How Hyperscaler Marketplaces are Shifting Tech Routes to Market
Companies must reimagine their GTM strategy to succeed in the new cloud ecosystem
Hyperscalers are altering the rules of engagement for software companies by redefining the arc of innovation and growth through their marketplaces.
Over the past three years, Amazon Web Services, Microsoft Azure, and Google Cloud Platform have created marketplaces as new routes to market and established themselves as a strategic control point for enterprise software sales. According to our research, some forward-leaning ISVs already secure ~5% of their ARR through hyperscaler marketplaces, a figure that should climb to north of 20% in coming years. Emerging companies built with a marketplace-first approach in mind, meanwhile, could capture 50% or more of ARR via this route.
This transformation is driving a profound realignment of the relationship between ISVs, vendors, and hyperscalers, and reshaping the ways by which software companies go to market, contract, and transact with customers. To succeed in this new era, all players in tech ecosystems will need to understand the changing nature of software sales and ensure that their C-suite leaders embrace the new paradigm. The realignment of GTM around marketplaces is here to stay, and the time to act is now.
The rise of hyperscaler marketplaces
The past three years have seen the rapid rise of hyperscaler marketplaces, with listings growing at least 2.5X. That trend will only accelerate, especially in today’s environment, in which software spend is under pressure and marketplaces enable access to pre-committed cloud spend.
By the end of 2025, marketplace sales are predicted to reach as much as $45B. This growth is fueled by a symbiotic relationship encompassing all key stakeholders:
- For ISVs, hyperscaler marketplaces offer a unique opportunity to ride on the tailcoats of hyperscalers’ success, accessing their vast customer base and buyers’ cloud budgets while contracting and transacting with customers at scale.
- For hyperscalers, marketplaces could yield up to $2B in transaction fees by the end of 2025, while generating a further 3–5X in revenues from increased cloud consumption.
- For buyers, marketplaces offer ease of contracting, ability to retire cloud commits and access to pre-vetted, cloud ready software.
- For channel partners, key opportunities will emerge to support complex marketplace transactions and offer customers a simplified buying experience and the ability to draw down cloud commits.
5 key takeaways for marketplace participants
To successfully navigate this complex and interconnected ecosystem, stakeholders need to understand five tenets shaping the new landscape:
- Marketplaces create new routes to market and ways to transact for software companies
On the hyperscaler marketplaces, there are two main types of sales offers: public offers, which are transacted directly and are more suited for very simple transactions or try-buy, and private offers, which are not visible to everyone and support more customized pricing and complex transactions.
Software companies are leveraging both motions on the marketplace. Public offers are often used for lead generation while private offers are critical to support the complexity of enterprise sales. Private offers account for about half of hyperscaler marketplace sales by volume, but are the primary drivers of revenue growth, accounting for up to 80% of marketplace sales by value.
These private offers play a crucial role on hyperscaler marketplaces. Private contracts average around $100K, but seven- or even eight-digit deals aren’t uncommon. Companies are starting to leverage this motion for new logos as well as partner-driven sales, with some generating 10% or more of their revenue through marketplaces.
Adding to the complexity, private offers are often constructed and executed through multilateral processes involving a supporting cast of value-added resellers and other channel partners that facilitate transactions and shape the terms of bespoke deals. Such deals can include additional bundled products and services, including professional services, or can be packaged and negotiated by channel partners acting independently while using the hyperscaler marketplace as the backend for their transaction.
For ISVs, these multi-party motions are less about retiring credits than driving easier transactions with customers at scale. Marketplaces have added to the complexity for traditional software resellers as well, whose business model and economics have been under threat from the move to SaaS. It’s imperative for all players to find a way to intersect with marketplace offers.
2. Vendors need to set a clear strategy and quickly adapt, or risk being left behind
To succeed, ISVs will need to make hyperscaler marketplaces a strategic priority and be clear about three things: 1) how they intend to use hyperscaler marketplaces; 2) how to operationalize marketplaces at scale; and 3) how to manage changing relationships with partners.
Not all SaaS companies will get the same leverage from cloud marketplaces — infrastructure software companies that directly drive hyperscaler usage will get more, while application companies with product-led motions or those that serve SMBs lesser. Some companies only intend to leverage hyperscaler marketplaces for lead generation, while others see them as core to driving GTM transactions at scale through bespoke offers. Among the latter, proactive ISVs such as Crowdstrike are already realizing a substantial share of ARR from hyperscaler marketplaces with plans to further increase that number in the coming years.
The role of marketplaces in an ISV’s GTM strategy is ultimately a factor of its existing sales channel maturity, alignment with hyperscaler strategy, and customer preferences. Being clear in the role that hyperscaler marketplaces will play in an organization’s GTM enables vendors to adapt to the evolving roles of other marketplace participants and recalibrate their marketplace strategy to capitalize on emerging opportunities.
However, building out a marketplace presence takes significant time, resources, and process change. It requires deliberate planning, investments and building operational capabilities. Vendors will need to develop the ability to formulate and execute complex private offers at scale — including integrating transaction processing capabilities, reorganizing sales and alliance teams, and expanding post-purchase customer support. Aggregators like Tackle.io have emerged to play a key role in facilitating ISV’s move to marketplaces and accelerating onboarding. With marketplaces already growing rapidly, companies looking to grow this route should invest early in technologies that can integrate marketplace transactions with their back-end systems at scale.
3. Resellers will continue to experience business model disruption, fueling the need to build new capabilities
It’s no surprise that the move to cloud has disrupted reseller business model and compressed the associated margins. Hyperscaler marketplaces add yet another layer of complexity — while offering a more streamlined buying experience and consolidated procurement process for end customers, they reduce the need for and potentially disintermediate traditional resellers. Channel partners still have access to customer relationships but must learn to leverage the hyperscaler marketplaces in order to tap into associated profit pools in this shifting route to market landscape.
In the near-term, that means working with their software partners and actively driving private marketplace transactions as the seller of record. With revenue growth flowing through private offers, channel partners will need to quickly acquire expertise in the marketplace-specific intricacies of private offers, and position themselves as a central figure helping both ISVs and buyers craft sophisticated private offers that provide customization while enabling drawdown of cloud credits. For most resellers, this will be a transformative effort — managing private offers at scale requires significant technology investments, and some value-added distributors and technology vendors are already helping drive such integrations.
In the long term, channel partners will need to continue diversifying their business model away from pure reselling to more value-added services. A lot of resellers are already eyeing professional and managed services as a strategic growth vector, and helping customers manage the complexity of their multi-cloud or hybrid environments (both multi-cloud and on-premise). Provisioning support and support of hybrid cloud environments are not yet offered by hyperscalers, providing room for channel partners to bring value. In addition, helping customers procure multi-vendor solutions and managing their procurement process across multiple routes are all opportunities that remain for partners to continue to play a key role.
4. A new tooling landscape will emerge to ease friction for buyers and sellers
The rapid growth of the marketplace sales channel creates unique complexities and challenges in contracting, invoicing, transacting, and accounting for all stakeholders. This problem is exacerbated by the number of marketplaces ISVs and resellers need to integrate with. We are seeing new tooling and software categories emerge e.g., marketplace platforms and aggregators. The evolution of the landscape is also lowering barriers and speeding up marketplace transformation efforts for software vendors and channel partners who can benefit by accessing solutions without prohibitive upfront investment in technology and resources.
On the vendor-hyperscaler side, aggregators such as Tackle.io have emerged to simplify the experience of listing products and selling across marketplaces. These aggregators have developed platforms and tools to effectively offer a consolidated window into multi-marketplace operations, streamlining both the onboarding process and the resource and technological cost of managing transactions across multiple marketplaces.
On the reseller and end-customer side, new platforms are emerging to service hyperscaler marketplace operations. Distributors like TechData and Ingram are already leveraging their backend technological capabilities and providing platforms to support cross-marketplace syndication for resellers, for instance, while resellers have important opportunities to simplify the buying experience for end-customers and offer white-glove service to enable hybrid solutions for which hyperscalers don’t currently offer support. Secondary marketplaces with backend connections to hyperscaler marketplaces can also be a way for companies (both ISVs and channel partners) to port existing customer relationships to hyperscaler marketplaces, capturing the benefits of marketplace presence without disrupting existing sales motions or jeopardizing customer retention.
5. Marketplaces will become the dominant channel for all partners to work and transact on hyperscalers
The importance of the marketplaces will continue to grow and evolve. We’ll see all participants explore new ways to promote their own interests by driving value for other stakeholders.
Hyperscalers leverage marketplaces not only to drive more adoption, but also to provide a seamless buying and billing experience to their end customers. They will continue diversifying their marketplace portfolios and will lean into co-selling and co-development partnerships to boost marketplace sales and drive consumption. Software vendors will find creative ways to leverage marketplaces and tap into customer cloud commits, compete for opportunities to access deeper and more enduring hyperscaler partnerships by demonstrating how much incremental revenues they are driving for hyperscalers. While cloud partners and resellers don’t see direct benefit, they will use the marketplaces to protect traditional resell revenue streams and help with transactions.
Marketplaces will continue to be a strategic priority for hyperscalers and they see it as a core component of scaling their partnerships. By 2025, hyperscalers will likely start requiring all major co-selling partnerships that drive significant cloud consumption to transact off their marketplaces. Forward-looking executives will need to quickly onboard their companies and work to understand their developing role in the new ecosystem in order to keep up.
A new paradigm for software sales
Hyperscaler marketplaces are creating a new route to market and building a new strategic control point, and software companies must adapt to ensure their continuing relevance in the new era. It is imperative that leaders work to understand this sea-change in software sales and commit to overcoming the challenges and capturing the growth opportunities that lie ahead.
- Software vendors need to rethink their routes to market, establish clear strategic intent, and make deliberate investments to scale operations in the medium term.
- Channel partners need to re-imagine their role in the software value chain, embrace marketplaces to not just preserve their resell revenue but increase their intimacy with customers and relevance with key software vendors, as well as generate demand for their value-added services.
- Hyperscalers need to nurture the marketplace ecosystem to cultivate diverse portfolios and incentivize all stakeholders, while taking an increasingly hands-on role in co-selling and co-developing with partners.
In the face of sweeping change, the cost of inaction is high: companies that engage too late could find themselves left behind. Those that recognize and leverage the possibilities inherent in hyperscaler marketplaces, however, will position themselves as leaders in a fast-growing new sales channel — and lay the groundwork for potentially break-out growth in the future.
We would like to thank Federico Fabbri, Derek Kennedy, John Merchant, Stephen Robnett, John Soumbasakis, and Scott Stemberger for their thought partnership and Max Baas-Thomas, Sallie Lau, and Abhishek Samdaria for their contributions to this work.