Are Marketplaces Transforming How We Sell and Consume Technology?
Tech Vendors Should Have a Marketplace Strategy
Tech marketplaces are online platforms where technology vendors and buyers can connect, interact and transact with one another, in one place, in an easy and fairly automated way. The use of marketplaces has become an integral part of a broader go-to-market strategy for technology vendors, and a go-to place for technology buyers.
Enabling matchmaking is far from enough for these marketplaces to work and thrive, as both sellers and buyers are looking for efficiency gains and higher value. Which third-party marketplaces to engage with, and whether it makes sense to launch your own marketplace, are strategic decisions for technology vendors.
Selling Through a Third-Party Marketplace
Many technology vendors have been using cloud marketplaces — e.g. AWS, Azure, and Google Cloud — as an extension of their sales force, to target the long tail of customers as well as to support marketing and monetization goals, without having to invest in and maintain additional infrastructure.
While these marketplaces provide vendors with faster time to market and shorter sales cycles, end-user organizations — that don’t live and breathe digital technology per se, but need it to run their businesses — benefit from these marketplaces by being able to discover available technology from different vendors in one place, and use them in conjunction with other value-adding applications and services. Also, these marketplaces typically offer a streamlined procurement process, easy deployment and metered usage.
Market analyst firm Canalys estimates that by 2025, US$25 billion of sales will flow through the three major cloud marketplaces — AWS, Microsoft Azure, and Google Cloud — a 59% CAGR compared to 2020, with specific geographies and software segments potentially achieving even higher growth.
In the broader IT industry, where there is room for multiple marketplaces to co-exist and thrive, it makes sense for vendors to diversify their marketplace channels to appeal to a wider and more diverse audience. Adding a solid marketplace strategy to their core business model, can give tech companies a combination of high-value service revenue and high-volume marketplace revenue.
Launching Your Own Marketplace
Some vendors may choose to launch their own marketplace — more niche than the ‘big three’ — where they can sell their offerings alongside value-adding partner products and integrations. Owning a marketplace has its associated costs that should not be underestimated, and its success is highly dependent on how well the partner network is built out.
Coming up with a winning strategy requires key considerations such as:
- Who it will serve, and how it will bolster the brand as well as engagement with customers
- What the marketplace will offer that is unique or attractive to customers
- How the company will participate in the marketplace — e.g. the operational issues
At the end of the day, it is about exchanging value, therefore, before launching your own marketplace, you need to have a clear idea of what it will offer to your partners in terms of access to a broader customer base —the buyers — who may start out by discovering your products, but who may ultimately want the value-added services provided by your partners. In a similar fashion, your partners — the sellers — need to have a good sense of what they bring to the marketplace that can be differentiated, and get the best construct for the partnership. Ultimately, it’s the partner/seller network that makes or breaks a marketplace.
On the infrastructure side, there are some solid enabling technologies out there — both centralized and decentralized options — so if you decide to launch your own marketplace, you don’t have to build one from scratch.
The Future of Marketplaces
I’ve asked my crystal ball and it says ‘yes.’ :-) On a more serious note…More broadly, during the first quarter of 2021, global venture-capital investments in online marketplaces reached an all-time high of US$28 billion — almost tripling the amount invested in the same period in the previous year — according to a report entitled The Future of Marketplaces, published in the summer of 2021.
Generally speaking, digital marketplaces are disruptive in terms of boosting innovation, revenues, as well as providing access to a new and more diverse customer base. A recent research report published by Accenture found that many companies pursue new ecosystem plays in order to navigate, disrupt or lead their industry.
Digital marketplaces will continue to improve seller as well as buyer and user experiences, including more automation, flexibility, and trust in terms of interactions and transactions. Well, they need to.
I believe that over time, online marketplaces will become more and more decentralized, as markets tend to call for efficiency and trust, and middlemen tend to be replaced with more efficient alternatives. Blockchain and associated technologies give us a chance to cut out unnecessary and untrusted parties and automate inefficient and untrusted processes.
