Clouds Are Fast Becoming an ISV Channel

Cloud services require applications to deliver value. Independent software vendors (ISVs) are leveraging cloud providers as a primary channel to market. Vendors and ISVs need strategies for capitalizing on cloud marketplaces.

By Larry Walsh

Go to any cloud service and you’ll find an attached marketplace of third-party and complementary software applications. Most marketplaces will allow customers to buy on the spot. Others – particularly those offering more complex infrastructures and applications – will collect contact information for follow-up sales calls. Regardless, the marketplace is the beginning and end of a secondary cloud sales cycle.

The advent of cloud marketplaces isn’t news. Amazon Web Services (AWS), Microsoft, Salesforce.com, IBM Cloud, Rackspace, and others have launched marketplaces over the past several years as a means to provide their customers with access to products that enhance the value of their platforms.

Third-party applications and plug-ins developed by ISVs and application developers extend the functionality of cloud services, thus enhancing customer satisfaction. And satisfied customers lead to longer, deeper engagements that are paramount to the cloud computing recurring-revenue model.

According to analyst firm Gartner, the cloud computing market for infrastructure, software, and platforms is growing at a compound annual growth rate (CAGR) of 10 percent annually. By 2020, businesses around the world will spend more than $383 billion on baseline cloud services. It’s an impressive number that eclipses the networking, security, and storage markets combined.

The cloud computing market continues to grow unabated, but so, too, does the enterprise software market, with many of those applications heading to the cloud as well. By 2020, the enterprise software market will top $450 billion. That growth is due in large part to the increasing volume of ISV products sold for and through cloud platforms.

The AWS marketplace boasts security applications from Palo Alto Networks, Trend Micro, and Sophos; storage solutions from NetApp; databases from Elastic Cloud and Teradata; and business intelligence tools from SAS, Tibco, Tableau, and more.

The Microsoft Azure marketplace showcases a similar portfolio of vendors and products, as well as an impressive number of ISV offerings. Algorithmia, ScaleOut Software, SoftFluent, BankSight, Pointivity, and Rescale are among the hundreds of ISVs plying their wares through the Microsoft marketplace.

Salesforce.com, a pioneer in ISV marketplaces, boasts hundreds of traditional and emerging software vendors and ISVs in its AppExchange marketplace. Most of the ISV applications either plug in automatically or integrate with the underlying Salesforce.com platform.

Vendors and ISVs are seeing the potential of cloud marketplaces to develop ecosystems that not just enhance the value of cloud platforms but also provide a valuable, revenue-generating channel to market. With so much software easily distributed via the cloud, it only makes sense to sell through the same medium.

In the cloud era, software and cloud vendors may find themselves not just operating marketplaces or selling through complementary vendors but also selling through competitors. Again, look no further than Microsoft, which once steadfastly stood monolithically against working with direct competitors but is now more liberal in its views. As Microsoft’s channel chief Gavriella Schuster told Pod2112, Microsoft’s goal is getting its software on every platform. That “be everywhere” goal is why Microsoft offers its wares through the AWS marketplace.

Cloud platforms will become an increasingly important channel for vendors and ISVs as more infrastructure and workloads move to the cloud. Chris Rimer, head of IBM Cloud’s channel and ecosystems, confirmed that notion during a podcast with 2112, saying that we’re only scratching at the potential of cloud marketplaces as a driver of new and renewal business.

Marketplaces are already disrupting the consumer and SMB hardware channel. The cloud has disrupted the entire legacy infrastructure market segment. Cloud marketplaces will provide vendors and ISVs with an expansive and expeditious route to market. Hardware and software vendors, as well as ISVs, will need to rethink their channel strategies to incorporate marketplaces – including those operated by competitors.

For more information about marketplace channel strategies, check out 2112’s exclusive report “Strategies For Engaging Automated Digital Sales Channels,” available for free through the 2112 Research Library.


Larry Walsh, The 2112 Group

Larry Walsh is the founder, CEO and chief analyst of The 2112 Group. Follow him on social media channels: Twitter, Facebook, LinkedIn.