Breaking Down the Total Economic Benefit of the Microsoft Commercial Marketplace Report
In December 2023, Microsoft and Forrester released a report on the TEI (total economic benefit) of the Microsoft Commercial Marketplace. As more and more businesses shift from ad hoc software buying to a more streamlined marketplace purchase, we thought it would be a good time to break down and summarize the TEI report from one of the leaders in the cloud marketplace space.
(Note that for this report, Forrester only interviewed 10 Microsoft companies with experience using the commercial marketplace. This seems like a fairly low number based on the total number of customers but the insights are still valuable.)
Key takeaways on why people are moving to the cloud marketplace economy
Consumers are looking to simplify software purchasing while maintaining strong security, corporate, and governance policies, as well as balancing costs.
Purchasing through a marketplace like Azure, AWS or GCP gives buyers an opportunity to speed up the sales cycle while feeling confident about what they’re purchasing.
- Applications listed on cloud marketplaces have gone through security review, giving buyers the confidence that if it’s listed, it has passed the high bar set by the cloud marketplace vendor.
- Procurement and legal review become much easier when software purchased from the marketplace is on the cloud provider’s paper.
- Buyers can utilize committed spend for apps purchased on the marketplace, allowing buyers to use money already allocated.
Azure Marketplace stats you should know
Top stats from the interviews below are based on a 3-year average.
Through interviews and financial analysis, Forrester found organizations that purchase through the Microsoft Commercial Marketplace experience benefits of $4.98 million over three years versus costs of $726,000, adding up to a net present value (NPV) of $4.26 million and an ROI of 587%. The organization’s payback period is less than six months.
In general, organizations…
- Reduced employee effort required for each procurement engagement by 50%. By simplifying procurement with reduced research, vetting and approval time, less people were required and involved in the buying process. Less time and people = less money spent.
- Recaptured up to 50% of at-risk spend. A high-number of committed dollars go to waste every year. In fact, a recent survey was mentioned in this Forbes article that states that 30% of cloud spend is wasted. Purchasing software through the Microsoft commercial marketplace allows buyers who have committed spend with the cloud provider to fulfill a portion of its minimum spend outlined in its MACC agreement. By optimizing its Azure cloud spend through the Microsoft commercial marketplace, organizations realized a savings of $2.1 million in preserved discounts over three years.
- Improved time savings of 30% for the payments and finance purchasing team. Processing and consolidating invoices, correcting billing errors, and other manual finance processes take time and can cost a company heavily. The productivity gains are worth a risk-adjusted $570,700 to the composite organization over three years.
- Avoided proof-of-concept fees. Free access to trial versions of software solutions help speed up software evaluation and testing. Over the three-year analysis period, that’s $173,400 in risk-adjusted savings on proof-of-concept fees.
- Reduced time spent onboarding new vendors by 75%. The Microsoft commercial marketplace simplifies the vendor onboarding process lessening the amount of internal labor it requires to enroll each new vendor. This benefit is worth $50,900 to those interviewed over the three-year analysis period.
Beyond these tangible benefits, those 10 companies who were interviewed mentioned some non-tangible benefits that we thought should be included.
- Improved security and compliance
- Flexible payment terms
- Improved visibility into the tech stack
Common challenges before using the Microsoft Commercial Marketplace:
- Interviewees mentioned that prior to using the Microsoft commercial marketplace, their organizations struggled to efficiently identify and implement new software solutions.
- Their legacy procurement processes were slow, labor-intensive, and required several months of effort to vet, onboard, and integrate new applications.
- Some interviewees shared that their teams purchased tools from resellers and suppliers on an ad hoc basis, which sometimes resulted in departments purchasing redundant applications or risks to security and compliance.
Benefits of adopting the marketplace at a high-level? Cost savings, streamlined operations, and increased agility in software acquisition and integration.
The interviewees’ organizations…
- Saved money on their overall Azure spends
- Improved their procurement processes
- Reduced proof of concept fees
- Enhanced vendor onboarding efficiencies.
With so many benefits it’s hard to think of why every ISV would not consider the marketplace as a key selling channel. The truth is listing is just the beginning and it takes time, energy and an understanding of the ecosystem to play in this space that buyers are so eager to buy in.
If you’d like to learn more about making the case for cloud marketplaces you can check out our two part ebook or contact us to learn more.
