going with the flow.

Tackle is a huge beneficiary of this process because the cloud providers know that Tackle can get the listing up faster than they can. Being more nimble and focused on that effort, Tackle can get a listing up in a month or less, which is typically months faster than the customer could do it on their own.

This dynamic resulted in a very healthy sales funnel for Tackle and the false go to market felt real there, with revenue growing exponentially. But transactions were not increasing in proportion to the new ISVs that were listing products. Why? Because in most cases, sales teams were not involved until the end of the process. The sales teams were not driving a new private offer motion — they were simply going with the flow.

If sales teams were clear on how to build the CMPs into their sales processes, the spend in cloud marketplaces would skyrocket. Somehow most of the software world is missing this.

The good news is that if you are reading this, you are ahead of the game.

If your sales team gets familiar with how to build CMP selling into their sales process, you will be able to move deals faster, increase the revenue per deal, marginalize competition, co-sell with the most powerful partners in the world, and make customers happier.

And of course, there are options when it comes to how to get that done. You can figure it out yourself and build out training and enablement programs. But it’ll take a while and you’ll be giving up the early-mover advantage.

To truly minimize time-to-value, sign up for an annual subscription starting at $1000 for up to 10 salespeople.

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