Cloud software vendors are facing a new challenge today. There’s a drastic shift in their buyer behavior from offline purchases to more digital channels. Starting in 2020, customers are completing more of their 28-moment customer journey online, and sellers are having to adapt to their go-to-market strategies.
Buyer’s preference for direct purchases from vendors dropped 9% in 2022 compared to 2021, while purchases from third-party marketplaces and value-added resellers rose by 6% and 4%, respectively.
To keep up with these trends, sellers also have to meet their customers in these digital touchpoints along their customer journey. This affects companies of all sizes from SMBs to large enterprises. At the same time, more software solutions and services are linked to cloud vendors.
So, where can sellers go to make software acquisition easy? Short answer, Cloud Marketplaces.
Juhi Saha says, “In a digital landscape marked by rapid technological advancements, leveraging cloud marketplaces has become a strategic imperative for businesses aiming to expand their revenue. With streamlined procurement, enhanced market reach, flexibility, trust-building, and simplified billing, these platforms provide a multifaceted approach to revenue growth.”
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Why marketplaces?
Just as how marketplaces have reshaped global trade and eCommerce in the past decades, we are now seeing a boom in B2B software marketplaces leading to a sea of change in the cloud software sales channel emerging as a dominant force for driving sales.
Software Marketplaces today both by Cloud Hyperscalers and by independent IT vendors such as SAP and Salesforce are considered as the future of sales for the software industry.
Companies (buyers) are going to marketplaces as their first place to look for solutions to their problems. Shopify introduced ads to their app marketplace in late 2023, explaining that 60% of installs came from customers searching the marketplace, which favored the more established apps that are displayed first.
And, as more and more vendors and buyers start adopting the cloud marketplace, this will create a cycle of sustained growth further benefitting the parties involved. Especially, as buyers who grew up in the digital age acquire more purchasing power.
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The hyperscalers are now reporting growing numbers of billion-dollar customer commitments through enterprise cloud consumption credits, which cover more than just software, and marketplaces are expected to make over 10% of all software purchases by 2030. In 2023 alone, there was a YoY growth of 90% and over 340 Billion dollars in committed cloud spending across AWS, Microsoft Azure, and GCP.
B2B Software marketplaces offer several advantages to the seller:
- Pre-committed spending from cloud customers
- Faster, and streamlined software procurement
- Larger deal sizes on average
- Improved relationship with resellers and channel partners
- Better trust and proven security solution
With a majority of the companies already working with one or more cloud providers, cloud marketplaces are naturally an extension of the cloud service provider and enable them to position their solutions alongside cloud provider services.
Cloud providers lowering their fees to 3% and providing discounts for larger deals and renewals have further boosted the adoption of marketplaces as the key channel for software procurement.
As Partner Insight data shows, with the current growth rate, Cloud hyperscalers have repeatedly been beating Wall Street expectations – Azure and GCP are growing at 30% and 25.7% respectively and AWS is on track to meet a $100Bn annual run rate.
Key challenges to marketplace entry
Though we’ve seen the amazing benefits the marketplace offers, there are still several challenges to marketplace entry that limit companies from listing and utilizing those benefits.
Technical challenges
- Compliance review – Completing a Foundational Technical Review (FTR) is one of the first steps in your AWS cloud GTM strategy. While AWS has the FTR, other marketplaces also have similar reviews to ensure proper compliance and ensure a stable experience for their users. This can take significantly longer for newer companies where best practices in development and security haven’t been thoroughly followed.
- The necessary compliance and vendor Insights steps to set up your solution can take time. The complexity of these can vary depending on the type of compliance your product adheres to and the industry your solution is in.
- Getting live updates on the status of your customers’ subscriptions and managing their communications requires you to subscribe to AWS SNS and set up separate infrastructure to manage the message queue and connect it to your existing CRM tools through APIs. This task is complicated and time-consuming.
- Building a data-driven strategy can be hard for all companies. Set up the right set of tools, databases, and analytics to gather marketplace data, create actionable insights, and double down on what works for you.
Operational challenges
- Sales teams familiar with their current CRMs want to continue using them as their single source of truth. Having to work with AWS Marketplace and connect the sale happening there would require them to create external integrations using the marketplace API or add in the customer details manually. Both of which are time-consuming and inefficient.
- Updating the listing regularly, promoting it through other channels, and providing educational content about your product’s capabilities are all important to reach your target audience.
- Navigating the marketplace for the first time can be a difficult task. Cloud providers’ documentation is unclear, and customer support can be limited and take time. This isn’t sufficient for companies looking to move fast and grow in the marketplace.
- Choosing the right sale options. Cloud marketplaces provide flexibility for vendors to experiment with different types of purchase options and the ability to have multiple sale options – standard subscription, bring your own license (BYOL), usage-based pricing, and free and freemium models.
Sales challenges
- Updating the listing regularly, promoting it through other channels, and providing educational content about your product’s capabilities are all important to reach your target audience.
- Navigating the marketplace for the first time can be a difficult task. Cloud providers’ documentation is unclear, and customer support can be limited and take time. This isn’t sufficient for companies looking to move fast and grow in the marketplace.
- Choosing the right sale options. Cloud marketplaces provide flexibility for vendors to experiment with different types of purchase options and the ability to have multiple sale options – standard subscription, bring your own license (BYOL), usage-based pricing, and free and freemium models.
Marketplace success requires ongoing effort, thus, companies need to have alignment between their teams from marketing, sales, technology, and finance. Furthermore, navigating the challenges of setting up and managing a B2B SaaS product on cloud marketplaces necessitates a strategic choice between a manual approach, involving significant time and in-house resources, or outsourcing to specialized cloud marketplace management platforms for a faster and more supported journey.
Labra Cadabra: Turning challenges into opportunities
Using Labra, you can turn your challenges into opportunities. Through our cloud expertise and cloud sales automation platform, we equip sellers with the tools to overcome every obstacle in their cloud journey.
- Preparing for the marketplace: We help companies prepare their solution to be ready for the marketplace. This includes providing you assistance with technical challenges, improving your compliance standing, and getting your team cloud sales-ready.
- Cloud sales partner: As a recognized AWS Partner, we’ve had years of experience working with AWS. We’re here to guide you with our expertise in these marketplaces and set you up for success. Working directly with the product teams of cloud providers, we always provide you with an up-to-date, functional, and user-friendly experience for selling your solutions.
- Support throughout your cloud journey: Labra offers around-the-clock support for leading enterprise teams with complex needs. In addition to support, our documentation pages, and in-app guidelines assist in solving any issues you may come across.
- Integrated processes: Our cloud commerce platform integrates with your existing CRM system. This ensures you have a seamless selling experience through private offers and channel partners, and are set up for Co-selling too. Achieve this and more from Labra’s cCommerce platform.
- Custom and automated workflows: We provide customized workflows that are enabled by automation and cater to your specific requirements. Easily map additional fields, keep all stakeholders informed, and scale your cloud selling with ease.
Conclusion
While the thriving cloud marketplaces offer immense value to B2B SaaS vendors, the decision to enter marketplaces poses the above-mentioned challenges. By choosing a specialized cloud commerce (cCommerce) platform like Labra.io, companies can expedite their listing process and unlock the full potential of the cloud marketplace opportunity sooner.
Further, through automation, tight integration, shared expertise, and customization, companies can scale to millions in revenue without the need to expand their team, have additional training programs, or spend countless developer hours on building in-house.
To create the future of Cloud Commerce, Labra’s cCommerce platform integrates essential services in the Marketplace, Partners, and Cloud Co-Sell into one unified experience. This has helped hundreds of companies of all sizes across industries and geographies to take their cloud Sales to new heights.
Book a demo with us today to find out how we help you overcome these challenges and, at the same time streamline and enhance your cloud marketplace experience.
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