Hi, I’m Roman from Partner Insight,
Welcome to another edition of my newsletter, where I explain the winning Cloud GTM strategies and emerging trends in the dynamic world of cloud marketplaces. Today, we're focusing on a critical, yet often overlooked aspect of Cloud GTM: how companies strategically leverage multiple hyperscalers. We'll explore this through the lens of Elastic's winning GTM approach and delve into McKinsey's research on the adoption of CSPs by enterprises, particularly how they allocate their cloud workloads and budgets.
💡 Ready to master cloud marketplaces? Join the upcoming cohort of my 5-week Cloud GTM Leader course. It's an immersive deep-dive with 10+ industry experts, all in a supportive community of cloud alliance leaders.
Now, let's delve into cloud GTM insights.
________________________________________
Elastic's Growth Playbook with AWS, Azure, Google Cloud
Elastic Cloud's impressive 31% YoY growth, outpacing the company's other products ~2X, is a showcase of the power of strategic partnerships with hyperscalers. With Elastic's shares 2X+ in the last 12 months, CEO Ashutosh Kulkarni credits much of their success to collaborating with AWS, Microsoft Azure, and Google Cloud.
Elastic is on a trajectory towards a $1.25 billion annual revenue run rate, exemplifying the advantages of leveraging cloud. Their suite of products enables businesses to search, monitor, and secure large data volumes in real-time. Elastic's strategic expansion into cloud offerings, combined with their presence across all three major cloud platforms, has not only tapped into vast hyperscaler ecosystems but also significantly accelerated its growth.
Last quarter (Q2'24) Elastic Cloud showed an impressive 31% YoY growth, driving the company's overall 17% revenue increase. This surge, as the CEO explains, is fueled by “continued improvement in cloud consumption” and the tailwinds from Generative AI.
The Power of Strategic Cloud Alliances
CEO Ash Kulkarni emphasizes the crucial role of hyperscalers in Elastic’s GTM strategy:
“On the go-to-market front, we continue to focus on our partnerships with the major cloud hyperscalers. [...] Customers are making significant multiyear commitments to our platform through these cloud marketplaces as they leverage Elastic as an AI-powered data analytics platform for multiple real-time use cases across search, observability, and security.”
Elastic’s strategic leveraging of cloud hyperscalers has yielded multiple notable benefits, including:
Co-investments and powerful technology integrations
Preferential access and relationships
Joint sales pursuits (co-sell)
The CEO elaborates on the advantages of co-selling with hyperscalers:
“our relationship with -- with Google, with Microsoft, with AWS, they are strong and they're continuing to grow stronger. And that just means that, you know, when customers are talking to them, you know, it allows us to go and jointly with these partners and have these kinds of conversations where customers are looking to do things that are, you know, on the leading edge. And those are the relationships that we believe are really critical at this phase.”
Elastic's Significant Cloud Marketplace Growth
Microsoft
3000+ customers use Elastic on Azure. In 2023 Elastic won Worldwide and US Microsoft Partner of the Year Award for Commercial Marketplace.
Elastic's collaboration with Microsoft began in 2017, leading to co-investments in developing Elastic as an Azure Native ISV Service. In 2020, they launched their solution on Microsoft's Commercial Marketplace, simplifying the process for customers to consume, pay for, and deploy Elastic Cloud on Azure.
Google Cloud
2,600+ customers use Elastic on Google Cloud. In 2023 Elastic won GCP Global Technology Partner of the Year
Kulkarni emphasized the GTM aspect of their partnership:
“Building on our recent joint success with Google, we are accelerating and extending our joint go-to-market activities and technology integrations with Google Cloud. Our collaboration includes the powerful combination of the Elasticsearch Relevance Engine and Google Cloud's Vertex AI platform, which empowers developers with a scalable tool set to build privacy-first generative AI applications”
AWS
In 2023 Elastic was awarded AWS US Rising Star Partner of the Year. Elastic's presence in the AWS Marketplace is marked by significant growth in shared customer transactions, 376% YoY customer engagement, as the company continues working on AWS integrations.
CEO highlights their recent strategic moves:
“We just announced a new two-year global strategic collaboration agreement with Amazon Web Services. This will accelerate the integration of Amazon Bedrock into the Elastic AI Assistant, enabling customers to get richer and more contextualized and relevant results by using their preferred large language model, coupled with the organization's unique IT environment and proprietary data sets.”
Kulkarni affirms:
“We firmly believe that our relationships with the major cloud hyperscalers will be a key factor in our success in the future. And toward that end, we are continuing to invest in these relationships.”
Elastic's Impressive Marketplace Wins: A Deep Dive
Elastic's recent marketplace achievements underscore their strategic approach to leveraging hyperscalers. CEO Ash Kulkarni shares insights into their significant deals:
“We signed a multiyear marketplace deal with DocuSign, the world leader in eSignature and contract lifecycle management solutions. More than 1.4 million customers and more than 1 billion users in over 180 countries use DocuSign [...]
We also signed a contract with a leading video sharing platform for Elastic Cloud via the Google Marketplace to provide hybrid search, blending AI, vector search, semantic search, and Reciprocal Rank Fusion, or RRF, offering a platform that enables millions of users to create, edit and share videos”
Hyperscaler Inclusive and LLM Agnostic
Elastic's recent successes are partly attributed to the resurgence of interest in search driven by generative AI. Kulkarni notes:
“customers use semantic search, vector search and hybrid search to ground large language models with their private business context and ESRE provides the most comprehensive and enterprise-ready platform for these use cases.”
At the same time, Elastic’s commitment to openness and offering customer choice is a major differentiator. Kulkarni elaborates:
“We've always had this mindset of being very open as a company, providing our customers a lot of choice. So, we are LLM agnostic. We have excellent partnerships with all the major cloud vendors with Azure OpenAI, with Google Vertex AI, with AWS Bedrock.[...]
And we also support a lot of the open source, the community LLMs, like Llama 2 and so on from Meta. And that just means that when somebody uses us, they get a platform that gives them the choice of LLMs because we don't believe there's going to be one LLM to rule them all in the future, and that choice matters to customers.”
CEO's Strategic Outlook: Ecosystem Partners are Essential
CEO Ash Kulkarni concludes by highlighting the importance of integrations and relationships with ecosystem partners, particularly hyperscalers, in offering differentiated solutions to customers:
“At the end of the day, our ability to best satisfy our customers comes from the fact that we are able to provide them unique, differentiated functionality with the integrations with all the ecosystem partners. And we have relationships with these ecosystem partners like the cloud hyperscalers that allow us to reach and service those customers very, very effectively. And our focus, not just on commitments, but also on consumption, all of that is paying off.”
Sources: Company, Yahoo Finance. My research/opinions.
________________________________________
Decoding Enterprise Cloud Usage
How many Cloud Service Providers (CSP) companies typically use and how they distribute their workloads/budgets? Let’s take a closer look.
These insights help you to better understand buyers, if you’re selling via cloud marketplaces. Or they may help you to benchmark your own cloud strategy.
80% of Organizations Use Multiple CSPs
Research from McKinsey & Company reveals that over 80% of companies in North America and Europe use two or more CSPs, like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud. This multi-CSP approach reflects diverse needs in applications, infrastructure, and skill sets within large organizations.
✔️ Single CSP Choice
Companies opting for a single CSP often aim for simplified maintenance, faster talent upskilling, specific toolsets and platform capabilities, and cost efficiency (via scale discounts and operational savings).
✔️✔️ Multi-CSP Strategy
The adoption of a second CSP usually comes into play to capitalize on its unique strengths or enhance competitive leverage. However, this demands additional investment in talent upskilling and maintaining architectural and operational consistency.
How Companies Adopt Different Cloud Providers
Let’s reflect on how companies adopt different cloud providers from the graph - you can guess the names of CSPs easily.
Industry-Specific CSP Preferences
Certain industries show distinct preferences for CSPs. E.g. the Banking/Insurance industry leans heavily towards CSP 1, particularly companies 2 and 5 with 100% of their workloads there. Healthcare companies 10 and 11 have a high allocation in CSP1 it too. This preference could be due to specific service offerings, compliance, security features, etc.
Diversification and Dominance
Many companies distribute workloads across CSPs, leveraging varied strengths and to mitigate risks. Yet, CSP 1 emerges as a dominant player, particularly in sectors highlighted above.
Trends by Cloud Program Start Year
Companies starting their cloud programs more recently show tendencies towards a single CSP, while those with older programs show a more diversified CSP usage. This is a natural evolution in the cloud journey.
Emerging Opportunities
Noticeably, CSP 3 is gaining ground, especially among companies that started in cloud post-2016. This shift could signal changing market dynamics or improvements in CSP 3’s offerings.
Marketplace Buying Trends
Considering these trends, 80% of large companies will likely have cloud commits across multiple providers and buy via their marketplaces. Microsoft UK recently shared that 85% of customers with MACC are buying via its marketplace.
Key Takeaways for Alliance Teams
Tailoring your strategy to meet the specific needs of various industries is key.
Building strong relationships with dominant CSPs is crucial, but keep an eye on emerging CSPs for new opportunities.
_____
📈 Accelerate your Growth in Cloud Marketplaces
Transform your marketplace strategy with first-hand insights from Cloud GTM leaders in our 5-week cohort course. Learn in a community of great alliance leaders. Join 100+ alums from companies like GitLab, Darktrace, IDC and others.
Comments