According to a report by Canalys, enterprise software sales through hyperscaler cloud marketplaces, led by AWS, Microsoft and Google Cloud, are projected to reach $85 billion by 2028 from $16 billion in 2023.
The availability of cloud credits for third-party purchases through the hyperscalers’ marketplaces and the emergence of new digital-first buyers are reshaping enterprise customer procurement behaviour, vendor sales strategies and channel models. While most vendor sales via these marketplaces are today direct to end customers, channel partners are playing an increasingly important role. By 2027, it is expected that more than 50 per cent of marketplace sales to flow through the channel.
As per the report, enterprise customers have committed to spend over $360 billion on the top three hyperscalers’ cloud services on a multi-year basis. Spend is shifting to the hyperscalers’ marketplaces as customers seek to burn down a portion of their cloud credits on third-party software and SaaS. AWS Marketplace remains the clear leader in terms of sales volume, but Microsoft and Google Cloud are focused on closing the gap. With enterprises facing IT budget pressure, the opportunity to use pre-approved cloud budgets to source a wide array of software and cybersecurity products while taking advantage of simplified billing and consolidated purchasing can be highly compelling.
Further, vendors from across the technology spectrum are tempted to sell through the hyperscalers’ marketplaces. CrowdStrike and Snowflake were among the first to publicly claim $1 billion of total cumulative sales through marketplaces, and a host of the largest software and cybersecurity vendors are actively embracing this route to market. Cisco, Citrix, IBM, NetApp, Nutanix, Red Hat, Salesforce, ServiceNow and Zoom are just some of the vendors that have launched or grown their sales on the hyperscalers’ marketplaces so far in 2024.
At the same time, many smaller digital native independent software vendors (ISVs) built on one of the three top hyperscalers’ cloud platforms are using their respective marketplaces as their primary routes to market. The hyperscalers meanwhile are funnelling substantial investments into marketplace co-sell resources, demand generation, sales incentives, and channel programs to attract vendors to their cloud platforms.
Furthermore, the channel is becoming a focal point in the battle between the hyperscalers as vendors prioritise partner-first marketplace strategies. Through models such as AWS’ Channel Partner Private Offers, Microsoft’s Multiparty Private Offers and Google Cloud’s newly launched Marketplace Channel Private Offers, vendors can enable their partners to create customised offers for their customers on the hyperscalers’ marketplaces while seeking to maintain margins for the channel.
Commenting on the report, Alastair Edwards, chief analyst, Canalys, said, “The channel has concerns about the rise of marketplaces, but both hyperscalers and vendors acknowledge the vital role of channel partners in driving customer adoption and growth. Customers often prefer buying through trusted partners for help with managing cloud commitments and accessing professional services and technical expertise when sourcing complex technologies from multiple marketplaces.”
