Busting Myths About Listing, Selling, and Managing a Cloud Marketplaces Business

Erika Childers:

All right, I think we’re in a great spot to get started. Welcome, everybody. Don, I’ll pass the baton your way to kind of set up the topic for us today, walk through some intros for our panelists, and then we’ll stop sharing screens for everybody that’s here. There won’t be a screen. We’ll keep it really conversational, like I mentioned. Feel free to put your comments and questions and things like that in the chat or in the Q&A, and we’ll get to as many as we can. Otherwise, enjoy the webinar and we’ll talk soon.

Don Addington:

Thanks, Erika. And Erika knows that I hate presentations, so she always does me a solid and doesn’t make me go through slides whenever I do webinars. So, if you’re a student of Tackle webinars, you know I rarely am flipping through slides. We are first very thankful for having everybody join us today, so really appreciate it. It looks like we got a great audience and I’m joined by a couple of Tackle family friends here to have a conversation today through really a lot of sort of myths and misconceptions about marketplace. And some of them I’d say are applicable if you’re looking to get into marketplace and you’re not yet there and kind of what are the sort of myths and misconceptions we see before you get there. And then we’ll carry that through the lifecycle of once you’re there and what’s happening.

Don Addington:

So, we’ve got a bunch of ground to cover today. I’m excited for the conversation. We’ll go through some introductions here. We’ve got Hillorie Farace if you’re a novice, or you can go with Hillorie Farace Di Villaforesta if you’re taking the 401 level class. But I recommend some practice beforehand. So we’ll go with Hillorie from Dataiku first, and then Kit, and then myself, I think is the order.

Hillorie Farace Di Villaforesta:

All right, so, Hillorie FDV 101 class. I’m the head of Cloud Alliances here at Dataiku, and Dataiku is an industry-leading everyday AI platform. And what I mean by everyday AI, that’s such a big word, is that we’re really systematizing the use of data to make AI an everyday behavior so that people within organizations, of every skillset, can really contribute to AI-driven business transformation initiatives, and so much of that has to do with cloud. So, I’ve been really enjoying my 3 1/2, 10 years here at Dataiku. I’ll pass it over to Kit.

Kit Wetzler:

Awesome. Thank you, Hillorie. Hey, everybody, I’m Kit Wetzler. I’ve spent the last six months here at ShiftLeft. ShiftLeft is a code security platform. We do static analysis and software composition analysis. Prior to that, I was at Armory where I helped scale a commercial open source company in AWS and Citrix. It’s great to be here.

Don Addington:

Yeah. Thanks for joining us. We’re excited for it. For those of you who haven’t met me yet or don’t know me, I’m Don Addington. I’m chief revenue officer for Tackle. I’ve been on this journey with Tackle for a little over 2 1/2 years now. A very fun part of the journey is getting to meet and work with people like Hillorie and Kit. Kit and I actually met a couple of years ago when I had first joined Tackle and started talking about marketplace back when he was at Armory. So, we’ve got an interesting history there. And Hillorie and I were just talking beforehand. We’ve been talking with Dataiku and team over there for quite a while, too. So, it’s fun to have a couple of familiar faces here.

Don Addington:

We’re going to talk today really about a couple of main categories of sort of myths and misconceptions. So, Erika, we can kind of dive into it here. We’ll start our conversation. And really, I think, one of the key areas that we see, and Tackle now works with 300 plus ISPs, so we see a lot of and counsel a lot of software companies as they’re thinking about getting into marketplace. And one of the key areas that we spend a lot of time in is just education and kind of the what is marketplace and how does it work? And one common theme, if you had to bucket a bunch of things that we see in here, is this misconception that there’s a ton of complicated product work, there’s a ton of complication. You can really over-complicate your approach to marketplace, and that happens in several different ways.

Don Addington:

I think one of the key areas is really, as you just think about getting your product listed, and what that means and what you have to do technically. And so I’m going to maybe, Kit, pull you in, because way back when you were at Armory and we were first talking, we were trying to work through, hey, what does a listing strategy look like, the need to auto-provision as soon as somebody buys, and how things just automatically kick off. A lot of times even preparing for that kind of organic self-service drive-by purchase, when those aren’t actually the purchases that happen the most frequently, causes people to over-engineer. And so maybe talk a little bit about your journey at Armory, because I think you started out there, right? Like, hey, we’ve got to do a ton of stuff. And so maybe talk about that a little bit.

Kit Wetzler:

Yeah, when I joined Armory, I was fairly fresh on AWS, so I had this vision of people coming to the marketplace and executing on business with Armory, just as self-service as possible. So I way over-thought it. I thought that people would come in, basically swipe their credit card or their Amazon EDP, we’d have an agreement. So I tried to make things work as automatically as possible and it took a long time. And I think, man, it must have taken us at least a quarter and a half to actually get our marketplace entry up, and we just really over-thought things. We wanted to make it as automatic as possible. At the time, we weren’t actually a SaaS solution. We were installing mostly in other companies cloud accounts. So we wanted to make that automatic, which was just about impossible with marketplace.

Don Addington:

Yeah, for sure, and I remember walking through and just trying to work through the, how can we do this? I think thinking about marketplace as a series of growth phases, right, and it’s sort of, how do I MVP my way into this, not how do I start all the way at the end where everything’s fully integrated and provisioning is automated. All this automation, I think people really come to the plate with automation in mind, and it’s like, well, there are ways to do this that allow you to baby step into it and capture business first, and then work on the more complex layers of things.

Don Addington:

But Hillorie, in terms of Dataiku, I would be interested to hear your perspective there similarly. As you guys were thinking about marketplace, we were just talking beforehand, like you had a bring your own license, which kind of functions almost like, okay, great, I already have a license, I just need you guys to spit out this software. There’s no commerce involved with that. As you guys looked to get into marketplace and actually transact, what are some of the misconceptions that you’ve had to help to break down?

Hillorie Farace Di Villaforesta:

Yeah, absolutely. So I would echo Kit’s sentiments. We actually took about a year over-analyzing pricing models, a year, and really it was overthinking. Okay, marketplace, well, how is it going to affect our standard pricing model? How will it affect our customers? We have on-prem hybrid and cloud. We’re subscription-based. So if we do SaaS-base, how does that work with our users? We’re project-based. And literally, once we started to do hours and hours of homework and look at it, we actually could do a BYOL, we could do an offer, and literally when the thought process changed to just start with something, it’s a door-opener. It’s for customers to start, to let you know they’re there, that you have an offer that you can upsell, that you can change, and that you can customize. It was that quick. It was, oh, great, let’s just price it for a year or do it this way and get the listing up. And it was an unnecessary aha moment.

Don Addington:

Yeah, it’s funny. That’s another thing that we see really commonly is this sort of propensity to overthink everything. By that, marketplace needs a strategy and you need to be thoughtful about, okay, we’re not just going to show up there and magic happens. So, what’s the strategy? But there is this almost just innate need organizationally to over-plan for everything. And so one thing we see super commonly is maybe we’re working with the revenue side of the business or alliances and business development and things like that. Operationally and from a finance perspective, generally, it’s like, hey, we have to think through every single edge case, because as soon as we turn this thing on, the crazy is going to happen. It is rarely the scenario that you get 100 orders on day one of your listing being available, and just knowing that there’s things that you can do to actually gear your listing for, hey, I want to do more enterprise size deals and things like that coming out of the gate.

Don Addington:

So, it’s interesting you guys spent time a bunch of time thinking through that. Where we really help or try to help our customers think through, what do you want to sell? Who do you want to sell it to? How do they need to buy in and want to buy? And then what are the rules of the marketplace you’re trying to sell in? You’re looking for that Venn diagram, how you land upon that listing strategy, right?

Don Addington:

As you guys then got past the, okay, we just got started, one of the next things that we see is sort of like, it is the magic of the marketplace, like we’ll get a deal and that’ll be great. One thing that we see happen quite a bit is once you’re there, oh my gosh, I don’t even know how to book a deal. What do I do when I get one? Did you guys have to go through that operationally? I think, Kit, especially at Armory, Dataiku, you’ve had some help from Tackle and guidance there as well, but Armory I think early days story would be interesting, and then, Hillorie, maybe you can bookend it with your experience.

Kit Wetzler:

Yeah, when I was at AWS, I worked with some of the largest accounts there, so I was pretty familiar with how their enterprise discount programs worked and how third-party software could be recognized as a part of those commitments. And one of the things I was excited about at Armory was selling our software to large organizations that had EDPs in place already. I had the fortune of being aware of how private offers worked. What I realized after overthinking this whole thing was that really what we wanted the marketplace to be was just a procurement vehicle for us. We didn’t expect to get a whole lot of self-service traffic, just simply because we weren’t a SaaS service and it wasn’t like we could auto-provision in someone else’s environment. And once we realized that, we realized that we didn’t even need really organic traffic to get to our marketplace listing. We just needed at the time to use it as a procurement vehicle to allow people to do these large transactions.

Kit Wetzler:

Of course, then when the first one came in, we had no idea how to actually do a private offer. And then once someone accepted the private offer, we didn’t get anything. We were like, wait a minute, did this close? It was like the 29th of the month and we were trying to book a deal, and we didn’t have anything to book it with. We were refreshing the reports, trying to download Excel spreadsheets, going to finance and say, “Hey, can I book with this spreadsheet?”

Hillorie Farace Di Villaforesta:

I have to check though, because it’s like a communal pain around a fire, where you say, “Oh, yeah, been there, done that.” I would say that same experience. As a startup, we’re very resource constrained and it was first extremely painful to say, “Okay, let’s go ahead and try this. We’ve over-rotated on the analysis.” And then, “Okay, well, who do you want to start with?” And Microsoft, we were furthest along with Microsoft. “Okay, well, go make it happen.” Okay, no resources. “Well, tap whoever you need from engineering, finance, et cetera.” So think about that, with whoever I eventually tap all need to go to management because everybody’s strapped for time and resources. I’ll need to explain to them what we need to do and what I need from them and how to do it.

Hillorie Farace Di Villaforesta:

Now, back into that, to what Kit was just talking about in terms of something bookable to order, how does the web hook actually go into the landing page, how does the offer actually get set up, public or private? How many listings? We had no tribal knowledge. Literally, it was me reading these documents for six months. And it was a head count, who was Global Alliances management, focused on this. I cannot explain to you the level of pain it was and then documenting that and then trying to reiterate that and map that to the actual offers. It took me like six months plus to get there.

Don Addington:

Yeah, it’s funny. I got a call, this was two weeks ago, from a good friend of mine that I’ve worked with many, many stops ago. We were talking to their company about marketplace a year ago. They decided to go build their own integrations and manage that process themselves and everything. Whenever that happens, we take a seat back and we’ll watch and see, like how long does it take for somebody to actually show up in marketplace. Do they show up there at all? It usually takes a lot longer than they think. It took six months, a little more for them to get the listing out there.

Don Addington:

When my friend called me, he explained something very similar, Kit, to what you were talking about and Hillorie as well. He’s like, “The process of just trying to build a private offer, nobody knew how to do it, and what can you and can’t you do? And then, once we actually got through all that, which made us go back and forth with the customer to the point of the customer, the buyer’s frustration, right, because we don’t know what we’re doing.” He was like, “Once we did that, we had no idea how to book it.” And it’s one of those things you really don’t think about. It’s like, “What do I get in my hands that’s analogous to a purchase order that I can take and attach to a Salesforce record and close to win the damn thing and book it?” And there’s not a clean and easy path there necessarily with how these marketplaces work.

Don Addington:

So, planning for that, that’s not an over-complication. That’s thinking it through. But the over-complication that we see frequently there is trying to automate all that stuff and make it all happen magically and build it. When you take a step back, that’s a lot of people building a lot of stuff before you have a dollar of revenue, right?

Don Addington:

So, cool. Well, one more thing I wanted to hit on since we’re talking about private offers, so for the folks who might be watching who aren’t as familiar with how the marketplaces work, you can either have somebody buy off a public listing and procure your spot that way or buy a private offer, which is a custom deal with custom pricing and maybe you’re negotiating on terms and conditions and so on. But I think one of the interesting things about when we engage with customers to talk about their listings is, oh, man, we have a price book of hundreds of skews, or at least dozens of skews. How are we going to get all that on our listing? And sort of that thought process of what goes onto the listing? What are we going to list? It’s not very intuitive that you don’t always have to sell what’s on the listing. You can have a minimal listing and sell additional product in the form of a private offer. There’s ways to engineer that, the listing, to do that.

Don Addington:

So how did you guys work through that strategy, Hillorie, at Dataiku when you were trying to figure out what product is going on the shelves, but what do we do with the listing and how, I guess you said you were reading through all the documentation. Is that really how you informed the strategy?

Hillorie Farace Di Villaforesta:

Yeah, so it was really painful. I’d say the demand is customer-based demand. We have 50% plus of our business on the cloud. So, customers have contracts with Microsoft, GCP, and AWS. They wanted to facilitate procurement, but we’re also an enterprise scale platform. So, a lot of our customers want a custom offer or custom terms or custom licenses. So, it was a head-scratcher like, okay, do we just go ahead and do all private offers or do we have a public listing and a private listing? And how do we set that up?

Hillorie Farace Di Villaforesta:

Tackle was instrumental because we fumbled through Microsoft and did only private offers and really gummed up our public offer, and then we had separate listings. But come to find out, customers would look at that public offer and immediately move over to private offer. So it was like it was a wedge. It was something for the customers to say, “Oh, this is attainable. This is interesting. I want to find out more.” And 80 to 90% of our customers who wanted to transact anyways, it would be private. And then those new customers, which we attained new customers immediately, wanted to then move to a more custom offer.

Hillorie Farace Di Villaforesta:

What Tackle really helped with that was really important with private offers are the addendum pieces. We didn’t know what we needed to have where, and each one of the marketplaces has a different way to put in their marketplace terms and agreement, either click-through or there’s a space for an addendum. I had no idea about those. All three are different. So it was really, really, really important, and our legal and finance team wouldn’t sign off on any private or public offer until that was rectified. And with Tackle, we were able to literally line item it and get it out. So, a little long-winded, but that was one of the most painful components.

Kit Wetzler:

Yeah, it turns out a Zoom recording is not indeed a bookable artifact. And we were trying to show, look, they clicked through, he clicked through, he did it all.

Don Addington:

I’ve got them on recording here. Did you know that was recording?

Hillorie Farace Di Villaforesta:

I have a email screenshot.

Kit Wetzler:

I should have had him hold his driver’s license up.

Don Addington:

We have so many people that come, it’s interesting now in our business. Our early days, we were really focused on just helping people get into marketplace and help operate a marketplace. We’ve gone into the operationalizing your marketplace business, and how do you scale it and grow it out? There’s day two implications for when you start running a lot of businesses through the marketplace. And so now we talk to a lot of customers who maybe have built their own marketplace presence, and they want to go to the next marketplace, for example. And it’s like, oh man, we’re not doing that again until you guys are [inaudible 00:23:15].

Don Addington:

But it’s interesting as we engage with those customers who have been in marketplace and we take over, we dive into like, “Okay, tell us how you were booking things. How does that process look?” “Well, we were screen-shotting this report that we got 48 hours later, and sometimes it showed up a week later.” If that was the way that it all worked, it would be very, very difficult to grow and scale a business like that. Knowing what these tips and tricks are and how to do it, I think that’s really super important.

Don Addington:

But you guys, Hillorie, you led me right into the next area just organically, so well done there. But we wanted to talk about really thinking about who marketplace is for. I’d say, under this umbrella it’s, what does my buyer look like there? How do I leverage marketplace? We’ve talked a bit about public and private. A lot of times the misconception is marketplace is simply a place for people to go self-service and buy product, and it’s not a place for complicated deals and enterprise deals. So, maybe talk about that. Your customer, Hillorie, typical customer profile, what do they look like? what types of companies are you calling on? What’s that profile look like for you guys?

Hillorie Farace Di Villaforesta:

Sure, absolutely. So, primarily enterprise across all verticals were very entrenched in FSI manufacturing and retail. Our typical average deal size, I’d say 250 to 500K, subscription use case-based 25, 50, 100, 500 users. So with that, there are different types of users. There are many different business units within the organizations who start to adopt Dataiku, so we have a lot of upselling, we have a lot of expansion. That right there in doing the math equals private or custom or flexibility.

Don Addington:

Totally, and I think that’s what Tackle observes across our business is the majority of the deals that happen are happening with more complicated deals, multi-product, customized, usually relatively larger deals, not smaller, incremental size deals. We’ll talk about sort of the low end of the market and kind of that [inaudible 00:25:56] stand product-led growth strategy plus marketplace. But the bulk of the business that we see is coming by private offers, with larger enterprises, and they can be some really complicated deals. We listed a company a couple of weeks ago who their first deal on marketplace was almost a $14 million deal and pretty significant business.

Hillorie Farace Di Villaforesta:

That’s big.

Don Addington:

And a lot of people don’t have the perspective that that would actually be possible. Kit, you came from AWS, so you kind of knew what was happening in marketplace and leveraging marketplace for things like EDP. But maybe talk about the value prop of EDP. I think a lot of people know Enterprise Discount Program for AWS, Enterprise License Agreements for Microsoft, Google Commit for Google. But these are all the same similar type of programs. Maybe talk a little bit about how those helped to drive your strategy, Kit.

Kit Wetzler:

Yeah, sure. Well, I was talking earlier about overthinking, and we certainly didn’t stop overthinking this whole process when we realized we needed to do or to focus really on EDPs. At Amazon, the way an EDP helps a customer is that you get a certain discount for making a commitment to spend a certain amount of money with the cloud provider over a given period of time. And oftentimes that commitment is based on growth. So, if you’re growing 250%, you’re commit might be 250% of your current spend, which is a lot. But you get a pretty substantial discount for doing so.

Kit Wetzler:

What a lot of companies find themselves doing is not quite growing into their commit and having a gap between what they’ve actually spent and what they need to spend to keep their discount level in place. And marketplace transactions, when you have any EDP account, 50% at AWS towards that commit that you’ve made, I believe it’s 100% at both Google and Microsoft, and hopefully AWS will follow suit so that they can see all of the third-party spend is helping the customer meet their commit. But we had pivoted so much towards EDPs, we didn’t really think about our public listing.

Kit Wetzler:

And it turns out that a lot of B2C, SaaS, and SaaS-like customers want to try software actually like a consumer and actually buy it like a business, which means that if your public offering or the thing that you actually put out there is a little bit janky, they may be more hesitant to do business with you in the first place. We actually had that feedback. We had a customer tell us, “Hey, I went to your marketplace listing and it didn’t actually look real. I was a little bit nervous about clicking through.” And luckily, he reached out to us and chatted with us because otherwise we might’ve lost him as a customer.

Don Addington:

Well, and I think that you actually really nicely kind of highlighted there as well, while the bulk of the significant deals that we see in marketplace happen via private offers, and EDP burndown or Google Commit burndown, or as your ELA burndown is a significant driver in those, that’s not the only value proposition, and in fact, it might be the wrong value proposition for your buyer, depending on what you’re selling.

Don Addington:

If I look at your listing, Kit, you guys have an entry level, easy to purchase straight out of the gates listing. That brings with it some different requirements, right, of, okay, how are we going to approach this and make the listing easy to understand so that somebody could buy it without talking to anybody and leaving a contact maybe if there are questions and things like that. But overselling on the value proposition of EDP, if you’re in a sales cycle of, “Hey, do you have EDP?” We see this all the time, sales reps, when they find out we’ve got a marketplace listing available, they rightfully take this into their own hands and run in to their customers and go, “Hey, we’re on marketplace. Do you have an EDP?” And their buyer is like, “I don’t know what you’re talking about.” Or the product that they’re positioning is maybe 15,000, 30,000, $40,000, and it’s not really a significant burndown against $100,000 million EDP commit or ELA.

Don Addington:

So, knowing the value proposition in there as you’re positioning this to the customer is important, but I think that helps us to expose kind of another myth, which is like, again, sort of like the magic just happens once you’re in marketplace. When in reality, the early days are usually enabling your sales teams to understand how to use this tool called marketplace and position it.

Don Addington:

So, Hillorie, can you maybe talk through the path of, okay, marketplace presence, great, but how do we now start to use that? And how did that engagement with your sales team and the process, what did that look like for you guys?

Hillorie Farace Di Villaforesta:

Absolutely, sure. Just on your last topic, which actually was something that helped with what I’ll cover is, if I were to look, as we’re discussing right now, peer-to-peer, or how we accelerate business on one piece and customer satisfaction and customer obsession on the other piece, having the marketplace offers really facilitated adoption and ease of use and ease of deployment. It also for us acted as an acceleration to close, especially for our larger customers who had the MAT contracts or Commit contracts. So, that really helped us. And then starting to work with our field sales teams, we definitely communicated that out. So with sales, it’s very much wash, rinse, repeat, very simple, what’s in it for me? And the what’s in it for me went right back to rapid adoption, accelerate, close, leverage the contracts, collaborate with your field sellers, because once we’re on the marketplace, they can also get compensated if you’re part of an ISV program, and then it directly led to, well, do I take a haircut?

Hillorie Farace Di Villaforesta:

So that was probably one of the first discussions out of the gate I had with management, and I was so thankful that they were open to it is, it’s behaviors. So, each one of the marketplaces takes a transaction fee, as they should, a lot like a distributor model, very invested. But how do you then account for that? Is it a cost of sales or do do the field sales reps, like an indirect sales deal, get a lower margin? I was very lucky that our management team understood that and it’s net neutral. So, our field sales teams get 100% rev rec on that in compensation, and that really neutralized any behavior and help them understand, “Wow, this can really help me accelerate the deal close.”

Hillorie Farace Di Villaforesta:

So when the sparklers came up, why the customers, how this will close your deals, you won’t get a haircut, you can do it in any currency, here, here, and here, it was really quite easy. And then we started to see the marketplaces roll in. Luckily, we had Tackle because then it was the currency. Then it was, how quickly can we book it? Can we do it in 12 hours? So, we still discovered a lot faster with Tackle what we needed to note in the FAQ’s to set up the expectations on the field sales, to be able to tell the customers. They adopted it very quickly. They really appreciated it.

Don Addington:

Kit, I know you’re small and growing, but in terms of how you all think through leveraging the marketplace listing and making sure that you’re taking the conversations to the customer, you’ve got an easy starting point. But how are you negotiating and navigating that path with the go-to-market now that you’ve got the listing in place?

Kit Wetzler:

Yeah, we just recently got our listing at ShiftLeft onto the marketplace. We haven’t actually announced it yet. We’re waiting for AWS PR [inaudible 00:34:05]. One of the things that I went, when I was looking for a new role, the important things to me were to find a company that was already a SaaS solution, that we weren’t going to be installing on-prem. The second thing was that there was a self-service motion that was proponent to that, because I really wanted to leverage marketplace not only to drive EDPs, but because of what I said earlier, people try things like B2C products, and then they want to buy like B2B, that I wanted a self-serve motion that people could use to try all the software and they could buy it if they wanted to.

Kit Wetzler:

But our product actually touches both development teams and security teams. And while developers are oftentimes in their AWS accounts or their cloud accounts all day, security teams very rarely log in directly to a cloud account. Usually, the security teams are the ones that actually hold the budget. So, what we were thinking from a go-to-market perspective is that our public listing should be priced such that a developer can try out our software, but we’re probably not going to get an enterprise-wide rollout from the developer trying our software. And the way we’re thinking about it is likely when that happens, we’ll do an EDP, but we’ll likely also have to step the buyer through that process and help them log in and help them understand what it is that occurs there, and also help our sellers help our customers do that. So, sales enablement is certainly going to be a big part of this as well once we make some more noise about it.

Don Addington:

Yeah. Well, we’ll consider this your soft launch. We won’t tell more than the 31 people that are on right now, but keep that on the hot through the launch. What was that, Hillorie?

Hillorie Farace Di Villaforesta:

I see a Q&A in there that was really linked to what Kit was just talking about. It’s around the resellers bars, et cetera. That has been another major component and benefit for us. So many of our deployments have a Capgemini and Accenture, a Wipro involved, and other technology partners. AWS, Microsoft, and GCP are putting a tremendous amount of momentum in up-leveling and scaling out their own channels. So they are CSP program, CPPO program. So many of our customers actually have a cloud service provider like Rackspace, et cetera, and they’re purchasing through. So, what we have found out as we go is that it’s important to and probably beneficial to opt into the CSP and CPPO programs and understand how to leverage that as well. And being that Tackle has all the operational elements handled there, we can very seamlessly start to scale, leveraging the entire channel ecosystem with the cloud vendors, which has been beneficial for our go-to-market.

Don Addington:

That’s awesome. Thank you for diving into that one. It’s definitely what we’re planning to chat a little bit about.

Don Addington:

I think I want to just make sure we go back and highlight real quickly a couple of things there, because both of you said some really I think important things. And Hillorie, in terms of the compensation for sales teams, and if you’ve watched any of the Tackle stuff already or read anything on our website and the great content that Erika and team put out, trying to help, even if you’re not a Tackle customer, just trying to help educate software companies on what to do and how to think through this, one of the key areas when we come in and we see marketplace hasn’t taken off, or even when we sign on a customer and it’s like, “Hey, it’s six months, and we don’t have any deals through the listing,” usually one of the most common issues is compensation and how you’re compensating your sales team.

Don Addington:

And that very small, but very important detail of how you treat the listing fee for the marketplace provider or the cloud provider rather is really, really important. And treating it as expense and taking it out of the backend of the equation, and recognizing that top line and comping on the top line is really important to get the buy-in from the sales team. Because nobody wants to be kneecapped on their deals and like, “Hey, why am I giving X percent away on a deal?”

Don Addington:

And while it’s different than a VAR relationship, it’s no different than any partnership you have. You have to invest in it, and usually you’re bringing some stuff to the plate to show, “Hey, we’re here, we’re a player.” And it’s hard to get that motion going if your sales team is not compensated evenly. So it is a fight worth having, and we’ve seen it turn into fights quite a bit, but we’ve also seen some of the most successful marketplace sellers who are also our customers started out with a program that penalized their sales teams for the marketplace deals. And as soon as they changed that, all of a sudden the business takes off.

Don Addington:

That’s something that I think as you’re thinking about working with your finance teams and talking through, how are we going to deal with marketplace, setting the stage for evolution around how you treat marketplace. Once it’s $100 million dollar or $200 million business and running like a well-oiled machine, you can readdress compensation at any point in time on that journey, but don’t start in the most complicated place. So I think that’s an important one to double down on, so I’m really glad that you brought that up.

Kit Wetzler:

Yeah, what I actually found is that when I first rolled out marketplace to the sellers, we actually didn’t make them whole on the marketplace margin. We did just pay them on the net revenue from marketplace. At the time, the margins were actually much larger also. It was actually kind of funny because it drove one of the sellers to actually get us into ISV accelerate and then lower our margins, because he was like, “Forget this, I’m not paying this much margin on it,” which was awesome. It’s certainly not what you … Actually, it was not what I wanted the sellers to do. I wanted them out selling.

Kit Wetzler:

Now that the marketplace margins are all across the board smaller, it may not be as much of an issue, but I think we were paying over 15% on our first few transactions through marketplace, because we weren’t part of these accelerator programs or anything like that. And then the margins came down, and now they’re almost, I think Microsoft has led the charge on making the margins so low that they’re almost rounding errors at this point.

Hillorie Farace Di Villaforesta:

It’s almost like a disti.

Don Addington:

Yeah, [inaudible 00:41:03]. It’s really more like a disti type of relationship now. I think one thing to hit on and then we’ll come back to the partners and let’s talk about including third-parties and things like that. But I think the other thing we’ve seen evolve just even over the past couple of years is, and you guys both fall into a pattern of our buyers are technical. They sit on the IT side of the house for the most part, I’m going to guess, right? You’re not selling to a business audience, maybe the application salary for Dataiku cause you to bring in business people as stakeholders. But usually the misconception is, if I don’t have a product that is purchased by somebody who’s in the IT organization, like marketplace is not relevant and sort of back to that idea of, what is the value proposition of marketplace, it can be, hey, my buyer is there and they understand AWS. If I talk to them about AWS and marketplace, they’re going to have the context to understand it.

Don Addington:

But we see a ton of business applications and marketing and a lot of solutions today in marketplace that your buyer isn’t technical. And the question is really more, who are you selling to? What does that look like? Are they spending, are those companies that you’re trying to sell into spending money with AWS or GCP or Azure? And if they are, it’s more about going in and capturing that wallet share. That oftentimes comes in the form of, well, they’ve got budget dedicated to spend with the cloud provider.

Don Addington:

I think that misconception, you guys probably didn’t have to deal with it much because your buyers are there. I would think maybe more the related but different misconception is because my buyers are technical, they’re going to know what marketplace is, so I can just walk in and go, “Hey, do you want to buy us to marketplace?” You can get a fast no that way. So, I’m not sure if you guys have had to deal with that kind of salespeople coming back and going like, “Hey, I brought it up and they don’t even know what a marketplace is.” Any kind of education you’ve had to do for your sales teams around that? Or has it been a pretty natural extension of your conversation with your prospects?

Kit Wetzler:

Well, it’s dependent. I mean, we’ve certainly brought it up to customers who the buyer had no idea what we were talking about, and we have explained. There’s certainly been cases. I know there were a couple of cases at Armory where we explained the benefits of buying through marketplace and our buyer went, “Wait a minute, what?” It turned out that they swung almost all their purchases through marketplace to help make it count against the commit, even though the finance team had never heard of it before. The finance team literally proactively went out to all the other departments like, “Hey, you need to ask all your vendors if we can buy our software this way, because it doesn’t cost us anything more, and it certainly helps with both the transaction and keeping the invoices in one place and all that good stuff.” We’ve certainly seen that. We’ve also seen customers say like, “Hey, in order for us to have this count against our cost center, we can’t do this through marketplace because it would end up looking like it was coming through engineering or something along those lines.” So, we’ve seen both sides of the coin.

Hillorie Farace Di Villaforesta:

It was a pretty rapid adoption for us. It was okay. It was fairly clean.

Don Addington:

I love those stories, too. Cool. Well, we’ll hit real quickly, and Hillorie, you touched on it, being able to include a third-party in a purchase is something that I think each marketplace is at varying stages of maturity. But it’s a layer of complexity, but it’s also an area of opportunity. I’m interested to spend a second on how each of your organizations think about partner plus marketplace, because I think there are value-add stories, and then there’s sort of the, okay, it’s an either/or, right, and looking at the customer to drive. So, how do you guys deal with marketplace plus, let’s call it.

Hillorie Farace Di Villaforesta:

Kit, you want to start?

Kit Wetzler:

Yeah, I’ll actually start, but my answer’s going to be really quick, is that today, I actually learned that you could involve a third-party with marketplace. We have not done a lot of that. So, Hillorie, actually I’m probably going to reach out to you afterwards to understand that a little bit better.

Don Addington:

The Tackle team can help you, for sure.

Kit Wetzler:

Yeah, that’s true. The reason I didn’t know that is we didn’t actually do much through the channel at my previous role. We are a channel-focused company here at Shift:eft, but I’ve only been here for six months and we haven’t done a ton through the large channel partners in conjunction with cloud providers, so I’d love to hear more about this.

Hillorie Farace Di Villaforesta:

Yeah, absolutely. So for us, Dataiku, when we think of AI transformation, it’s sometimes like, wow, that’s huge, that’s big. But when you actually get into it and you look at these enterprise customers, they’re at varying stages. A bank might be going on-prem to hybrid, to cloud. They might have certain business units that are working with Capgemini or Accenture. And we have a lot of embedded partnerships with the large SIs and Wipro and resellers, because a lot of them are helping companies on this AI transformation.

Hillorie Farace Di Villaforesta:

It’s a lot more than just the infrastructure. It’s the software, so we have a lot of integrations with Microsoft, with AWS, with GCP across their services stack, and those need to work. But then the deployment area is often left to the experts, the consultancies, and a lot of them act, let’s say Microsoft, for example, as CSPs. So they’re actually the hosting mechanism. I don’t want to say their infrastructure, but the unit within that’s managing this whole project. And governance and security are a big topic. So they’re going to put in mechanisms and controls and auditability functions that don’t necessarily allow all the users to purchase. You may or may not know that. I didn’t know that when we had one bank who wanted to purchase and they worked through a CSP, that particular address to accept the offer was not authorized. So, that was my foray into learning about the importance of CSPs.

Hillorie Farace Di Villaforesta:

But for us, our focus is not necessarily on building out a practice organization. Our focus is enabling these big consultancies to do AI transformation and build embedded practices that are with AWS, GCP, and Microsoft, plus a Snowflake or plus another ISB, put it together and deliver it. And that actually helps us. So, being able to leverage CSP, CPPO government programs really aligns to our overall corporate strategy in working with partnerships because it helps us work on the larger scale AI transformation initiatives, which is where we often are used.

Don Addington:

Yep, and I see a couple of important things in there. I think, Kit, in your example, leveraging channel partners and having a bar strategy, we encourage our customers to think about the marketplaces as a channel, right, as your reseller is AWS or Azure or GCP. That’s your fulfillment on those. Sometimes customer preference drives, “Hey, I need to buy through HSI or Optiv or whoever. That’s who our budget is parked with and they manage our EDP or whatever.” So to include those partners on those transactions, something that’s relatively easy to do from an AWS perspective.

Don Addington:

Hillorie, your use case is a little bit different, which is, “Hey, we have partners who have complementary services, and they’re selling our software and their service is wrapped around it.” Right? And so putting together something like that, that’s where a marketplace plus can make a ton of sense and really be helpful. It’s great that there’s capability there to do that today, but there’s a lot of complexity around it, right? Figuring out how you architect those things and where those gotchas are, Hillorie, of like, “Oh, they can’t buy, because they’re not…” Those are all learning curve items.

Hillorie Farace Di Villaforesta:

Yeah, especially at end of quarter, you don’t have it in there. Another nugget that we actually learned is with the CSP and CPPO programs, a lot like the transactions being dropped a lot, cloud competitiveness to really drive that channel in the marketplaces, they also compensate their partners. We might have our own program. We have our own channel partner program and we have influence fees and resell fees, et cetera. All of these cloud, so Microsoft and AWS, their CSP partners, they compensate them. So if they’re driving volume through this program, they’re actually, and you’re available through the marketplace and you’re opted into CSP. that’s actually a benefit and could get incremental visibility and potentially sales for you, which I found was really interesting.

Don Addington:

Totally. We’ll wind down here on the last area, which is really around the overall relationship with the marketplace providers and how to optimize that. Really, we talk about having a plan for a better together story. It doesn’t necessarily have to be out of the gates a better together story, but one of the misconceptions I think of marketplace in general is, hey, once we show up in the marketplace, we’ll be able to tap into this field of sellers. We’ll be able to co-sell with this much larger audience and a team of sellers who gets compensated when your stuff sells to marketplace. They do, but getting to that co-sell motion, it’s a journey and a path that you need to plan for. So maybe, Kit, you having come from AWS and understanding the environment a little bit, talk us through your thought process around what the journey to co-sell looks like. And then Hillorie, maybe again to complement what Kit’s comments are.

Kit Wetzler:

Yeah, I mean, co-sell at AWS specific is all about case studies. You really need to find a win and be able to talk specifically about that win before you can get anyone really excited about or to talk about what it is that you’ve done. AWS is really good about helping to put together the value prop of that case study and what happened and the impact of that case study. It’s really the key to getting that motion started. There’s also, certainly also personal relationships with the reps. You’ve got to do everything you can to really get that first win and getting a first couple of wins and being able to talk about those things. If you think about the life of an AWS seller, they get bombarded from all sides about all the third-party software that is transactional in the marketplace. So the more you can fit that case study into a specific vertical or use case, or something that makes it unique, especially involving the value profit product, the better [inaudible 00:52:37].

Hillorie Farace Di Villaforesta:

That is absolutely perfect. I would add to that, especially for strapped startups, it seems daunting to get to know the programs, the AWS program, Microsoft, GCP programs. They all have different elements. They all have tiers of either consumption or spend or deal registrations or anything you have to hit to be a partner. Take the time, get to know what those are. The Tackle team usually knows what those are. Oh, you have to look into this. Leverage those as much as possible. When you hit certain tiers with Microsoft, they will do a joint customer story with you. So will AWS. They will put out an internal win wire. They will get in front of those field sales reps. They will compensate them, provided that you’ve taken the steps to actually get into the programs. So, that was one of the major blockers for us.

Hillorie Farace Di Villaforesta:

A few years ago, I looked into our SFDC and into our deal [inaudible 00:53:33]. There were no deals. Well, how can we show to AWS and Microsoft execs that we have business to bring to the table together. So, we’ve brought it from I think zero to 14 million for each of the cloud vendors. That gets their attention with big accounts. We really are driving our field sales teams to collaborate, hey, collaborate. We’re going to compete. That’s fine. All technologies compete. Everybody’s moving up the stack. The ecosystems are changing. There are acquisitions. But it’s differentiation with the customer, and what I appreciate about the cloud vendors is they’re really interested in partnering. If there’s an RFP and we are competing, we figure out how to position together or how to align or work in parallel or not. But it takes being part of that program and understanding it and doing those deal registrations to get the reps working together and talking together, then getting the customer wins, then getting the credits to do a joint campaign. So, it’s an entire life cycle system that is fairly painful to start, but it’s necessary.

Don Addington:

And that’s where I think really important to have a Hillorie, a Kit, to have folks in the organization that understand what it means to build the partnership from ground game to well-oiled game plan and execution. That takes a while in setting the expectation of we’re going to own a lot in the beginning, and here’s what it means to own a lot. We’re going to register deals, and we’re going to reach out and call those reps who own the accounts we sold into and tell them about the deal. You got to ground game it in the early days, but then plan that path to the better together story.

Don Addington:

Some of the very best sellers in marketplace started out with a marketplace really just as fulfillment, and working that kind of ground game pattern. And as the revenue started to flow in and you get more and more attention to air cover, you’re in more programs, doing all the things you’re supposed to, now the better together story means, okay, can we leverage some of the native cloud tooling with our product? That means a product integration story potentially over time. It means being able to show up and say, “Hey, when somebody buys Dataiku, the consumption that we’re going to impact looks like this. Our software is this, but the consumption is that.” And if you can tell a story like that, that’s what you want for that to over time, but it’s not a day one story, right?

Hillorie Farace Di Villaforesta:

Yeah, absolutely. Well said.

Don Addington:

Well, I think, I know we’re right up on time here. We started a little bit late. I think we touched on most, if not all, of the questions. But if anybody has any additional questions to pop into the channel, we’ll give it a second to populate. But really have enjoyed the conversation and super helpful. One of the reasons that I joined Tackle, in fact, was this community aspect of marketplace where everybody is kind of figuring this thing out together and how to operate optimally together. And I love our customers coming together and help each other out. It’s fun to be the fabric that brings them together, but it’s the community aspect of marketplace, and what we’re all doing here has been one of the more happy byproducts of what we’re doing at Tackle.

Hillorie Farace Di Villaforesta:

Yeah, I can’t say enough. You guys are a game changer for us. Personally, I love Tackle because, my gosh, you just saved me. Professionally, really a game changer for our organization and keep innovating, keep doing what you’re doing. It’s helped us and so many other organizations very much. So, very happy to be here and talk about our story.

Kit Wetzler:

If I ever have to look for a job again, definitely one of the things I’m going to add to the list is helping sellers sell, because I like to think I understand sellers pretty well at this point, and I think it’d be fun to sell to them and help them sell more, too. So yeah, Tackle has been great for us. Really appreciate the help and the guidance.

Don Addington:

Thank you. It’s been tremendously fun to help sellers sell. That’s our mission in life. One last question here it looks like we had was, what percentage of deals that goes through the marketplace involved some sort of a burndown or commit a burndown. And I don’t know exactly what the percentage is. It’s probably relatively high. I think there are plenty of self-service solutions that are swipe a card and use the tool for a couple of hours type of solutions, and that’s really where a lot of these marketplaces got their start. So, there is a significant amount of volume on a transaction basis. Dollars-wise, if you think about the large transactions, almost all of those transactions are impacting burndown. And so if you think about it from a revenue percentage perspective, probably relatively high, but transaction-wise, there’s all kinds of different transactions are happening that don’t involve burndown.

Hillorie Farace Di Villaforesta:

Yeah, so I would say for us, it’s about 50% by customer count, and it’s about 80% by revenue volume. So when we look at all, yeah, so we’ve got more volume, more customers starting, but if we were to aggregate, it’s 80% in terms of volume.

Don Addington:

Cool. Well, you had the data to back up my words, so way to go. I love it.

Don Addington:

Well, thanks everybody for joining us. This was a ton of fun as always. Hillorie and Kit, you’re awesome. We love helping you all out, and thanks for being here, and thanks, everybody in the audience, for joining us.

Kit Wetzler:

Any time.

Hillorie Farace Di Villaforesta:

Thank you. Keep innovating.