How Cloud Marketplaces are Changing the Future for Channel Partners

A look at how resellers are leveraging first-move advantage to differentiate themselves with the Cloud Marketplaces

When Tackle launched our 2021 State of the Cloud Marketplaces Report, we had four predictions for this year, including: Channel partners that learn to differentiate with Marketplace will start on a new journey.

Channel partners that learn to differentiate with Marketplace will start on a new journey.

It wasn’t so long ago that the hyperscaler Cloud Marketplaces like AWS, Azure, GCP, and Red Hat, weren’t an opportunity for channel partners as much as a source of friction between them and ISVs. 

The real reason for the friction requires a look at the wider trends driving the popularity of Marketplaces, including a shift in buyer behavior. Buyers are increasingly using software purchases through the Cloud Marketplaces to burn down committed cloud spend, accelerate time to value, simplify procurement, and gain fast access to tools. And that’s only growing year over year. 

As buyers move to the Marketplaces, ISVs follow, which means ill-prepared channel partners have seen deals move away from their business leading to friction and confusion. The result was a bit of a rift between the Cloud Providers and the channel partners (and consequently the ISVs).

However, some mature channel partners have now recognized the opportunity that Marketplaces represent. After all, 83% of buyers said they are likely or extremely likely to purchase through the Marketplaces in the future, representing a 12% bump from the previous year, according to the 2021 Tackle State of the Cloud Marketplace Report. 

At the same time, the Cloud Providers have created programs that permit the channel to engage directly through the Marketplaces like AWS’s CPPO and Microsoft’s CSP. Both parties recognize a vested interest in working together with the channel.

Read More: Tackle’s Guide to AWS Marketplace’s CPPO (Consulting Partner Private Offers)

Ultimately, the stage is set for forward-thinking channel partners to capitalize, even if it’s still a little unclear what the ideal set up will look like. 

What we do know is that channel partners who embrace digital transformation, new concepts around consumption-based pricing and product-led growth, and Cloud Marketplaces in their strategies will be better prepared to differentiate themselves in future. 

Further, ISVs need to consider how they can benefit from how their own channel partners structure a relationship with the Marketplaces. Working with lean-in channel partners ultimately allows the product or service to be put in front of more prospective buyers. Smart ISVs are actively working to shape how their channels play in the world of Marketplace selling.


The role of channel partners in Cloud Marketplace

Traditionally, enterprise buyers trust channel partners to recommend effective solutions and services. Channel partners have spent years building reputations and relations based on trust. Maintaining that level of trust and service regardless of that fact that they’re operating in the Cloud Marketplace is key.

Further, channel partners need to think beyond simply using Cloud Marketplaces to streamline procurement. While that is one benefit, the ultimate payoff will be reserved for partners who are able to translate the trusted partner-buyer experience to the Cloud Marketplace, balancing what is valuable to buyers from traditional reseller relationships with the unique benefits that come with selling on the Marketplaces. 

Read More: 2021 State of the Cloud Marketplaces


Good, better, best: How channel partners leverage Cloud Marketplace

When thinking about how channel partners leverage the Cloud Marketplaces, it helps to start with an understanding that this is very early stages. Tackle is seeing channel partners just beginning to embrace and consider how this new model can fit into their future. However, early adopters who are using Marketplace today can be placed into three general categories. 


Type 1: Traditional resellers simply selling through Marketplace.

The most common way channel partners get involved with Marketplaces today is via technology resale. It’s basically a lift and shift strategy. The business that was flowing from ISV to distributor to reseller, shifts to be the reselling of an ISV solution listed in a Marketplace. Buyers maintain purchasing consistency with the reseller as seller of record. Software sellers keep their channel partner loyalty and incumbency. However, the value add is basically limited to easier transaction processing.

Tackle is seeing a lot of activity across Cloud Providers to ensure programs supporting technology resale are available, competitive, and simple.


Type 2: Owning the cloud transformation

Early movers of channel transformation have moved beyond Marketplaces for technology resale. Many of these partners started as Type 1, but have now expanded their cloud services offerings. This class of partner is helping customers in major cloud transformation projects while also setting up and managing cloud spend agreements for their customers. These partners are instrumental in their buyer’s overall cloud strategy and maximize cloud spending power by helping buyers secure the cloud services and the third-party software they need via Cloud Marketplace procurement.

We are seeing Cloud Providers further develop these programs as well in an effort to “bundle” product and service solutions to deliver better, more comprehensive customer outcomes.


Type 3: Strategically leveraging the Marketplaces

The most aggressive channel companies are undergoing major transformations to team with the Cloud Providers and to develop a portfolio of managed cloud services. This group is not interested in low margin, low touch software resell. Rather they are developing fully managed, well-architected, cloud services including third-party software solutions. Pricing is bundled at a managed solution level versus margin on a software purchase.

For example, a Type 3 partner might be delivering a fully managed SAP service on a particular cloud platform, or a secure compute platform leveraging AWS or Azure or others coupled with best-of-breed cloud infrastructure security. 


The future of channel partners

Channel partners earned their spot in the classic software supply chain by differentiated value add. They helped companies discover, try, procure, and deploy solutions from diverse suppliers. As buyer behavior changes, and solution discovery shifts to digital, partners must adapt their value add to this new paradigm. 

We predict that channel partners who are able to combine the value-add with the Cloud Marketplaces buyers want to purchase from will outpace competitors. 

We predict that channel partners who are able to combine the value-add with the Cloud Marketplaces buyers want to purchase from will be ahead of competitors. 

However, keep in mind buyers aren’t necessarily concerned about which Cloud Marketplace they’re purchasing from, they’re focused on the end result of a product or service that works well and solves a problem for the best price.

Tackle expects that eventually some channel partners will build their own Cloud Provider-agnostic Marketplace (Private Marketplaces) that couples their recommended products and services, creating a one-stop-shop buyer experience. 

We also see the Cloud Provider programs like CPPO and CSP continuing to evolve and integrate with the channel partners. 

Though we can’t predict exactly what will happen, we do know that channel partners can’t dismiss or ignore Cloud Marketplace. As ISVs start to expand their business (i.e. specialized sectors, international markets), it is clear that channel will have a role to play. Channel partners who begin thinking strategically will be ready when it happens.

To see how Tackle can help you get listed and scale your Cloud Marketplace revenue, schedule a demo.