The world of cloud is expanding rapidly, and many companies recognize that leveraging cloud marketplaces of AWS, Microsoft Azure, and Google Cloud—and co-selling with them—is essential for their growth. However, this requires a deep understanding of how to succeed in these marketplaces.
John Jahnke, CEO of Tackle.io, has been riding these waves long before they were mainstream. Read on for the key insights from our deep dive with him or watch our entire conversation.
Beyond Just Getting Listed
There’s a very common misconception in the cloud go-to-market (GTM): getting listed on marketplaces like AWS is the end goal. John debunks this myth by emphasizing that it's merely the starting line. The real challenge lies in building a robust cloud GTM revenue system within your organization.
“Cloud go-to-market is a sneaky, complicated problem where you think about, oh, getting listed with AWS, how hard could that be? Getting listed is the starting line, not the finish line. Building a scalable revenue system inside of your company is the destination, and that requires not just thinking about one build, it oftentimes requires thinking about one cloud, thinking about how do you integrate that with your company's operations? How do you teach your sellers to take advantage of these new tools? How do you do that across clouds…”
While the evolution of cloud GTM has brought many opportunities, it has its fair share of complexities, especially when integrating Co-Sell. Let’s dive in.
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The Evolution of Cloud GTM
When cloud go-to-market (GTM) first became a topic of interest, it was met with intrigue and uncertainty. Fast forward a few years, and it's the revenue pillar of many successful businesses. Here's what John Jahnke revealed on key insights they saw from their State of Cloud Marketplaces survey they started in 2020.
Recognizing the Power of Cloud Budgets
John points out an initial insight they had from their State of Cloud Marketplaces research a few years ago. Cloud budgets were more than just one-off purchases; they were durable budgets that spanned multiple years. It’s became possible to harness these budgets using the cloud marketplace GTM, paving the way for faster and bigger sales.
Velocity is Key
In 2020, many were only beginning their cloud GTM journey. However, for those who'd scaled, they discovered they could accelerate sales through this channel, using standardized contracts from cloud providers. By dodging the tedious negotiations that are synonymous with direct selling, businesses witnessed increased sales velocity.
"So the second insight really centered around selling faster, which is one that I continue to love, especially as we transition out of the era of growth at all costs to this capital efficient growth era."
Setting Revenue Targets Through Cloud GTM
In 2022, a shift in the narrative emerged. Instead of counting deals, businesses began evaluating successes based on revenue percentages garnered through the cloud. An impressive 44% of sellers said that they aim to achieve 10% of their revenue via cloud GTM. On a first look, 10% didn’t sound like a lot, but for large companies, this could translate into tens of millions.
"When you unpack it, you're like 10% for a billion dollar ISV is $100 million flowing through one channel. That's probably the biggest channel in the company."
Channel Integration is the Future
Another major trend of the last year was that the intersection of marketplaces and channels was finally recognized as a powerful combo, predominantly due to AWS's Channel Partner Private Offer (CPPO) program. The positive sentiment towards the fusion of marketplace and channel has only grown, which became evident from the data.
" In 2022, there was pretty broad sentiment from the ISV ecosystem that marketplace plus channel was something they would use and use much, much more. And we've seen that play out in the data this year."
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Why Cloud Marketplaces are taking off
As John astutely puts it, growing cloud marketplaces “is a multi-persona problem". It's not just about the cloud hyperscalers, it's about the complex interplay between buyers, sellers, channel partners, and the cloud itself. The challenge for hyperscalers, and perhaps the real innovation, they made was in understanding and unlocking the incentives for everyone.
Cloud giants aren't just building repositories or platforms; they're trying to empower their customers with the tools needed for their digital transformation. Given the vast number of services and software products out there, hyperscalers focus on a seamless integration of both first and third-party products to truly drive digital transformation.
The role of financial dynamics cannot be overstated too. As John mentions, back in 2015, cloud budgets weren't usually among companies' top 10 expenses. Today, it's a different story. Hyperscalers are aiming to increase their share of the overall cloud budget by consolidating third-party purchases and first-party consumption.
Both Clouds and Buyers have something to gain with marketplaces. While hyperscalers are looking at driving core service consumption, buyers are seeking ways to make the most out of their commitments to these platforms. By merging third-party purchasing with their cloud commitments, buyers can optimize their plans and commitments more efficiently.
Where it gets intriguing, as John suggests, the "entanglement" of first-party workloads with third-party software in the formation of new applications is perhaps a less discussed benefit. While technologies like containerization have made it easier to transfer workloads between clouds,
“when you entangle first and third party services together in a really complicated way, the likelihood of those services moving around goes down”
This intertwining ensures a more long-term, sustained relationship with the cloud provider.
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The Great Cloud Marketplace Playbook: Deciphering the Top Cloud Providers
When we dive into the nuances of the big three hyperscalers - AWS, Microsoft, and Google Cloud, we realize they're all racing towards the same finish line but taking different paths, each leveraging their unique strengths.
The AWS first-mover advantage
AWS not only had the first-mover advantage, but also innovated with the introduction of the private offers. The concept of custom pricing and terms passed on to buyers using the marketplace infrastructure was revolutionary.
John remarked,
"instead of someone saying I'm going to buy an EC2... they're like, no, I'm going to do an annual contract."
These annual contracts became essential for unlocking larger deals.
Then AWS “combined that with the alignment of the cloud budget with marketplace was a really smart thing”.
Finally AWS was the first to bring channel and marketplace together via CPPO (channel partner private offers).
Microsoft's Channel-centric Approach
Microsoft is historically deeply rooted in the channel and building software application layer.
“They had a lot of different storefronts, and those storefronts did different things. But they they converge those storefronts in like 2020, and that allowed them to bring not only their infrastructure focus with Azure, but a business focus with app source together into the same thing”
John insightfully points out that Microsoft leaned into business applications and vertical software, a niche area that AWS wasn't deeply involved in at the time. Further boosting their marketplace edge, Microsoft reduced the marketplace fees to 3%, opening this channel for many who were on the fence or price sensitive.
And now Microsoft is integrating its longstanding Co-sell program with its cloud marketplace. The recent announcement at the Inspire event underlines this strategic merge.
Google's Niche Focus
Google’s approach has been more focused, capitalizing on its strength in the data ecosystem. Their strategy is, as John describes, "historically less breadth and depth, and much more focus from a catalog standpoint". Concentrating on areas of strength, such as data, has led to notable successes with some ISVs for Google. With continued advancements in AI, Google is defining its unique path, tailoring its programs according to its strengths.
All three giants, although swimming towards the same destination, are aligning their strategies to their strengths. But it’s essential to realize, as John reminds, that we're only scratching the surface: "$755 billion B2B software sold, you know, single digit percentages of that flow through the cloud marketplace today." The arena is still nascent, but it's expanding rapidly.
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Common misconceptions among CEOs: Decoding how to get Cloud Marketplaces right
We focused on the common missteps that CEOs tend to make when they start with Cloud GTM. John believes that the biggest one is to treat Cloud GTM as a mere experiment rather than a strategic revenue stream. Instead it demands the same dedication and long-term horizon as launching any other new sales channel. John reiterates, "it's a new way of selling, you have to invest in it, like it's a new channel."
Another misconception is that by simply listing a product on a cloud marketplace, buyers will flock to it. Many believe “we're gonna go get listed and people are just magically buy our product.” John, however, emphasizes that most dollars flowing through clouds today come from larger contracts, private offers that use cloud budgets. This might evolve with time, but for now, the majority follows this route.
Finally, John underscores:
"This is not just a go to market decision. This is...a company strategy decision. How does your company and the clouds fit together?”
Embracing cloud marketplaces goes beyond the sales team or the go-to-market plan; it touches every corner of a company. Everything, from product development, positioning, value proposition to the target audience, should be thought through within the context of the cloud marketplace.
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Commitment Required in Cloud GTM: All-In or Step-By-Step?
One of the biggest questions that companies ask themselves considering cloud GTM - should we test and iterate or go all-in on the marketplaces?
John's advice is before diving into the cloud marketplaces, companies need to reflect on where their strongest value proposition lies. John advises to anchor the cloud GTM around these strengths, advising to "start selling and let the tailwind of revenue drive your strategy."
For some companies, going all-in on cloud GTM from day one has led to resounding success. But there’s a critical distinction: they typically come with prior experience in executing this strategy. As John highlights, "they've seen it, they know it works." It’s not a plunge into the unknown but a calculated move based on proven outcomes.
Launching across all major cloud platforms from the get-go isn't just a sales decision. It impacts everything - from product design, infrastructure, to marketing. John stresses the multi-faceted challenge:
"have your products work well across all three hyperscalers and meet the demands of buyers in all three hyperscaler marketplaces is complicated,"
But there are still companies like Wiz, who ventured early into all-in multi cloud strategy and reaped immense benefits. John highlights that while having an amazing product was fundamental, an all-in cloud GTM strategy was integral to their success.
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Setting Cloud GTM Expectations: From Listing to Scaling
In general though, John advises to engage with marketplaces in three stages.
Initiate with a few deals to understand the landscape.
Replicate initial success and expand to dozens of deals, thereby familiarizing a wider spectrum of your revenue ecosystem with the new channel.
Define and pursue the scale, which various companies may define differently:
"Some people like scale to us is 10% of revenue. Other companies are like scale to us is 75% of revenue".
Think through the workflow of Cloud GTM:
Execution. "Marketplace is the last mile. It's how you tap into the cloud budget. It's how you execute on the deals" John observes.
Pipeline Creation: Before execution you need to create a pipeline. Co-selling with cloud providers facilitates this process and will eventually turn into marketplace revenue.
Before pipeline creation, there's data. Analyzing data can help in decision-making, particularly finding opportunities that can be accelerated through the cloud.
John also notes a more recent trend where new companies entering cloud marketplaces often already have buyers ready to engage.
“In the early days of marketplace, you'd launch and then it sometimes would take 3 to 6 months until you got aligned in a sales motion to execute on a transaction. Whereas we see sellers launching today and executing on deals in days. They're like, “we already have a buyer who wants to do it, we need to get there so we can execute in this way.”
John concludes by advising companies to "start small, keep it simple, figure out what success looks like, replicate success with a pattern that makes sense to your company and then drive to scale". Recognizing it as a continuum and acknowledging the time it will take is essential.
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Decoding Co-Sell: From Brand Recognition to Replication of Success
Establishing your unique brand in the cloud ecosystem is critical. John emphasizes,
"the clouds have hundreds of native services, they have thousands of products listed in the marketplace, how are you going to differentiate yourself?"
Your offering should resonate with what's important to the cloud: helping buyers and driving core service consumption.
Drive Your Own Success First
Before you dive into Co-sell, John stresses the importance of creating your own success stories.
"If you start trying to Co-sell before you've ever driven some success, it will be really hard to differentiate yourself," he notes. Once you've solidified your own success stories, you can use Co-sell to replicate and scale them.
Two-fold Storytelling
Firstly, you need to tell a compelling story to your customer about the benefits of buying your product on a cloud marketplace.
Secondly, and perhaps even more crucially, tell the story to clouds. Highlight how the cloud's core services combined with your product drove a particular outcome. John encapsulates this by saying,
"That's what the cloud sellers really care about - the story."
Harnessing Co-Sell Opportunities
Smart ISVs have a dedicated team to identify and make the most of Co-sell opportunities. John shares a "hack around Co-sell", where successful engagements with one cloud seller can be leveraged to approach other sellers.
“And when we go win with a seller at AWS, our cloud go-to-market team goes to that seller and it's like, “hey, we just drove success together, do you have other customers that meet this pattern too? Or could we talk to your team, your peers about this and the success we had together?”
John underscores the potential of scaling Co-sell when you have a great example.
"One great deal, that's a great story, turns into 10 opportunities for you in Co-sell,"
Journey of Strategy and Time
Achieving success in Co-sell is not instantaneous. Companies like CrowdStrike have invested years of effort to build a recognizable brand within the cloud ecosystem.
John highlights:
“They have invested heavily for a long period of time to get to the point where they have this amazing brand in the cloud ecosystem. And it's really well understood, like the Twitter link description of “why CrowdStrike plus Cloud” is pretty well understood inside the ecosystem”
The Evolving Definition of Co-Sell
Cloud companies historically separated Co-sell and marketplace orgs in their companies. As they begin to merge these orgs, understanding and leveraging Co-sell becomes crucial. People might think they've grasped Co-sell from its traditional definition, but in reality it has evolved. Co-sell is now part of a broader cloud go-to-market journey. This shift is more than just semantics; it represents a more integrated and strategic way of thinking about selling in tandem with cloud providers.
Confronting Competition Head-On
One of the nuanced insights John shares is about competition with clouds. There's a prevalent fear, especially among ISVs, because some core cloud services might seem to compete directly with them. Instead of fearing potential overlap or competition with core cloud services, successful ISVs lean into it, showcasing their unique value propositions.
John's advice is to acknowledge this competition, lean into it, and be confident in your value proposition. This involves articulating clear differentiation and showcasing the added value of one's offering in comparison to core services.
Auth0's Journey Through Co-opetition
John highlights the journey of Auth0, a company initially apprehensive about entering the AWS marketplace due to competitive services. Still Auth0 launched and clearly defined and communicated their unique value proposition. Their first deal in the marketplace paved the way as John mentions, "They were able to launch and in their first year, they only did one deal and that one deal proved the pattern." Subsequent years witnessed 10X growth, a testament to the efficacy of their strategy.
Snowflake's Path of Focus
Despite early competition in the cloud, Snowflake concentrated on customer value and fine-tuned their narrative to cater to both their strengths and the marketplace's interests. They positioned their services not as alternatives to core cloud services but as an at-scale, versatile solution that addresses broader needs. Their significant growth is a result of that unwavering focus.
Strategy & Commitment
While navigating cloud marketplaces might seem intricate, John brings the conversation full circle with a foundational insight:
“You have to have a clear product strategy, you have to go build stories of success that are good for your buyers, for your sellers for the cloud providers and execute…. It's not rocket science, it just takes commitment.“
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The Future of Cloud Marketplaces: A Transformation in Buying and Selling
John foresees a significant uptick in the adoption of cloud marketplace strategies. He says,
“Five years from now, every seller in every software company will know how to win with cloud.”
The current landscape where only 5-10% of companies have fully embraced the cloud GTM indicates the huge growth potential lying ahead.
As John highlights, the change in the buying behavior is pivotal. With marketplace models simplifying and speeding up procurement processes, there's an inevitable shift towards these platforms. “Once people buy this way, they don't want to go back,” points out John, emphasizing the stickiness of marketplaces and reluctance of businesses to return to tedious 6-month+ procurement cycles.
One of the top questions in the industry is: how many marketplaces will dominate in the future? John believes that there will be high concentration among a few winners. The main reason is the gravity of budgets behind cloud initiatives and the significant market share these platforms have garnered.
As channel partners adapt to the changing business landscapes, John emphasizes that the $755 billion of B2B software migration to the cloud will largely be driven by channels. Channel partners plus marketplace could potentially accelerate growth rates.
To conclude, we will probably see a new way how companies discover software. The conventional discovery methods - like Google searches leading to ads or content to product - may witness an evolution. This will change the way in how products and services will be marketed and sold too. Stay tuned for more insights on cloud marketplaces.
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