Navigating Cloud Growth & Consumption

Cloud hyperscalers show high growth and margins, but sustaining them requires new acquisition strategies. In this race, 💡 marketplaces are not just transaction platforms but ecosystems driving powerful network effects and cloud consumption.

🛠️ Six Cloud Use-Cases on Average

Research by UK regulator Ofcom reveals that as businesses embrace the cloud, 33% purchase all 3 types of cloud services (IaaS, PaaS, and SaaS), with 35% buying a combination of IaaS and PaaS. At the same time, 78% of respondents use SaaS.

IT spend is shifting towards software rather than infrastructure consumption, making it essential for hyperscalers to be the first-choice platform for ISVs.

Buyers often prefer best-in-class SaaS products. If these products run on a specific cloud, it not only drives cloud consumption but also triggers the purchase of other services.

The average number of cloud use-cases is 5.7, with 53% companies having 6+ use cases (see the image). This is roughly consistent with assessment of Jay McBain from Canalys that 7 layers of technology bought in the ☁️.

🎯 What Makes Marketplaces Central?

The research shows strong evidence that all hyperscalers seek to grow their cloud marketplaces as an essential distribution channel.

Among the goals they shared:

✔️ “Marketplace to become the most strategic channel that ISVs use to acquire new customers.”

✔️ “Marketplace to be the primary online distribution channel for both first-party and third-party solutions.”

Oracle, for example, noted that while marketplaces are not yet a significant revenue source for hyperscalers, they “can act as particularly powerful generators of network effects,” especially for those customers who use marketplace spend to meet spend commitments.

💰 Co-Sell Driving Cloud Infrastructure Consumption

Ofcom’s research unveils that hyperscalers see “co-selling schemes and marketplaces as ways to develop the ecosystem of services they offer on their infrastructure and ultimately as a lever to drive underlying infrastructure consumption.”

One of the hyperscalers explained that ISVs are “an important sell-through channel” which are “actively selling solutions that run on their infrastructure, helping us acquire new customers and driving more consumption from existing customers.”

Another stated more directly that “the marketplace is built primarily to drive underlying consumption.” Consequently, “marketplace partners will be offered increasingly tiered incentives and programs, depending on how much they drive infrastructure use ….”

📈 Navigating ☁️ Future

As we move to a world where cloud adoption is expected to roughly 2X in the next 3 years (Goldman Sachs, McKinsey & Company), it’s essential for SaaS companies to learn what’s driving hyperscalers and how to partner with them effectively.

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