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Hyperscaler vs. CRM Cloud Marketplaces: The Differences

Buying and selling B2B through a channel is nothing new. It used to look more like going through a distributor or reseller. A company would use a distributor like CDW, Ingram Micro, or Tech Data to buy or sell their products. Buying this way usually came with a discount and you had a close relationship with the one reseller you worked with. All of this has changed with the emergence of hyperscaler cloud marketplaces and CRM marketplaces.

Today, the distributor or reseller business is still in play but there is a newer channel that B2B buyers and sellers are flocking to and that’s Cloud Marketplaces. Cloud Marketplaces are run by a Cloud Service Provider (CSP), either private like Salesforce which runs with a single customer or public like AWS or Azure that host for many. 

 

Hyperscaler vs. CRM cloud marketplaces

 

Hyperscalers like AWS, Azure, Snowflake, and GCP are Cloud Service Providers (CSPs) who host cloud services for software vendors and companies of all sizes. These CSPs not only provide cloud services, but offer their own marketplaces where ISVs can list their software and where buyers can take advantage of a one-stop-shop approach to purchasing their software. This one-stop-shop model has a lot of the advantages, such as known security and easy evaluation of solutions built to work alongside the CSP. 

CRMs like Salesforce and Hubspot, as well as IT Service Management software like ServiceNow, provide a single instance (org) to a single company. This private cloud set up offers out-of-the-box functionality to individual companies looking to organize internal business processes, like customer relationship management and customer service ticketing. These software providers also have lucrative marketplaces full of SaaS solutions, built by ISVs, to fill whitespace in their out-of-the-box solution. 

To date, the Salesforce AppExchange alone has over 7K applications listed. More than 90% of Salesforce users have purchased at least one app from the AppExchange. 

 

It’s important to note that not all marketplaces act the same. 

 

What do CRM and Hyperscaler cloud marketplaces have in common?

 

Both CRM and Hyperscaler marketplaces have regulations in place. This can make it challenging for ISVs to list and sell. In general, ISVs must: 

  • Submit their application for security review or architecture review 
  • Sign a partner agreement which includes a percentage paid to the CSP for every deal sold 
  • Create listing with content and collateral available for CSP sellers and prospects 

 

Characteristics of hyperscaler cloud marketplaces

 

Not every hyperscaler runs their marketplace business exactly the same. Still, there are a few similarities worth calling out. 

  1. Hyperscalers allow a customer to buy or transact through the marketplace
  2. Purchases made through the marketplace are on the CSPs paper / contract 
  3. Cloud customers of a hyperscaler can use their committed spend (money allocated to cloud spend for their internal use) on marketplace applications 
  4. Hyperscalers allow you to submit opportunities to co-sell with the internal CSP sales team through the marketplace 
  5. The invoice for the software purchased from the marketplace is included on a buyer’s CSP cloud bill. 
  6. APIs are required to list your application 
  7. Once listed, an ISV must hit certain thresholds in order to unlock transactability, co-sell opportunities and incentives

In the past year, hyperscalers have begun to drop the PNR (percentage of net revenue) that an ISV must pay the CSP for a purchase made on the marketplace. The PNR is now only in the single digits (usually under 3%). The opportunity to sell through this channel model has become more accessible and appealing to software vendors or all sizes. 

 

Characteristics of a CRM / non-hyperscaler cloud marketplaces 

 

Again, each cloud marketplace will look slightly different and have different requirements, but below are some of the common differences between hyperscalers and non-hyperscaler marketplaces. 

  1. Although there are some options to “buy” directly from marketplaces like the AppExchange with a credit card, the majority of deals still go directly through the SaaS provider / ISV.  This involves a standard sales cycle ending on the ISVs paper / contract
  2. All contracts are directly between the buyer and the seller – the CRM marketplace provider is not involved
  3. There is no option to submit orders or automate the co-sell process. All co-sell opportunities must be done the old fashioned way – by trying to figure out which rep owns the account and tracking them down to work together on a deal. 
  4. ISVs bill the buyer directly
  5. PNR (percentage of net revenue) is typically closer to 15% 
  6. Once listed, an ISV can start selling immediately

 

Choosing which type of marketplace is best for you

 

The marketplace that is best for you depends on:

  • How your company does business and 
  • Where your technical reliance and your customers relationships already live. 

 

If you are already working with a CSP for your own application, that might be a great place to start. The dollars you already spend on your cloud commit will give you a leg up on hitting some of the requirements to unlock incentives. 

If your customers all seem to use Salesforce or Hubspot for their CRM or ServiceNow for their ticketing, you should consider one of those as an early focus. 

Going where your money is and where your customers are will help soften the transition into a new channel and make it easier to justify a business case. 

You can learn more about making the case for cloud marketplace in our eBook here

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