What Should I Consider When Purchasing SaaS in Cloud Marketplaces?

Ben : What is going on everybody? This is Ben ... here with another episode of SaaS Me Anything. In this week's episode, we are going to answer the question, what should I consider when purchasing SaaS in marketplaces?

Ben : Before we jump in though, a little story here. So for all my iPhone users out there, have you ever checked out the subscriptions area in your settings? From here, you can see not just the Apple services you are subscribed to like Apple TV or Apple Music, but you can also see anything that you've purchased through the App Store. It's a pretty convenient way to seize everything that you're paying for in one place and be able to take some actions against those subscriptions. Well, guess what? There's a very similar paradigm that exists for SaaS and it's growing like crazy. They're called marketplaces and all three of the major cloud providers have them, Amazon, Google, and Microsoft.

Ben : Well, first off, are marketplaces just a fad or are they a trend that you need to be leaning into? According to Tackle, which is a SaaS platform that helps companies launch their marketplaces and then manage their listings, in their latest state of cloud marketplaces report, they were projecting that as high as$ 15 billion in marketplace throughput by the end of 2023 and a hundred billion dollars by 2026. With that much money already going through marketplaces and with projected growth like that, I'd say we all should get up to speed on what it could mean for your business. So let's do that.

Ben : In today's episode I'm going to cover off number one, what are cloud marketplaces? Number two, why purchasing through a marketplace is beneficial. Number three, how buying software in a marketplace works. And number four, a few considerations as you adopt this new approach.

Ben : All right, so to get started, what is the cloud marketplace? It's honestly not all that different from what you're accustomed today in buying enterprise SaaS. The only difference is that you transact with your cloud provider to buy the software instead of your SaaS vendor or reseller. If you do a web search for AWS marketplace, Azure Marketplace, or Google Cloud marketplace, you can browse around and see what they're all about.

Ben : Now, there are a few really attractive benefits to purchasing software this way. First, invoicing and payment is centralized through one provider, your cloud provider, rather than through each and every software vendor that you work with. Second, it eliminates the need to onboard new vendors into your procurement system. Harvard Business Review reports that it's not uncommon for it to take a month to onboard a new supplier and could take up to six months for larger organizations. Third, the large cloud providers have discount programs where you can qualify for higher levels of discounts on your overall cloud spend as your annual spend commitments increase.

Ben : Marketplace spend qualifies, albeit with different caveats, based on your cloud provider. Put a different way, purchasing software via marketplace that you are already going to purchase has the potential to unlock higher levels of discounts from your cloud provider.

Ben : And finally, if you are on one of those discount programs with spend commitments, your company has already budgeted to spend that committed money with your cloud provider. There's an opportunity to tap into that existing budget if it is available for the software that you want to buy.

Ben : Now that we've covered what a cloud marketplace is and the benefits, let's dig into how it works. First and foremost, you'll need to make sure the app you want to buy is available on the marketplace you want to transact on. You can either look for yourself or ask your sales rep.

Ben : Quick side note here, traditionally you find many apps and services targeting engineering teams on these marketplaces, which makes sense. However, more and more SaaS vendors are selling software and services in marketplaces. For instance, last quarter, both Salesforce and ServiceNow made big announcements with AWS and are listing their products for sale on their marketplace. So if the app you want to buy isn't there, it likely will be in the near future.

Ben : Now, there are a few ways you can buy. One is via just a mouse click on the marketplace. That said, most companies we work with aren't buying enterprise software that way. For that reason, all of the big marketplaces allow for a more traditional enterprise selling motion with an account executive. When the time comes to purchase that is managed through the marketplace, almost think of it like your point of sale machine at your local coffee shop. When you're ready to transact, you do that through the marketplace. You can agree to negotiated terms, MSA pricing, the whole gamut. Once that happens, you are billed via your cloud provider invoice for the service that you bought. You pay your cloud provider according to your payment terms with them, and then they pay your SaaS provider.

Ben : Now, there are a few considerations and recommendations as you get started. First, go talk to whoever's responsible for your managing your cloud. Ask who your primary cloud provider is and if you are on a spend based discount program with them. Seek to understand if marketplace spend was considered when negotiating the spend commitments. Next, once you understand where things currently stand, get clear on which of your current vendors you could be buying through the marketplace. Also, start to ask new SaaS apps during the buying process if you can purchase on a marketplace. And then last but not least, traditional resellers like CBWSHI and SoftwareONE can sell via marketplaces and you can get the same benefits. So if you have an existing relationship with one of them, know that that doesn't have to go away.

Ben : To sum this all up, cloud marketplaces have become a big opportunity for IT and procurement teams to streamline the way they purchase software for the business. Not only does buying a marketplaces simplify parts of the purchasing and procurement process, it has the potential to save you big money as well. Make sure you understand, number one, your spend commitments to your cloud provider. Number two, how buying through marketplace can help your company hit those spend commitments and potentially qualify for additional discounts. And then number three, what vendors or existing partners are selling in your cloud marketplace and how that process works for them. As always, feel free to hit me up at ben@zylo.com with any real life experiences working with cloud marketplaces.

Ben : I'd love to hear about it. Thanks for listening. I will see you next time.