Hi, it’s Roman from Partner Insight. Welcome to my weekly newsletter, where I deconstruct winning Cloud GTM strategies and the latest trends in the rapidly evolving world of cloud marketplaces.
Today, we'll discuss recently published research highlighting the role of ecosystems in enterprise growth and the increasing influence of Lines of Business (LOBs) in making SaaS purchasing decisions. We'll then examine the current share of cloud marketplaces in SaaS purchases and its potential future evolution.
Let's dive in.
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Ecosystems: The New Frontier for Business Growth
69% of enterprises are actively participating in ecosystems in 2024, reveals an EY survey of 1,400+ organizations. This underscores the critical role of collaborative growth across sectors. But what's driving this massive engagement and what challenges do companies face on their ecosystem journeys?
Ecosystem Dynamics: Financial Services and Technology Lead
In November, EY surveyed enterprises across industries to learn about their current ecosystem behavior and intentions. In this global survey, US and UK enterprises comprised 35% of respondents.
69% of organizations globally collaborate with ecosystem partners, with the APAC region (75%) slightly ahead of the Americas (68%) and Europe (66%).
The ecosystem mindset is most prominent in the Financial Services and Technology sectors, with 81% and 72% of enterprises in these industries engaging in ecosystems, respectively.
AI as Collaboration Catalyst
AI emerged as a key ecosystem driver, with businesses highlighting AI and GenAI among technologies most suited for their ecosystem strategies.
This is especially true in the Americas, where 53% of enterprises named "Analytics and AI" as a key technology driving collaborations.
As enterprises lean into deeper collaboration, the demand for suppliers who can navigate and lead these networks becomes ever more critical.
Globally, nearly half of the enterprises prioritize AI technologies for their ecosystem strategies. 47% naming "Analytics and AI" and 39% highlighting "Generative AI" for collaboration with other organizations.
Yet, the ecosystem journey is not without its challenges.
The Complexity of Multisided Partnerships
Despite the enthusiasm, 60% of businesses find executing multi sided partnerships complex.
The hurdles? A lack of strategic alignment remains the biggest challenge for collaboration, followed by a low willingness to share data.
Limited awareness of collaboration opportunities has risen to the second position, especially among the government and public sector.
A focus on non-core initiatives for collaboration (meaning a lack of focus on the things that truly matter) also made the top 5 "anti-ecosystem" list this year.
The research also discovered the increasing perception of ecosystem collaboration as "nice to have" rather than "mission critical." This is up from 51% in 2022 to 61% of businesses in 2024.
The Orchestration Imperative
As businesses navigate these complexities, they are prioritizing deeper collaboration with vendors and more than ever choosing partners who can clearly explain their ecosystem role. Moreover, 71% of businesses now prioritize vendors that can orchestrate other partner networks.
This aligns with other EY findings that while 71% of organizations accept open innovation principles, they lack knowledge and awareness of the supplier landscape and resulting opportunities for collaboration.
Looking ahead, a growing proportion of businesses are prepared to prioritize partners who can articulate their role in industry ecosystems and orchestrate others.
Marketplaces: Simplifying Ecosystem Engagement
This emphasis on partners capable of ecosystem orchestration echoes the dynamics of cloud and B2B marketplaces, increasingly known for streamlining partner interactions. As enterprises lean into deeper collaboration, the demand for suppliers who can navigate and lead these networks becomes ever more critical.
In a landscape where ecosystems are both a strategy and a challenge, how are you leveraging marketplaces and partnerships to navigate this new frontier?
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Growing Power of LOB in SaaS & Cloud GTM's Hidden Potential
The newly released Zylo SaaS Management Index '24 unveiled that 13% of SaaS apps are bought via cloud marketplaces (AWS, Google Cloud, Azure) or via resellers (CDW, etc.). This highlights the early stage of Cloud GTM with anticipated growth.
Zylo is a leading SaaS management platform overseeing 30M SaaS licenses and $34Bn in spend.
It discovered that cloud marketplaces and resellers account for 13% of SaaS apps equating to 9% of SaaS spending. This trend is "largely consistent across all segments, including enterprises."
Researches however expect the portion of SaaS purchased through hyperscaler marketplaces or resellers "will grow in the coming year.”
The primary reason is because cloud marketplaces “offer significant benefits to buyers, including marketplace spend qualifying for discount programs and consolidated billing for marketplace purchases.”
Growing Power of LOB in SaaS
A key insight from Zylo's research over the years is diminishing IT ownership over SaaS used by businesses. This trend persisted into 2023, with IT owning 28% of spend and 17% of apps, a further decrease from 31% of spend and 18% of apps in 2022.
Today lines of business (LOB) are controlling an impressive 69% of SaaS spend in 2023 or 48% of apps used by businesses.
If you’re selling SaaS, LOBs are likely your primary targets.
Towards (De) Centralized SaaS Management
Despite this trend, businesses have incentives to centralize purchasing (using marketplaces?) to combat the challenges of shadow IT, a persisting problem. Another reason is 5X higher risk of cybersecurity incident if companies don’t have centralized visibility.
A significant 84% of IT and Software Asset Management (SAM) leaders surveyed indicate their company is shifting from a decentralized SaaS ownership model to an IT-led approach.
They aim to enable business units to make purchasing decisions and own apps but want oversight into the process along with other key stakeholders like Privacy, Infosec, Procurement, etc. This is exactly where cloud marketplaces offer advantages.
Rationalization Meets Optimization
An impressive 93% of IT and SAM professionals now integrate SaaS management into their cloud optimization efforts.
The continuous focus on optimization led to a 25% reduction in SaaS spending from 2021 to 2023, with the average spend falling from $60M to $45M.
The average number of apps used by organizations in 2023 decreasing to 269, showcasing a trend towards leaner tech stacks.
However, looking back to 2008, when Gartner reported worldwide SaaS revenue of $6.4Bn, we see that SaaS has grown exponentially in 15 years, reaching a projected spend of $243.9 Bn in 2024.
Will SaaS re-accelerate and will cloud marketplaces consolidate a large portion of SaaS spend in the coming years? For many, the answer is quite obvious.
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