Palo Alto Networks has seen the future, and it’s in the market.
While it didn’t provide many details, the cybersecurity giant with nearly $7 billion in annual revenue believes that the market in which the big hyperscale cloud platform providers operate will be its biggest source of future revenue growth.
“It’s not just the direction hockey is going,” said Prem Iyer, the company’s vice president of ecosystems. “That’s where the puck is right now.”
It’s hard to argue with numbers. Revenue in the cloud market is growing by near triple-digit percentages and has been doing so for the past few years, Iyer said. “If we don’t invest more in working with these cloud providers, customers will still go there, they’ll buy there first,” he said. “Cloud Marketplace allows us to seamlessly and easily distribute products to customers more cost-effectively.”
Palo Alto Networks’ Ayer said the market is “where the puck is now.”Photo: Palo Alto Networks
Clients apparently agree. According to Vertical Web Media LLC, the cloud market—the list of complementary products and services buyers can purchase from companies they do business with—is growing more than seven times faster than total business-to-business e-commerce sales in 2021. According to According to Finextra Research Ltd, B2B market sales are expected to account for 14% of all online sales by 2025, growing at a compound annual growth rate of 32% during this period.
The cloud market is growing at a triple-digit rate and is expected to generate $15 billion in sales by the end of 2023 and $50 billion by the end of 2025, according to Tackle.io Inc. Bessemer Venture Partners LP estimates that deal value in these venues will grow 70% to $4 billion by 2021, three times the growth rate of public cloud as a whole.
all roads
Jake Swenson, vice president of commercial marketing at Microsoft, is equally bullish. The company’s Azure and AppSource marketplace “is about $8 billion in global billing sales in 2022. By 2025, that number will expand to $50 billion,” he told CRN earlier this month. “All roads lead to the market”.
Digital marketplaces aren’t new—Apple Inc. launched the App Store in 2008—but their development in business software has been slow, with decades of sales rep visits, lengthy negotiations, and lengthy installs and tests Cycles have become the norm.
But cloud computing—especially software-as-a-service—has reset expectations. Buyers now expect even complex software to be up and running within hours without significant capital expenditures. The need for one-click simplicity has been accelerated by the growing number of digitally native business buyers.
Millennials are increasingly in charge of buying decisions, and “the last thing they want to do is talk to a salesperson,” said Jake Zborowski, general manager of product management at Microsoft.
Marketplace transactions are closing 40 percent faster and 80 percent larger, AWS’ Grusz said. Photo: SiliconANGLE
Amazon has been a trendsetter in both retail and cloud. Back in 2000, it began allowing businesses of all sizes to sell products through its e-commerce site, charging a commission for each sale while embellishing the one-stop-shop reputation it hoped to build. Third parties now account for about 60% of Amazon’s overall retail sales.
Amazon Web Services established the first cloud marketplace in 2012, initially to provide machine images of the specific infrastructure software needed to run cloud instances. “We’ve expanded significantly from Amazon Machine Images,” which are AWS-specific virtual machines, Chris Grusz, AWS general manager of global ISV alliances and marketing, told SiliconANGLE in an interview.
At AWS’s big re:Invent conference in Las Vegas this week (pictured), the cloud computing giant is expected to announce that its marketplace now lists 13,000 products from 3,000 independent software vendors. Amazon has said the marketplace is in a “multi-billion dollar” business, but has not specified. The company may announce some partnership programs to further develop the business.
means the end
Cloud providers have shifted from viewing the marketplace as a source of commissions to more usage of their platforms, and they are aggressively enlisting ISVs — even competitors — to join them. “At the end of the day, the main goal of hyperscalers is to drive infrastructure consumption,” said Maryam Zand, vice president of cloud partnerships at IBM’s Red Hat subsidiary. “Everything else is a means to that end.” “
Red Hat’s Zand: Hyperscalers see marketplaces as a way to drive infrastructure consumption.Photo: Red Hat
Three years ago, AWS simplified its pricing structure and reduced fees for marketplace partners. Google cut the fee it charges marketplace sellers from 20 percent to 3 percent last year, and Microsoft followed suit. Microsoft also launched the ISV Success Program, currently in public preview, which provides developers with cloud credits, developer tools, requirements generation services and even architectural engineering guidance. “It helps them build the app, decide what category to put it in and helps refine the listing so that when customers search for apps they do well,” said Anthony Joseph, vice president of Microsoft Cloud Marketplace and ISV Journey.
The marketplace has the potential to disrupt the traditional software sales model by simplifying transactions and reducing overall costs for buyers and sellers. Their appeal spans multiple stages of the buying process.
“A successful cloud market is a trio of values,” said Dai Vu, managing director of cloud platform market and ISV listing program at Google LLC. “Customers can manage and source products more easily; software and application vendors get a very efficient route to market and scale, and cloud providers drive more consumption.”
a bill
Integrated billing is one of the strongest appeals. A growing number of enterprises are signing multi-year cloud commitments that can reach $100 million or more, with the risk of forfeiting unused credit at the end of the contract. In response, cloud platform providers have been adjusting their billing terms to allow marketplace purchases to count towards these commitments.
Microsoft’s Svensson: “All roads lead to the market.” Photo: Microsoft
“As customers increase their SaaS subscriptions, they need to centralize how they find, try and buy solutions,” Microsoft’s Joseph said. “Customers can count every dollar they purchase toward their cloud commitment when they purchase eligible solutions.”
This provides convenience for marketplace sellers. “If you already have an account with one of these cloud providers, it’s definitely a good sign for us that our stuff is suddenly easier to use and faster to deploy,” said Confluent Cloud, head of product management at hosting service Confluent Cloud. Dan Rosanova from Confluent Inc. says what’s more, “Users from Marketplace activate at a higher rate.”
AWS says it has seen a 24 percent increase in deal closing rates on its marketplace and an 80 percent increase in average size. “Additionally, ISVs are closing deals 40 percent faster,” Grusz said.
Buyers can also rely on cloud providers to do most of the vetting typically involved in working with a new provider. AWS’ recently launched Vendor Insights program aggregates security and compliance information that it says can save buyers up to 10 weeks of time typically spent evaluating potential vendors. “We no longer need 200 questionnaire packages per supplier,” Grusz said. “Buyers no longer need to do outside-in things like penetration testing” because AWS has done the upfront work for them.
“The biggest motivator for customers is the belief that it’s going to work because it’s bought through the cloud marketplace,” said Dan Garfield, co-founder and chief open source officer at DevOps platform developer Codefresh Inc.
Enable complex transactions
While touting the simplicity of doing business in their marketplaces, hyperscalers are also catering to buyers’ interest in negotiating custom arrangements for a greater share of wallet.
Confluent’s Rosanova: For customers who already had an account with a cloud provider, “Suddenly our stuff became easier to use.” Photo: LinkedIn
Five years ago, when AWS launched Private Offers, a program that allows buyers and sellers to negotiate their own prices and licensing agreements, “subscriptions exploded in size,” Grusz said. “We’re seeing seven-figure, eight-figure deals. Our customers are now saying, ‘I want to buy everything here.'”
ISVs are increasingly looking to the market as a key sales driver. Clumio Inc., a developer of software that protects AWS applications from ransomware and other threats, conducts its entire business through AWS Marketplace, CEO Poojan Kumar said in an interview with SiliconANGLE. It estimates its cloud computing annual run rate will increase by 450% in 2021, driven by a 400% increase in its AWS customer base. “We have noticed [customers] Onboard yourself, we allow AWS to bill you automatically, so you don’t need to talk to us,” says Kumar
Red Hat is working on making all of its products, even professional services, available on all major cloud platforms. “We’re seeing a huge shift towards markets as trading venues,” Zand said.
basics still matter
But for all the upside platform providers promise, the marketplace doesn’t eliminate the need for sellers to do basic blocking and processing. When she started working at VMware Inc. In the cloud market a decade ago, “the thinking was that if you put it out there, customers would come, but that wasn’t the case,” Zand said. “ISVs have to create preferences, drive demand, provide differentiation and optimize for specific clouds. That’s what they do.”
Bound to third-party customer relationship management and accounting systems also have limitations. “We don’t know much about these sites,” says Confluent’s Rosanova. “It’s difficult for us to justify the marketing spend that took you to a website that we don’t own, and we can’t judge how successful it was.”
Marketplace platforms are evolving, “process [of listing and maintaining them] It’s not very seamless at this point,” Zand said. “It’s still very manual. “
But in general, the cloud market is highly rated by suppliers and, in terms of sales, by buyers. In the long run, they could be the tip of the spear of a larger trend sweeping other industries.
beyond the cloud
Miracle is one of more than a dozen companies promoting markets in industries such as manufacturing, food and beverage, fashion and hospitality. Its value proposition is similar to that of the cloud: diversify the range of products a company offers, improve the customer experience, keep people on site longer, and generate revenue without the burden of inventory and fulfillment costs.
CEO Kumar said Clumio relies on the AWS marketplace to power its entire business. Photo: SiliconANGLE
“People expect things everywhere,” said Maya Pattison, Mirakl’s vice president of corporate marketing. “How do you meet that with the old warehousing and inventory model?”
Marketplace complements e-commerce platforms that “coordinate shopping carts, manage the customer experience and facilitate purchases,” Pattison said. The host is responsible for supplier onboarding, managing the catalog and ensuring proper placement of product data.
The idea is to “sell with complementary solutions that your market would consider buying when buying from you,” says Angela Troccoli, senior director of global product marketing. “If you’re looking for backpacks, you’re probably looking for thermoses too,” so listing other companies’ insulated food and drink containers would be a natural brand extension.
All of this neatly translates to the cloud market as well. The allure of ISVs hasn’t gone away. Palo Alto Networks launched its own marketplace two years ago to complement its Cortex XSOAR security platform. The managed ecosystem now includes more than 850 product integrations.
It just goes to show that in the fast-moving world of the business software market, anyone can still play.
Reporting by Kyt Dotson and Robert Hof