AWS has a clear advantage among cloud enterprise marketplaces: It has the most customers

AWS Marketplace debuted in 2012 with self-service Amazon Machine Images, but it wasn’t until five years later when the size of the deals consummated through the online store started to increase dramatically.

In 2017, a year after opening AWS Marketplace to SaaS companies selling prepackaged annual subscriptions for their business software built on AWS, the cloud provider introduced “private offers.” SaaS companies could now negotiate custom end-user licensing agreements, pricing, and payment schedules with individual customers.

Independent software vendors today see that option as a crucial part of their go-to-market strategy, particularly for joint customers who want to deduct their third-party software costs from their AWS cloud spending commitments and have all of the charges consolidated on their AWS bills. And unlike other ISVs trying to navigate the world of enterprise platform app stores, several companies told Protocol that they’re happy to work within the constraints of the system to tap into AWS’ vast customer base, even while gaining visibility with AWS’ internal sales teams can be challenging.

Private offers are the key driver for Stackwatch’s use of AWS Marketplace to sell Kubecost, its Kubernetes cost monitoring and management software, according to Alex Thilen, head of business development.

“On the line item, we get to do custom pricing for each customer,” Thilen said. “It can be negotiated, so it doesn't disrupt the sales cycle. Our teams still work with the customer directly, they do a [proof of concept], they align on pricing, and then we use the Marketplace for transacting.”

Stackwatch is among the more than 2,000 ISVs, 260 data providers, and 900 consulting partners selling their software, data sets, and professional services through AWS Marketplace. It’s the most mature cloud marketplace among the Big Three providers, and last year more than $1 billion in revenue was transacted through it, according to AWS.

AWS Marketplace features more than 12,000 listings in more than 65 categories that are available in 25 regions. Some 325,000 customers had more than 2 million active subscriptions purchased through AWS Marketplace last year, up from 290,000 customers and 1.5 million active subscriptions in 2020.

Five years ago, Chris Grusz’s discussions with software vendors centered on giving AWS Marketplace a shot.

“Now when I talk to a software company, it's all about, ‘OK, how do I do this better?’” said Grusz, AWS’ general manager of worldwide ISV alliances and AWS Marketplace. “It's really become an accepted way to sell software from an ISV perspective, and we're starting to see more and more customers just default to buying all their third-party software for their AWS environments through AWS Marketplace.”

Before AWS introduced private offers, customers could take advantage of a self-service AWS Marketplace experience and buy prepackaged annual subscriptions on demand. But once they started using large amounts of software through the platform, customers wanted discounts on their purchases.

“Those customers would invariably leave Marketplace, and they would go work directly with the ISVs and … buy directly,” Grusz said.

Private offers brought them back to Marketplace, and AWS subsequently allowed software vendors to authorize their consulting partners to make private offers as well.

“With the private offers, we started to see very big deals: six-figure, seven-figure-type transactions, now even eight-figure-type transactions,” Grusz said. “It's really changed the trajectory of Marketplace.”

With the private offers, we started to see very big deals: six-figure, seven-figure-type transactions, now even eight-figure-type transactions.

Microsoft’s Azure Marketplace and Google Cloud Marketplace have since added private offers as well, although for both, the feature didn’t launch into general availability until this year.

Billing made easy

Customers prefer the ease of billing through AWS Marketplace, according to software vendors interviewed by Protocol. That’s been the big benefit for Komprise, which sells its unstructured data management and mobility software on AWS Marketplace. It’s simpler for customers to work with Komprise through the Marketplace in terms of consolidating purchasing, billing, and budgeting, said Krishna Subramanian, Komprise’s co-founder, president, and chief operating officer.

“We sell to some pretty big enterprises, and if those enterprises already have a relationship with AWS, they can just buy our product like it's an AWS product,” Subramanian said. “It's the same contracting vehicle.”

AWS Marketplace helps speed transactions and the rate at which Stackwatch can cut through to customers’ procurement teams, according to Thilen.

“It really goes back to the procurement benefits, moving more quickly, reducing the procurement time and overall sales cycle,” he said. “When our sales team is engaged with a potential customer, then either that customer can request to buy via a marketplace or our sales team will bring it up proactively with customers, because we tend to see that those transactions close quite quickly because we're able to use AWS' billing and we don't have to be an approved vendor, and … they have terms that we're able to apply to our software.”

Customers can take advantage of AWS Marketplace’s standard contracting terms governing software usage without having to independently vet software vendors whose products have already been subject to vulnerability scanning and usability tests by AWS.

As AWS saw larger deals going through Marketplace, it also started adding more buyer-facing features such as Private Marketplace, which allows customers to build customized digital catalogs of approved products that their employees can buy from AWS Marketplace, instead of allowing them unfettered access to the entire store. AWS Marketplace Procurement System Integration, meanwhile, allows customers to integrate Marketplace with their procurement systems, including Coupa and SAP Ariba, to gain more control of their IT spending and centralized governance of purchase orders.

Software seller benefits

The pitch is simple: Software sellers benefit from AWS being the largest cloud provider. AWS leads the cloud infrastructure services market with a 34% share, followed by Microsoft Cloud at 21% and Google Cloud at 10%, according to the latest data from Synergy Research Group.

And software vendors who spoke with Protocol were fine with the fees that AWS charges for its AWS Marketplace transactions. While there is no fee to list a product on Marketplace, AWS takes a certain percentage off the top of each subscription sold.

We do not disclose our listing fees, but they get into low single digits for a variety of our ISVs.

AWS would not disclose its tiered fees, which are higher for self-service transactions than private offers. It further breaks down its fee structure based on whether deals are net-new or renewals, the latter of which come with the lowest fees.

“We do not disclose our listing fees, but they get into low single digits for a variety of our ISVs,” Grusz said.

Google Cloud Marketplace standardized its marketplace revenue share fee at 3% earlier this year, while Microsoft also cut its fees to 3%, from 20%, last year for its Azure Marketplace and AppSource enterprise app stores.

“For us, it's less about the fees,” Komprise’s Subramanian said. “It's really more about what makes it easier for our customers to do business with us.”

Likewise, the fees are not a concern for Stackwatch, according to Thilen.

“We're a young company, we're thinking long term,” he said. “We want to sign customers up. We want to close deals faster. If we pay a couple points and the deal closes much, much faster, that is well worth it to us.”

It’s the same for Kobiton, whose mobile testing platform has been listed on AWS Marketplace for a few months.

If we pay a couple points and the deal closes much, much faster, that is well worth it to us.

“This is just a channel to us,” said Brad Goldstein, Kobiton’s director of strategic alliances. “If there's a reseller like an Accenture, Deloitte, or Capgemini, they're going to take 20 to 30% typically. So 5% for a channel to procure quickly, to get something done efficiently with budget that's already there, to get paid efficiently … all those things [outweigh] anything, and I'll give them 5% all day for that.”

Discoverability pains

Some software vendors who spoke with Protocol haven’t had much luck landing new customers who’ve discovered their products through searches of AWS Marketplace, but they say that’s not their primary reason for joining it either.

“We've not really found that a lot of people find us in AWS Marketplace who didn't know us before,” Subramanian said. “If they could make it easier for new prospects to discover a Marketplace solution it would be very helpful, especially new B2B prospects.”

While AWS is marketing more of its Marketplace categories, Subramanian suggested that more content around discovering solutions, such as product reviews and demos, could help.

“It's also maybe the nature of the buyers that we're targeting,” she said. “They're bigger enterprises, and there's more personal selling involved.”

Registering deals with AWS can help, according to Kobiton’s Goldstein.

“Once you register deals, you get contacts, so you get the reps on those accounts,” he said. “If I were to register a deal with Electronic Arts, they already have reps at AWS. They would pair us up and now we have people to talk to who have sold to EA before, who've gone through the procurement process and can also kind of give us insight about the account overall.”

But, ultimately, Kobiton will remain its own primary lead-generation engine, according to Goldstein.

Stackwatch is a member of the AWS Global Startup Program and is enrolled in the ISV Accelerate Program, which matches software vendors with AWS sales teams for co-selling support.

“It helps position us with AWS field teams, and they're definitely strategic programs to be a part of,” Thilen said. “We are starting to see a healthy amount of leads. Those are not necessarily from AWS Marketplace itself, but from the broader AWS sales ecosystem. AWS sales folks bring us into customer conversations, and having a Marketplace listing has definitely helped that.”

With AWS Marketplace now falling under the jurisdiction of the AWS Partner Organization as of the first quarter of 2022, there are category managers in areas such as security, networking, storage, and data and analytics who can help software vendors better navigate the online store, according to Mona Chadha, director of category management for AWS Marketplace. Those subject-matter experts can identify software vendors creating game-changing products that AWS should continue to nurture, she said.

“There are others that may need some more help and better guidance on how to become successful and how to integrate with AWS services, etc., which will then help them innovate faster,” Chadha said. “Coupled with partner development managers who really know how to build the partnership and the alliances with these ISVs really creates this great team.”

But not all software vendors on AWS Marketplace get category manager coverage or partner development managers.

Getting customer leads from AWS depends on how closely a software company is aligned with the cloud provider and how compelling its story is, according to Goldstein.

“We haven't quite got there yet,” he said. “If we're … driving astronomical consumption, AWS will pay attention. Your ‘better together’ messaging has to be really compelling. The AWS reps … get paid on selling things into the Marketplace, but they want the big hits, they want the home runs.”

AWS also has an industry vertical ISV and data provider team that focuses on co-selling with priority software vendors and data providers whose primary intellectual property is buyers in specialized industry verticals, which are a key growth area for AWS. That team is working with partners including HERE Technologies, Halliburton Landmark, FactSet, Qiagen, IMDb, and Foursquare, which use AWS Marketplace to transact with customers at scale.

Copycats

Komprise is not worried about the potential for AWS to see how it’s faring on the Marketplace and launch its own competing product.

“In general, that can always happen anytime you're partnering with someone,” Subramanian said. “It's not specific to the Marketplace.”

AWS Marketplace data is “completely sealed off from the rest of AWS,” according to Grusz.

“The service teams that are creating AWS services, they're not allowed to see the performance of any individual ISV through our Marketplace,” he said. “Even if there's an ISV that has some overlap with an AWS service, they actually do very well in the Marketplace … because there’s all kinds of benefits that apply to our AWS customers, and it actually provides a leveling effect.”

Grusz pointed to Amazon founder Jeff Bezos’ infamous flywheel model and the concept that selection plays in the success of AWS’ parent company.

“People buy from Amazon, because it's the ‘everything store,’” Grusz said. “That concept of selection is now coming across to AWS in the form of Marketplace. We want [customers] to be able to find third-party software and buy that, because we know that provides a much better customer experience versus trying to prevent that and steer them towards something else.”