Committed Spend – Your Cloud Marketplace Secret Weapon
With budgets for technology tightening across all industries, independent software vendors (ISVs) have started exploring new channels to unlock revenue. Today, ISVs are listing on cloud marketplaces such as Azure, AWS, and Google Cloud to take advantage of customers’ committed spend, or money that has already been allocated to their cloud service provider (CSP).
For customers, committed spend comes with benefits, like discounts and special offers. But many potential buyers and decision makers aren’t even aware that their organization has a cloud commit they can use when other budget streams run dry. In fact, one of the main reasons B2B cloud marketplaces are booming is because of cloud commits and the committed spend hat goes along with them, according to Jay McBain, Chief Analyst at Canalys.
Here’s an overview of committed spend, including tips for how ISV sales teams can incorporate cloud marketplace lingo into their discovery questions and sales cycle.
What is committed spend in cloud marketplaces?
If your company has a solution hosted on a cloud like Google, AWS or Azure, you have a cloud commit. Likewise, if you’re selling to a company who has any or all of their solutions in the cloud – they too have committed spend.
In the world of cloud, committed spend is used to describe an annual or multi-year contract between a cloud service provider (CSP) and an organization that has committed to spending a certain amount of dollars on the CSP’s products and services, or a certain level of cloud usage. In exchange for their commitment, customers receive discounts on products offered by their CSP, including third-party cloud marketplace solutions. Committed spend is also referred to as cloud commit, commits, cloud spend, committed use, or consumption commitment.
Like a gift certificate that expires, committed spend agreements follow the “use it or lose it” principle. While cloud commits can help businesses optimize budget, many key players in an organization are unaware that purchasing solutions on their CSP’s cloud marketplace is a more affordable option for procuring new software.
Benefit of using committed spend for B2B transactions
- Establish a long-term relationship with a cloud provider, who can provide additional resources once they better understand your business
- More predictable cloud costs
- Faster procurement and legal process
- Customers receive discounts from their CSP, maximizing budget to procure more solutions on cloud marketplaces
- Billing is simplified, as solutions purchased on cloud marketplaces are billed directly to an organization’s CSP bill (and you won’t need to worry about taxes, currency conversions, or other complicated financial transactions)
- Access to better deals and customizable private offers
- Scalability, especially for enterprise clients
- Solutions purchased on your CSP’s cloud marketplace are designed to integrate with your existing cloud ecosystem
- Reduce tech debt and the dreaded shelfware, or underutilized solutions driving little to no value for your business
- Opportunities to enhance your cloud strategy
- B2B solutions purchased on marketplace are stickier
Who owns the committed spend in an organization?
Key decision makers like CMOs, CROs, and partner/cloud alliance leaders can leverage committed spend to purchase solutions, especially if other budgets are tight. In most organizations, the CIO and CTO (usually in conversation with the CEO) made the decision to invest in a cloud commit as part of the organization’s agreement with Azure, AWS, Google Cloud, IBM, or another cloud service provider.
While the main purpose of committed spend is to help an organization build a robust cloud strategy and a bulletproof tech stack, including enhancing cybersecurity, organizations can also leverage cloud commit to invest in sales, marketing, productivity tools, and so much more.
If you’re interested in purchasing a solution that is available on your CSP provider’s cloud marketplace, be prepared to make the case to your CIO, CTO, and/or CEO. If you can show them that the solution you’re looking to purchase will drive ROI or save time, they will be more willing to allocate budget towards your request, especially if committed spend is due to expire.
Closing a deal with committed spend as an ISV sales rep
After finding the perfect prospect who becomes a lead, too often ISV sales reps face the dreaded, We’d love to work with you, but we’re out of budget.
Rather than accept defeat or schedule a meeting for the next fiscal year, sales reps can add discovery questions around committed spend and cloud marketplaces:
- Who is your CSP? Where are you hosted?
- Do you have committed spend excess this year?
- When does your committed spend expire?
The best time to strike a deal with committed spend is when a company’s credits or committed spend is about to expire. At that point, if the company does not spend on new solutions or products on their CSP’s cloud marketplace, they will either 1) be charged that money on their bill after the contract ends or 2) lose the money they already spent upfront.
And no one wants to leave money on the table.
Cloud commit with Azure, AWS, and Google Cloud
Azure, AWS, and Google Cloud all offer plans that include committed spend. Read more about each CSP’s unique offerings for cloud consumption on their websites.
How Invisory helps ISVs unlock committed spend and cloud marketplace revenue
In the world of ISV sales, it’s becoming increasingly common for prospects to face budget pitfalls, while still having a cloud commitment to spend down. This is especially true for organizations that entered into multi-year cloud commit contracts in 2022, before the volatility sunk in, interest rates soared, and VC money dried up.
If you have customers that are interested in purchasing your solution on a cloud marketplace, you will need to get listed and start transacting on their CSP provider’s cloud marketplace.
Need help getting started? Invisory is a GTM cloud platform that helps ISVs get listed, get transactable, develop a co-sell strategy around leveraging committed spend, streamline your GTM strategy and more. Schedule time with one of our experts to learn more about how Invisory can help you unlock the benefits of committed spend.
You can also read our case study to learn how Invisory helped Lumifi streamline getting listed and transacting on Azure Marketplace after the ISV discovered that existing customers had a cloud commit to spend down.
