Brace for Budget Tightening with Cloud Marketplace

John Jahnke:
All right. I think Casey’s opening it up. Welcome everybody, thanks for joining. Look forward to the topic today. We’ll give everyone a few minutes to filter in and we will dive in. We have coast to coast coverage from California to Boston, brief stop in Buffalo in the middle.

Mike Asher:
Who’s in Boston?

John Jahnke:
Ben.

Benjamin Cook:
I’m in Boston.

Mike Asher:
Nice.

John Jahnke:
Is it sunny in Boston today? I know you were getting monsoon the other day.

Benjamin Cook:
Yes. It’s a rare, rare sunny day. Actually, it’s been pretty warm all summer, a lot more sun than usual. But it’s great, mid eighties, bright and sunny, couple clouds.

John Jahnke:
Didn’t you say it was a unusually dry summer in Boston?

Benjamin Cook:
Yeah. So last July, it rained 30 inches, this July, it rains one. So, it’s been unusually dry, but this week’s been a little bit more wet, so we’re actually really grateful for that.

John Jahnke:
Are we in California drought on the other side of the country?

David Schneider:
We are still dry.

John Jahnke:
So dry.

David Schneider:
We are just dry.

John Jahnke:
Yeah, that’s no good, that’s no good. Well, hopefully everyone on the call is joining from somewhere sunny and not super dry. All right. We’ll get started in two minutes, people still filtering in. Welcome, welcome. And we will do some introductions to start. It’s fun having finance people on a sales call, I love this. I can’t say it’s every day I have two CFOs on a call talking about sales.

Mike Asher:
CFOs are definitely part of the fun crowd.

John Jahnke:
Having known you both for a while, I know that’s true.

David Schneider:
We could do a whole nother session of how to use your CFO in a sales campaign. And I’ll tell you, in my experience CFOs end up being some of the best closers out there.

John Jahnke:
Yes, indeed. Yes, indeed. All right, that’s a great spot for us to kick off introduction. So, my name’s John Jahnke, I’m CEO at Tackle, excited to be here and really excited to be joined by a few amazing panelists, as we talk about how you can brace for budget tightening with cloud marketplaces. And just quick agenda wise, before we do intros, I’ll do a bit of a preamble on what we’re seeing in the market from Tackle’s perspective. And then we’ll dive into a chat about the current economic climate and changes we’re seeing impact buying and selling cycles.

John Jahnke:
And then from there, we’ll shift gears into talking a bit about cloud and marketplaces. And we’ve designed this to be really an interactive discussion, so please feel free to put questions in the chat, ask questions in Q&A. I’m going to be the MC for the discussion, so I will do my best to weave those into the conversation as we go. And let’s get after it. So, why don’t we start with Mike Asher. Mike, if you could introduce yourself, we can jump in from there and you can hand it off to Ben or David.

Mike Asher:
Okay. No problem. Hi everybody, my name’s Mike. I am the CFO, again, part of the fun crowd of a company called Neo4j, a pretty cool database company, which is based in Sweden, but I’m here in the Bay Area. My experience is mostly with, well, with technology companies. I’ve been the CFO for a lot of companies for a while, so I’ve seen a bunch of boom times and downturns in the economy. So, this is just the latest one, but each one has a different wrinkle. Ironically, I actually started my career as a software developer, but then switched over midstream to be a CFO. And I’ve been in finance for very large public companies to very small startups. I also happen to be on the board of Tackle, which is how I know the team here. So, really nice to be here and I look forward to a good discussion. Why don’t I hand it over to Dave next?

David Schneider:
Great. Hey everybody, I’m David Schneider. I’m actually an investor in Tackle and from a firm called Coatue. But prior to joining Coatue, I spent my career, about 30 years, running go-to-market revenue teams. Most recently, 10 years at ServiceNow, where I led all the go-to-market teams from a hundred million dollars to about $5 billion. And prior to that, data domain, another data storage company from $0 through IPO and eventually about a billion dollars in revenue when we sold the company. So, I’m excited to be here talking about all things marketplaces and all things revenue.

Benjamin Cook:
And I’ll take it from there. So I’m Ben, I’m the CFO of Tackle, and my entire career I spent in tech. I joined Tackle about eight months ago. Prior to that, I was a CFO at Klaviyo, which is a marketing and customer data company based out of Boston. And then prior to that, I spent the last decade or so at Qualtrics, helping it grow from about $20 million in revenue when I joined, to about a billion dollars when I left. So, seen all sorts of interesting challenges and opportunities through all that.

John Jahnke:
Awesome. Yeah. And maybe just a few words. Mike’s been with us for a long time, really since we got started with Tackle, but I think brings really unique perspective, both as a big consumer of cloud, as a company that marketplaces, and a later stage growth company. So, I think that’s one perspective we have on this call. Ben, being CFO of Tackle, moving into the growth phase of our journey and really scaling. And obviously marketplace is our business, we help hundreds of software companies sell through the marketplace, but we also leverage marketplace extensively internally in our buying process. So, I think interesting perspective there. And then lastly, Dave Schneider brings the revenue, I think, a combination of the revenue executive and the CEO persona to this call, and has partnered with CFOs, has sold to CFOs, and I think just is a really unique compliment. So, thanks guys for being here, really excited.

John Jahnke:
So, just from an intro standpoint, the current climate, every software company is looking for any way to win business that they can, but selling has definitely gotten more difficult over the last year or two. And according to Forrester, 75% of buyers say their average buying cycle has increased in length over the last 24 months, and a bit counterintuitive with all the talk of product line growth and usage based pricing that you see in the industry. And we’ve seen buying committees expand and enterprise purchase cycles are taking longer than ever. With procurement processes becoming more rigid, buyers are tightening up budgets and companies are more focused than ever on their bottom line. And efficiency is really key for all companies, both for buyers and for sellers. And budgets are getting harder to find, but it doesn’t mean that they don’t exist, and your ability to find and attach to new relevant budgets as a seller are really critical.

John Jahnke:
And this is where enter the clouds. So, IDC estimates full year cloud spending this year in ’22 will grow 22%. And that means we’re going to add approximately $90 billion to the cloud budget, making it top out around a whopping $490 billion. And cloud marketplace enable both buyers and sellers to take advantage of this rapidly growing budget. And those who can take advantage of this movement are winning. And just a few examples, so Mike Scarpelli, who’s the CFO of Snowflake, in Q4 we talked on their earnings call about how $700 million of their $1.2 billion in bookings were generated by co-selling with the cloud providers. So, a pretty amazing statistic. George Kurtz, who’s the CEO of CrowdStrike, talked about how they were able to cut their sales cycles down by nearly 50% when they were leveraging AWS marketplace. And then Seek, who’s a Tackle customer, is a cloud IoT platform for manufacturing, and they saw their marketplace revenue grow from zero to 20% of bookings over two years.

John Jahnke:
And I think that’s a particularly interesting case since it’s a vertical solution, not traditionally sold to the cloud buyer. And lastly, Satya this year from Microsoft at Microsoft inspire, talked about how they’ve done nearly $32 billion of cloud co-sell since they initiated their program in 2018. When we started Tackle, we believed that clouds had changed the way that so much of technology had operated, but had yet to change the way that software was bought and sold. And marketplaces represented the initiation of enterprise sales moving from offline to online. And we’re in the earliest days of this offline to online transformation of B2B software sales, but we’re really seeing things start to accelerate. And we believe, over the next five years, you’ll continue to see cloud budgets and enterprise software budgets, the lines between them will start to blur, and that will turn into this trillion dollar super budget between cloud and enterprise software budgets.

John Jahnke:
And just personally, as a lifelong B2B seller, pre-sales person, customer success person, it’s been really fun to be part of this evolution over the last five years. And I’m excited to dive deeper into how we can help everyone navigate through these economic times of marketplace. So, maybe first and foremost, why don’t we start with, how are you seeing the current economic landscape impact buying and selling processes? I mean, Mike, I’d love maybe to start with you.

Mike Asher:
Yeah. So, as I mentioned, and John mentioned, I’m the CFO of Neo4j. And so what’s interesting for me is, I’m seeing both sides of the equation here. So, I’m a CFO, we’re buying lots of software, lots of people are selling to us, and I’m looking at budgets, I’m looking at the economy, I’m looking at our forecasts and things like that, and helping make sure that we’re prioritizing what we buy. I also work closely with our sales team who is now starting to leverage the cloud providers as well and the marketplace. And so, at a high level, and I would say this is no surprise, just with the macroeconomic climate, inflation rates, there’s wars going on in Europe, there’s just lots of uncertainty, which makes everyone more hesitant, including me at Neo4j. So, when I look at the spend, we’re still spending on important initiatives, but we’re trying to say, all right, what’s the must have? What do we need to spend now? What can we push off? Let’s be judicious with this.

Mike Asher:
So, that’s on the spend side, so we’re doing that. On the selling side, we’re still getting deals done, there’s still a lot of demand for our product, but we are seeing, especially on some of the bigger ticket items, deals take a little bit longer, more scrutiny where there’s yet another level of signatures. And what’s interesting in times like this, I see our sales team go to their strengths, and what we’re seeing in some of the strong areas are when we leverage partners, and that could come in the form of SIs, but it could also come in the form of more modern cloud partners. And so, we’re seeing the more progressive sales people that we have really leverage the marketplace during times like this, to accelerate some of their deals or to make them more certain that they’ll get through, that they won’t get cut because they’re part of an important, bigger project that’s leveraging some of these partners. So, we’re seeing all of that. I’m happy to delve in more as we have more of the question.

John Jahnke:
Yeah, that’s cool. Maybe, Schneider, if you want to [inaudible 00:13:44].

David Schneider:
Yeah, I was just going to add onto, Mike was saying, because I’ve sold the personalities and personas ranging from the CIO to the CFO, to lines of business, et cetera. And unfortunately for me, I’m old enough to have gone through a few cycles, and this one is a slightly different cycle than prior cycles that happened all at once. There was a seminal event with Lehman Brothers closing or the dot com crash, and those things were like, the world just got really constrained really quickly. I think we’re surfing a wave into a recession at this point, with different parts of the market slowing things down, but almost everybody’s going through another layer of inspection in the sales process. And whenever you’re a go-to-market person or a go-to-market executive, you have to think about, what are the questions that I could ask that will help me understand where this fits in the priority and how does somebody want to buy?

David Schneider:
And so, if you’re not asking those questions in a good cycle or a bad cycle, that’s an opportunity for you and your sales team to think about, where does this project stand against the other priorities? Who’s driving it? What happens if they don’t do it? And what’s the best way for them to acquire it? Where they can use up budget dollars through partners or through other mechanisms that make the most sense. And I think that’s really the crux of this conversation, John, is this notion of, the cloud marketplace may be a speed ramp to a deal. And it doesn’t guarantee you a deal, but it gives you an opportunity to find money and sources of money that may already be contractually obligated that you need to tap into.

John Jahnke:
Great. And Ben, I’d be curious to hear from you on, obviously Tackle’s a earlier stage growth company, how is our buying? We buy a lot of software, we consume a lot of tools, we’re a fully remotely distributed company, always looking for ways to automate and innovate. But how’s our buying process changed?

Benjamin Cook:
So, it has changed pretty radically over the past year or so, and ultimately, as we’ve continued to evolve as a company, we’ve gone from more of the startup phase to more of the growth phase. And it’s been a lot of change from focus on speed, to focus on scalability, and combine that with how markets have shifted over the past year and how multiples have become compressed. I’ve had a lot of conversations with a lot of other CFOs in similar situations to Tackle, where there are a lot of conversations about, how do we focus more on profitability? How do we get away from the grow at all cost mindset? And I think Tackle, we have done a pretty good job at that over the past six months or so. And we’ve been really focusing more on asking our vendors more questions, going through more diligence.

Benjamin Cook:
And frankly, the biggest change I think is twofold. One, we’re going through a much more robust vendor selection process every time we choose a vendor, where vendors will come to us and we’ll actually have three or four people going through a full process. And when you go through that, little things can be the tipping point between going with one vendor versus another. And the other is just vendor consolidation, and as we think about our overall tech stack, making sure that every technology we utilize has value for us and that there’s not duplication of vendors, et cetera, throughout. And I think that it’s pretty common, especially across tech, to see other functions going through that same increased level of rigor overall.

John Jahnke:
Do I have any comments about that?

David Schneider:
Fairly logical.

John Jahnke:
I would expect nothing less from our CFO fronts.

Mike Asher:
Yeah. At Neo4j, I mean, one of the things that we’re doing, so I think Ben said something that resonates of, in 2021 money was just pouring into companies, like tech companies, and really the stock market’s at a high, it was really grow at all costs and invest for the future. So, when we were buying software, it was really on an eye on, okay, wow, we need to buy ahead of the curve here, because we’re growing really fast for year two and year three. One of the things that we look at now is like, okay, what do we need right now? Can we get in smaller, prove it and then grow it over time? So, that’s another way that we’re looking at it. And conversely, we’re seeing that in some of our sales cycles too, where is there a way instead, maybe the big deal that we are going after may or may not be there, but is there a plan B where we can get in quicker, maybe smaller bite size, but then prove it and grow it fairly rapidly? So, we’re seeing that on both sides of the equation.

John Jahnke:
Yeah. We’ll definitely come back to that point as we talk more about cloud and marketplace. And just curious to hear your thoughts just on cloud from a consumption standpoint, growing through these times, staying the same, strategic, and maybe even how a marketplace fits into that for you as a consumer.

Mike Asher:
Me?

John Jahnke:
Yeah. You, Mike.

Mike Asher:
Oh, yes. Yeah. So, through all of this is what everyone probably knows is called the cloud transformation. So, this it’s not like that this was a hundred percent and then the economy hits a speed bump and it goes from a hundred to zero. Every company is still going through this, still moving their workloads to the cloud. I’m hearing every day that big conservative financial institutions, for example, are moving more of their workload to the cloud. So, this is not slowing down at all. And the economy, yes, it’s giving people pause on what do they buy right now versus later, but the mega trend is clear and it’s there, the cloud transformation is happening. And then also from a partnership standpoint, the big SIs and the regional SIs and things like that. But the cloud providers, it’s a massive business and is growing really fast, and that train has left the station.

Mike Asher:
So, while we see changes from last year to this year, in terms of some of the details, the overall trend no doubt is still intact and moving in that direction. So, even if we’re not getting there as quickly, from a Neo4j perspective, as maybe we thought a few quarters ago, it’s still a huge part of what we discussed and where we’re investing and where we’re headed.

Benjamin Cook:
Hey, Mike, a question on that for you actually. So, within Tackle, what we’ve started to do is bucket our types of spend into critical can’t do without this spend, versus nice to have, versus luxury spend at the bottom there, and then applying the resources commensurate with those different buckets. When you talk about cloud providers and spending with those cloud providers, for us, we bucketed that into the critical have to spend this money, because it’s going to keep the lights on for us as a business. When you think about how the markets have changed, are you still spending as much with cloud providers now as you were historically? Or how do you think about that transformation with spend with cloud providers?

Mike Asher:
Yeah. So, it’s an interesting question. And so, maybe there’s two competing factors here, one is the mega trend that we were talking about, where every year it’s more and more in the cloud. And then I guess the headwinds there are the economy, and what you were saying earlier, growth versus efficiency, that kind of calculation. And so, what I would say is that even though 2022, with the economy, there is more caution, and I guess maybe I’ll say thoughtfulness, going into the different purchases. We’re still going to invest a whole lot more with the cloud providers this year than last, regardless of that, so that’s why my feeling, at least, is the overall trend is eclipsing the macroeconomic headwinds. It doesn’t mean the macroeconomic headwinds aren’t there. And like you said, looking at must have spend versus nice to have is certainly something that we’re doing, but overall, our spend is significantly higher with the cloud providers and the marketplace this year than last year, even with all these factors.

John Jahnke:
Dave, to that point, I’d be curious to hear more from a revenue executive standpoint, how that cloud movement, you’re seeing that play out either across your portfolio or peers in the industry.

David Schneider:
Yeah. I think the days of somebody building an internal data center are frigging gone. You don’t ever go into a CIO’s office or a CFO’s office and look at the line item for a $400 million brand new data center. I just haven’t heard that happening very often in all of my enterprise contacts right now. So in general, the spend and real estate spend, everything else is moving to a cloud provider or a hosting provider, et cetera, and the movement of everything outside your real estate is going to be there. I think to the extent that other folks we’re talking about, buckets of spend, you have to associate yourself with the mission critical activity, that’s your job as a software technology provider, builder of things, it really is important for you to link to something that’s important.

David Schneider:
If you’re in the nice to have/luxury spend item list going into a downturn, you got to figure out how to convert your current positioning to something else to be successful. The cloud providers, they’re going to grow at the rate of the market and they’re going to go, maybe not 23%, 22% on a huge number is massive. And I do think the trendline is in that way.

John Jahnke:
Yeah. I think the theme around clouds, the cloud providers are rapidly accelerating budget consolidation in enterprises. Mike, I think when we talked earlier in the week, you were like, “Hey, outside of people, this ends up being one of the largest costs in growth companies.”

David Schneider:
And correct me if I’m wrong, for someone like Mike, when AWS or Google or Azure is coming to him and saying, hey, for your internal use and for your customer use, et cetera, we want you to commit to, I don’t know, $50 million worth of spend. Now Mike’s got a committed number that is related to the consumption that he needs to run his business, but there’s also just a committed number. And the cool thing for all the people on the line who are thinking about using marketplaces to sell, is that committed number is really, really important to go access and figure out, how do I unlock some of those dollars from people like Mike? That’s really the key here.

John Jahnke:
Yeah. Mike, anything you want to say to that point? I think that’s a powerful point. We do the state of the cloud marketplace survey every year, and one of the top reasons why sellers want a marketplace is the ability to tap into committed spend. And I mean, from a buyer CFO standpoint, is that something you actively think about as a hedge to your cloud commitment, or an ability to make even a bigger commitment?

Mike Asher:
Yeah. And it’s really interesting because this committed spend, it encompasses multiple things, at least for me and Neo4j. One would be, what are we spending directly in cloud consumption? But it also gives us the ability to buy software from ISVs as part of this committed spend. So in some ways, by committing the spend, I’m pre-committing but getting a discount for it. And so therefore, if I end up buying software from a software vendor that is not the cloud provider, in some ways I’m getting an additional discount because it’s going to impact my overall spend. So then, when someone comes to me and says, hey, we want to buy this piece of software for $100,000 or $200,000, or whatever it is, in some ways it’s actually discounted from there, because I’m getting a discount just through another mechanism. But also, if someone comes to me and says, hey, we want to buy $200K, it’s not going to count against our committed spend.

Mike Asher:
Or someone comes to me and says, we want to buy this $200K piece of software, and it is part of the committed spend. It’s exactly what Dave and Ben were talking about, where, hey, it still has to meet the bar of, is this really important and must have and going to move the needle for the company? But right below that is, hey, we’ve already committed this spend, whether the macroeconomic is slowing down or not, that is all systems go and we’re getting the discount. It just makes it that much easier, as opposed to finding another bucket of budget that we have to go find.

David Schneider:
Yeah. I don’t think it’s this… The parallel I look at is, if I’m going to get cash back on a credit card for buying something, I’m going to use that credit card versus the non cash back mechanism. So, it’s just a buying preference to go do that. And I think most of us have experience in our personal lives where we’ve now got affinity cards based on some kind of discount or value. We basically have an affinity card with our Google or Microsoft or Amazon relationships, where we’re getting value beyond just this transaction, and we are thinking about ways to unlock that value.

John Jahnke:
I love that credit card analogy. I think it’s a really simple way to think about the power of these marketplace budgets.

David Schneider:
I’m a simple man, John, simple.

John Jahnke:
And one other phenomenon we’ve seen, and this is an unscripted question, but the cloud budgets have changed, where three years ago cloud budgets were often owned by either director of operations or a head of engineering. And as they’ve grown and become more strategic and larger in scale, they have transitioned to finance and procurement ownership. I’d be curious, Mike, was the ultimate cloud budget always owned by finance, or did your company go through that evolution over the last handful of years?

Mike Asher:
Yeah, that’s a really good question. And this is different than what I’ve seen in my career is, it is a change where, for example, we have a SaaS product and we run it in the cloud. So, that particular portion of our cloud spend budget would’ve been owned by our engineering group, because it’s essentially a cost going to SaaS, going to market. But now, the cloud budget, I guess two things, one, it’s gotten broader, where it’s impacting multiple areas of the company, and it’s also gotten much, much bigger. So, like you said, for a software company like Neo4j, there’s the, hey people by far is our biggest investment area, but our cloud spend and these cloud commits are there, a clear number two, even bigger than facilities and all this other stuff. And so therefore, it’s become not only multi-departmental, but much bigger, to where companies like ours are actually hiring people to manage this because it’s so big.

Mike Asher:
And if we can just make it 10 times more efficient or negotiate it a little better, the impact is so large. So, it’s getting a lot of attention up to sea level executives, and therefore, if the market’s going that way, the trend is going that way, the spend is already committed there. It’s just removing friction, it’s not a magic wand where you just say, hey, we’re part of the cloud, and all of a sudden deals are going to show up on your doorstep. But if you can remove friction in any meaningful way in this type of environment, that’s where you want to be. And so, it’s getting a lot of attention, in a way that I haven’t seen with other partners, like SIs and other things, it’s taking more of the budget and it’s more expansive.

John Jahnke:
And I like to just circle back to key takeaways at the end, but I do think the durability of the cloud budget, the strategic relevance of the cloud budget, and how cloud and enterprise software budget, those lines are starting to blur. I think that’s one of the key takeaways for this.

Mike Asher:
That’s right. And it’s multi-year, we’re not just committing to 2022, we’re committing to a three year cycle.

John Jahnke:
So, there was actually a question in the chat related to committed number. If you have a committed number and already have a path to achieve it, is it still motivating to make a purchase using these funds for a software purchase?

David Schneider:
I think the CFOs are probably better to answer that than I am. I have a belief in that, but I don’t know. Maybe Ben, what do you think?

Benjamin Cook:
So, my perspective on that is, yes, and the primary reason is simply, when you go through there, you actually have the ability to renegotiate your committed spend with the providers. And so, if you can build a specific run rate where you’re exceeding your committed spend, then you can go back to any of these cloud providers and renegotiate that and get a larger committed spend overall. So, when I was at Klaviyo, we actually had a committed spend of tens of millions of dollars with one of the cloud providers. And it was very similar to that where it’s like, yes, we felt like we had a strong path to getting there, but we still wanted to push all of our spending there in every instance. I mean, if you can save 1% or 2% off of $40 million by renegotiating, you want to do that every time.

David Schneider:
What do you think of the argument, Ben, though of reducing paperwork and putting a new vendor in your system? And all of that. One of the challenges when we were at ServiceNow is the thousands of vendors that we were having to manage, which included doing diligence on the various vendor risk and having direct party relationship versus third party relationship. One is a vendor, for you as a software company, if you go through Amazon or one of the other players, you know you’re going to get paid at the end of the day. You could argue about when you’re going to get paid, but you’re going to get paid. Whereas you’ve got risk selling through to a SMB or some other company about getting paid potentially. Plus, you got the contract process you’ve got to go through, the vendor risk assessment. What’s your take on the consumption side of that, when your team’s like, oh, just another vendor we got to sign up, what do you think about that?

Benjamin Cook:
Yeah. And there’s two sides of this. I think from our perspective, from a Tackle perspective, if we are buying through the marketplace, there are definitely benefits from the ability to get onto some standard contract terms, which can at times greatly accelerate our legal processing, which is good for the sellers, but is also really good for us, to not have to spend as many resources on legal or continually be following up with, sometimes, what can be a weeks long process going back and forth on contracting. As well as from an accounts payable standpoint, we actually have a large portion of our vendors flowing through marketplaces today, which dramatically reduces the amount of hours that need to be spent on understanding how do we bill for X, Y, Z thing. And on the flip side, when we do sell a decent amount via marketplaces, it’s really helpful on the collection side to know that the collections are going to come, and so we don’t have to have as many AR resources, we can feel much more confident in the ability to get those collections in because they are going through a cloud provider.

David Schneider:
Thanks Ben.

John Jahnke:
So, we had another question and I’ll pose this, I’m not sure, I may end up being the one to answer it, but wondering if folks are seeing teams within their companies taking advantage of pay-as-you-go listings on marketplace, given the capital shortage. We just heard from our VP of product management that he wants to deprecate pay-as-you-go to focus only on private offers.

David Schneider:
I don’t know if I have enough information to answer that question. You probably see it on your base more than mine.

John Jahnke:
Yeah. Maybe I’ll take a whack at this from a Tackle standpoint, and then maybe we could pivot the question to talk a bit about pay-as-you-go versus contract, and how you think about that finance. But from a marketplace standpoint, the majority of dollars today flowing through the marketplaces are related to private offers, people who are accelerating transactions, tapping into the cloud budget, leveraging the cloud contract to do first deals faster and bigger, repeat deals bigger. And we do expect that experience to evolve over time. And you end up in the classic, it depends answer around pay-as-you-go versus private offers, because it does depend a lot on your product and the way it’s consumed, but people don’t necessarily shop on marketplace today. If you think about where your products are discovered, a lot of times people will Google a problem, will find their way to some content that leads to potentially your website.

John Jahnke:
And then they read some case studies or read about your product and end up initiating some sort of conversation there. Marketplace today are much more about fulfillment and execution, but we do think that’s going to change over time. And I like to look at the consumer landscape, in 2000 you bought books from Amazon, you never would’ve thought about buying a TV, in 2005 you didn’t think twice about buying a TV. I think the shopping behavior is going to change significantly, and as people become more accustomed to using marketplaces to go faster and have these consolidated spends, then I think shopping experiences do start to evolve. So, that’s one we could definitely chat about offline, feel free to ping me or anyone from Tackle and we could help you navigate some thoughts there. Mike, Ben, just from a finance standpoint, when someone wants to start something new and there’s options for pay-as-you-go versus contract, how do you steer those discussions?

Mike Asher:
At least from my perspective, so we are doing mostly the contracts and the private offers, there’s maybe some pay-as-you-go. And I’m not sure exactly, pay-as-you-go, is that referring to, you don’t need the contract, you just get started, you go? Or is it where the lead is coming from? It seems like maybe there’s-

John Jahnke:
Yeah. The nuance pay-as-you-go would be starting with a free trial or a usage based model where you’re getting billed for gigabytes of consumption or something, usage based metrics.

Mike Asher:
So, I can describe what we’re doing and you can tell me what bucket it fits in. But we are doing what I would call a hybrid, which is we have private offers with contracts for a consumption based usage model. So, someone would sign up for a year, for example, with a minimum commit. But then it ultimately is based on consumption of big gigabytes and all that stuff, so it’s a hybrid maybe in this world. And we’re finding that this is actually a really good fit for the marketplace, where the ability to get started quickly, get going with a consumption based model makes the sales cycle and the proof of concept go much faster, because they’re not necessarily committing to some giant multi-year thing. It’s get going quickly, show the value, and grow it over time. And the fact that the procurement cycle can be quicker.

Mike Asher:
In fact, in advance of being on this webinar, I was talking to some of our sales folks who are using the marketplace, and what they were describing was some version of, look, Azure, AWS, and GCP, those are the ones that we are using, these big companies, they have figured out, it’s taken a while, but they’ve actually figured out with all these big fortune 500 companies how to work through the procurement process. So, when we show up, we don’t have to figure that out from scratch, so we can leverage that. And then if you also have maybe a pay-as-you-go type model, then the deal can get closed much faster, and it’s not as scary and doesn’t go through as much scrutiny. So, you’re getting quick, prove the value, and grow over time, and that’s what we’re starting to see.

John Jahnke:
Yeah. Cool. I actually think that contract with consumption, which is, the way that would get described in marketplace terms is a powerful business model. We see a lot of sellers take advantage of that, because you compare it to a free trial, free trial and SaaS consumes resources, and a lot of people are willing to pay, they know what they want. They don’t want some hacked version of your product, they’re willing to commit to a contract that they’ll only pay for what they use. And that is a flexible business model to get started. Believe that answered some of the pay-as-you-go question as we go.

John Jahnke:
So, I think just restating, cloud’s where it’s at, budgets consolidating, using the cloud relationships and contracts are pretty powerful. Private offers are a mechanism, but there is flexibility to start quickly using some alternative business models. Heard of benefit around collections, just guarantee around collections, maybe the timeline for collections could be a little more unpredictable, but knowing you’re going to get it is really, really valuable. So, just restating some of those benefits. All right. So, maybe Dave, from a sales professional standpoint, what are people missing? I think we’re, I’ll always joke, we’re in the third inning of cloud, we’re in the first out of the first inning of marketplace, and digital selling is a new skill set, marketplace is a new skill set. When you talk to sales teams and sales orders, what do you think they’re missing and what should they be doing in regards to this movement?

David Schneider:
Yeah. Again, I think that the greatest sales people out there remember to ask a lot of questions, and I think with marketplace, it is another series of set of questions you need to ask in your first call, just to find out who their marketplace provider is, do they have a contract, all that other easy qualifying things. And then as you progress through the sales process and you’re embracing some kind of value orientation to your deal, one of that element could be, as you’re doing the value prompter work, that you’re including the proposal through the marketplace and understanding the value to the customer through acquisition in that manner. I think it’s asking questions and continuing to qualify and doing the work that you know need to do as a rep, but oftentimes somehow forget to do.

David Schneider:
By the way, I’ll just make a call, there’s a guy on the call that worked for me 20 years ago, who is one of the best reps out there, John Farcage. And I’m like, I wonder if John’s remembering how to do this stuff or if I have to take him back to school and get them through the basics.

John Jahnke:
He could chat and comment and we could all find out.

David Schneider:
I’m wondering if he’s any good still. He was really good back then.

John Jahnke:
Nice. Okay. So, we just had another question come in. So, how would you frame the argument in favor of leveraging cloud budget when accounting may feel it muddles the point of budgeting and let’s team eat into the bigger bucket of IT budget? And I think a few different dimensions to that, one you could say, does the cloud budget become shadow IT? Or how do you think about the cloud budget when there’s these sub components that may be more departmentally distributed in your org?

David Schneider:
Don’t get me wrong, John, you’ve still got to go through an approval process. You can’t just… In most companies, especially in this economic climate, the days of just spending money willy nilly without getting somebody else to look at it, you’re going to still need to justify this spend. But I think the question comes from Paul is like, hey Paul, you’re not really mixing the budget per se as much as leveraging the vehicles that exist, and you still have to go through the approval signature process inside a company. It’s just one of the things that could help you speed up a deal. And maybe the CFOs have a different view than I do, but that’s how I would view it if somebody came to me to get something through this kind of contract vehicle.

Mike Asher:
Yeah, I agree. I think when the clouds first came out and we’re starting with this, the cloud, the committed spend, I think there was some confusion and maybe there still is some when it’s early, where all of a sudden there was this, oh my God, there’s this budget out there, and all we have to do is attach to it and it’s this free for all. I think that has matured over time, and I totally agree with what you just said of, ultimately it’s not going to be that CFOs and finance in companies don’t realize that there’s this big budget pie out there. It’s really going to be, no, of course you need to justify what you’re spending and buying, and you’ll still go through a similar vetting process, but it makes it easier in a lot of ways, it removes friction in a lot of ways.

Mike Asher:
It provides additional discount, like the credit card analogy, in a lot of ways. And it’s the future in a lot of ways, and people and companies are heading in that direction. So to me, it makes sense to take advantage of this as much as you can. And why would you go against this or not take advantage when it’s something that gives you that extra edge?

Benjamin Cook:
And for me, companies will handle this in a bunch of different ways. The way that we handle it is really, when spend comes in from a different department that wants to utilize the cloud budget, we don’t suddenly say, hey, this doesn’t hit your departmental budget anymore, it only hits the IT budget. We actually do push that dollar value back out to that actual department. But when it gets to me and I need to approve it overall, it’s significantly easier to get through me knowing that it goes through our cloud budgets, because there’s going to be financial benefits overall. And so, we can look at it more holistically, and you typically will get through approvals significantly faster by going and utilizing that alternative budget. So, that’s just how we do it here, but there can be many ways that it can be handled.

John Jahnke:
And I do think from a velocity standpoint, for those who maybe are less familiar with transacting through marketplace, if you can embrace things like standard contracts from the clouds, where you opt into the terms as well as the buyer opts into the terms, you can go from nothing to contracted in minutes to hours. Think about establishing a new relationship with a new buyer, especially a larger buyer, and Mike glanced over this benefit, of being able to do that where you’re riding on the coattails of the cloud provider. It’s just a very different process. When Tackle was growing, we built this company, there was no budget line item for a cloud marketplace platform, that didn’t exist. And we were able to leverage marketplace to tap into budget the same way that we’re describing today.

John Jahnke:
So, I think that use of contract, use of budget, making this a tool in your arsenal as a seller, everyone’s looking for more pathways to win and the best sellers know that there’s no one road. If you’re thinking about your options available to you and finding the path that makes the most sense, these are some of the good reasons. All right. Thanks, Paul, and great to see you on the webinar by the way. And we’re at about 10 minutes to go, so maybe we’ll just do a quick around the horn on any final thoughts people want to share, as well as a chance for people to ask final questions. So, Ben or Dave? Dave’s ready to roll.

David Schneider:
I was going to join in here really fast, John, because I think one of the questions that I often get is, how do I get my sales people to actually lever this, right? And how do I make sure they know it exists? I don’t know who’s on this call per se, but let’s say you’re a channel alliances person and you were tasked with an MBO earlier this year that said, you need to get us on the GCP marketplace. Well, that’s fine, that’s a goal. But my guess is, the person who assigned you that goal said, we need to get on because we want to unlock this much revenue. And so, anytime you take on an initiative like this, you really have to ask yourself, what’s the purpose of the initiative? I’m going to be responsible for doing it. And then, how do I create enablement for my sellers, my go-to-market team, my finance team internally to make sure they’re levering this appropriately?

David Schneider:
A marketplace by itself is not a panacea to all problems, your product still has to solve critical issues. What you want though is to treat or to train your sales people to think marketplace is a viable option for me to communicate custom or standard offers to my customers and help reduce friction. And I am seeing people, when we’re recruiting people into my portfolio companies, if you’ve been effective selling through a marketplace, that’s one of the gold stars that I put up there when I’m evaluating CROs or VPs of sales, or even regional managers, if I somehow get into those conversations. So, I do think, think about this as you’re recruiting people, as you’re starting a project, how you are going to enable the sellers to be comfortable with it. You can’t just sign up and then expect everything to work, you got to go do the work yourself to go make it happen.

John Jahnke:
Yeah, that’s great. I actually was talking to a CRO a couple weeks ago and they said they prioritize cloud go-to-market skills over domain expertise because they have so many people who understand their domain. They don’t have a lot of people who know how to sell in this era of ecosystem and cloud go-to-market, so they were specifically targeting those skills. So, we did get one question, I’m not sure, this one might be hard to answer. But should larger companies like CrowdStrike and ServiceNow phase out their data centers and get on the cloud? How would a CFO react to such a transition from a PNL stand point?

David Schneider:
I could tell you the perspective at ServiceNow. If we were starting all over again as a $0 startup in 2003, we may not have, or whatever it was, 2007, we may not have started with our own data centers. In fact, we didn’t start with our own data centers, but the cloud providers didn’t really exist. We built our own or used space in Digital Realty Trust, all those things, because we needed control before AWS and GCP existed. And then as we built that, we were purpose built for ourselves. That being said, over time they’ve introduced different workloads going to different places because it made sense.

David Schneider:
And I don’t want to get into the confidentiality of ServiceNow’s data center strategy. I would say, you always want to look at what’s the right thing for your business and keep evaluating how that’s going to tweak over time, whether it’s a CFO thing or just a business thing, margin’s important, control of the quality of experience is important. And then the final thing is, the strategic nature of the relationship you have with one of those providers. And again, in my past, we wanted great relationships with all the major players, we used their technology, they used some of ours. It was very helpful. And that was an increasingly important reason on how we are making choices.

John Jahnke:
Yeah. I think there’s a fascinating… When you look at companies that were founded in certain eras of technology and the cost of running the company, we’re in this transition with serverless, especially that the economics of building a new company in this latest era of cloud is insanely efficient. And there’s no doubt, consumption grows and grows significantly, data has weight and gravity, there are all these things that will cause you to drive massive consumption over time, but your ability to start small and be efficient.

John Jahnke:
And you don’t have to think about that as, hey, do I get rid of my data center or not? But your competitors are being born with that efficiency. So, that’s a different angle for the competition to think about. So, we had another question, stated to be a bit tactical, I don’t think it’s that tactical. What are the first steps one takes when looking to consolidate vendors? What kind of challenges are there when trying to gain visibility into what is critical, what’s nice to have spend? Does this data typically live in one centralized repository? And thanks for thinking our webinar was helpful. I think that’s a CFO question.

Benjamin Cook:
I can start. It’s hard when you get to a certain stage where you might have proliferation of technology in your company, and you’re trying to figure out, how do you get down to a finite number of vendors? How do you reduce duplication of vendors? Et cetera. And it’s been a process that we’ve been going through within Tackle for the last several months as well. I’ll start with the challenges first because that’s easier to answer, the challenges of this, first and foremost, are that you might have users of different technologies that care very passionately about using a vendor. And so, you might have four or five or six vendors that do the same thing, but you four or five or six different departments using them, and they don’t want to give it up because it’s going to be disruptive to them in the short term to get onto an overall enterprise-wide license for a single technology.

Benjamin Cook:
And so, I’d say that the most of our time has been actually spent with stakeholders today, understanding their use cases, understanding their concerns about moving to a different technology, and making sure that as we transition people that there’s the least amount of disruption possible. And I would just say from a actually how you do that standpoint, I’ve seen it start with procurement function. If you’ve got a procurement function, it can start with FPNA as well if FPNA is able to get a good beat or it can start with IT. I’ve seen it in different companies starting at any of those three spots, and just starting with get a list of all their technologies, a list of what they do, and then understanding what the usage of each of those is, and tracking that in whatever mechanism. Sometimes you have a vendor management system, sometimes you don’t. So, a little bit of a tactical answer, but there you go.

John Jahnke:
So, we did have a question in chat. I posted a resource to this cloud marketplace maturity guide by stage, which I think is a great resource done by our content team. But you’re a startup and you’re thinking about marketplacing, think about where you’re built, think about where your buyer’s wallets are. We see more companies being born marketplace native today, where they’re defaulting their selling motion to use the simple structure. So, I think it’s about focus, keep it really simple, think about private offers, and then also the majority of the buyers back to where the wallet is. When you understand that, the simplest way to start for a startup is just start asking your buyers, would it be easier to buy from us on your cloud build? Do you have a strategic relationship with a cloud provider? I think those questions, you can start before you ever think about marketplacing. And then Tackle’s always here to help people accelerate this journey and make it a business decision versus a product and engineering decision.

Mike Asher:
Yeah. And I would say, if a company is just starting out and you want to go cloud first and marketplace first, that’s one way to do it. And you set that up from the beginning. For a lot of companies that have sold without the marketplace for years, and now you want to introduce the marketplace at the company I’m at, now there’s a transition. And what we found we needed to do was to reduce friction with some of our sales teams. And so, what we ended up doing was saying, we are going to make a quota credit neutral, so the marketplace takes a little fee. But we said, we don’t want our sales people worrying about that because we want to encourage a lot of the business through the marketplace for all the reasons that we talked about.

Mike Asher:
And so, we ended up saying we’re going to remove that friction. And then also, there’s no substitute for just having a few folks who really believe in it and close some really good high profile deals. And so, for example, we have a win report that goes out, and every time a win report goes out with a marketplace deal, and they talk about how they close it faster, and it was aligned with our partners, that really gets the word out and starts moving things over with that momentum. So, we took a few of those steps while we’re in this transitionary period.

John Jahnke:
Yeah. That’s such a great… I think this tiger team approach, get a small group of people who care about selling in a new way, are inspired about this, to go win some deals and let revenue be the tailwind in your sale as you build your cloud go-to-market. Sometimes people try to educate everyone in their company, and there is a point for that when you’re at scale, but you want the social proof of why when you’re going out to do that, because you can almost broadly educate too soon. All right, we are at top of the hour. I want to say thank you, David, Mike, Ben for joining us today. Thank you everyone who participated, asked questions. If this is helpful, we have another webinar on September 8th talking about Google. And we are always here to support you on your cloud go-to-market journey. Have a fantastic day. We’ll talk to you soon. Thank you.