Technology Marketplaces. Not Quite the Wild West

This article provides an assessment of the ‘cloud marketplace’ landscape, and is aimed at technology sales and marketing professionals who are familiar with cloud marketplaces but who want to understand more on trends and futures.

What is a Cloud Marketplace?

We are all familiar with marketplaces, in the form of eBay, Amazon and Alibaba that offer access to a wide range of products from a wide range of sellers in a single on line portal. The key to their success is down to a number of factors that include:

• The range of products and services they offer, their ability to be a ‘one stop shop’

• Ease of use, particularly around smart searching, to get quickly to the product you want

• Seamless billing integration, the ability to invoice once for products from multiple sellers

• Customer feedback, allowing the user to make informed choices between seller offerings

Alibaba, a company founded in 1999 and now with a market value of more than two hundred billion dollars, features around one billion products, is one of the twenty most visited websites globally, and is the world’s largest retailer based on sales revenue (1). So there is no doubt that marketplaces matter, whether you are selling books, clothing, or cloud computing.

The sheer volume of products and sellers in a marketplace like Alibaba means that one of the differentiating factors is search technology. Alibaba recently invested in artificial intelligence search specialist Twiggle, which was founded by former Google employees (2).

It’s therefore no surprise with the growth of Software as a Service solutions in the business world, that cloud marketplaces have become significant. They are marketplaces where businesses, large and small, can select and buy cloud solutions from multiple sellers.

Darryl Plummer of Gartner tells us that “in 2014, companies realized that cloud marketplaces were interesting … but it won’t be until 2017 that we’ll know who the real winners and losers are” (3). In this bChannels paper we’ve mapped out who in our view is currently winning and losing in which race.

The Types of Cloud Marketplace

At bChannels we typically divide marketplaces into three categories. Broadly we talk about cloud marketplaces set up by vendors, those created by distribution, and those run by specialist cloud brokerages. Let’s take a look at each in turn.

Vendor Marketplaces

Many software vendors have set up on line marketplaces, some a good while ago. These marketplaces promote the vendors’ cloud software solutions, or complementary solutions developed by specialists that enhance or integrate with the vendor’s core offer.

The IBM Cloud Marketplace (4) offers end users access to a catalogue of IBM cloud solutions. It’s an IBM-only resource that makes it simple to search and select IBM cloud solutions.

The Salesforce AppExchange (5) introduces users of Salesforce to a wide portfolio of add on solutions developed by independent businesses who form the Salesforce community, the ‘sellers’. SaaS solutions offered by sellers are rated by end customers. Usage is generally charged ‘per user per month’ and billing is consolidated so that end users don’t get multiple invoices.

Amazon’s AWS Marketplace (6) features a wide variety of both commercial and free software that drives consumption for the AWS platform. AWS Marketplace ‘sellers’ include large vendors like Microsoft and SAP, and there are also hundreds of applications from specialist developers who focus on specific sectors (like education) or functions (like CRM). Usage is charged for by the hour, month or year and the AWS Marketplace manages end customer usage metering and billing for sellers.

Similarly the Microsoft Azure Marketplace (7) is offering software from a range of sellers that drives consumption of the Azure Platform, with associated usage metering and billing management. The AWS and Azure Marketplaces are differentiated from ‘product extension’ marketplaces like Salesforce AppExchange, as AWS and Azure are platform vendors, not SaaS application vendors. So their marketplaces offer the full technology stack, charged based on usage, including the operating system, database and security.

To summarize, in the world of vendor marketplaces we have:

VENDOR MARKETPLACES

• (A) On line catalogue marketplaces like IBM Cloud Marketplace

• (B) SaaS solution extension marketplaces like Salesforce AppExchange

• (C) Platform as a Service software marketplaces like Microsoft Azure Marketplace

Terminology is important and can be misleading, so we believe it helps to clearly define marketplace categories. The IBM Bluemix Catalogue for example, is not a catalogue marketplace. It’s closer to a solution extension marketplace (B), albeit for a core platform offer and aimed at developers not end users.

Distribution Marketplaces

Distributors always have been marketplaces and have always had catalogues, as they offer a range of vendor solutions from a single source. But they have only comparatively recently gone fully on line for cloud solutions.

Tech Data StreamOne is a mature example (8). This marketplace offers access to cloud applications, infrastructure and security, and in that sense looks a lot like a Platform as a Service software marketplace (C above) but it’s actually fundamentally different. StreamOne is designed for resellers, not end customers.

All of the vendor marketplaces (A, B and C) are aimed at end customers. StreamOne is aimed at resellers, allowing them to select and deploy cloud solutions for end customers. It manages usage metering, and consolidates billing so that the reseller can easily invoice the end customer.

IDC tell us that 55% of cloud business is indirect, as opposed to direct, and that indirect is growing fast as a route to market for cloud solutions, especially in emerging countries (9). That’s why the Microsoft and AWS platforms are in fact available not only through their own marketplaces, but also through StreamOne, for resellers to sell on to end customers.

The Ingram Cloud Marketplace (10) is another leading distributor marketplace. It leverages Ingram’s recent acquisition of Odin, which is used to manage SaaS software provisioning through partners to end customers.

Both TechData Stream One and Ingram Cloud Marketplace offer resellers the opportunity to white label. You’ll be familiar with this concept if you use eBay, which offers ‘shop front’ functionality. Sellers can create their own marketplace page within eBay, which looks like their own branded page. Similarly technology resellers can create their own branded page in the distributor marketplace, and leverage the distributor’s usage metering and billing technology to do business with end customers. Tech Data made announcements about this at the recent Microsoft Worldwide Partner Conference (11).

Other distributors have developed, or are developing marketplaces, including Arrow with ArrowSphere and the Avnet Cloud Marketplace. At bChannels over the last year or two we’ve seen rapid improvement in the technology infrastructure that supports distribution marketplaces, some as a result of acquisitions by distributors of companies with expertise in cloud service brokerage, on which more below.

So, extending our table from above, we can now see five marketplace types as follows:

VENDOR MARKETPLACES

• (A) On line catalogue marketplaces like IBM Cloud Marketplace

• (B) SaaS solution extension marketplaces like Salesforce AppExchange

• (C) Platform as a Service software marketplaces like Microsoft Azure Marketplace

DISTRIBUTION MARKETPLACES

• (D) Distribution marketplaces for resellers like Tech Data StreamOne

• (E) White labelled marketplaces created by resellers

Cloud Service Commerce

All of the marketplace types (A-E) we’ve looked at so far are brokerages of sorts. All of them offer users access to a range of solutions gathered from a portfolio of ‘sellers’ (with the exception of catalogues, A).

Over the last few years we’ve seen the rise of specialist ‘Cloud Service Broker’ companies, who follow the distribution marketplace model, but who have no legacy in on premise reseller models. They are sometimes also referred to as ‘Born in the Cloud Distributors’.

It’s estimated by Gartner that the market for cloud services bought through Cloud Service Brokers will exceed $160 billion by 2018 (12).

At bChannels we refer to this as ‘Cloud Service Commerce’ rather than as ‘Cloud Service Brokerage’, as in fact some of these companies only offer access to a marketplace platform, and do not broker relationships with sellers. In other words some ‘Cloud Service Commerce’ companies are platform and broker, some are platform only, and indeed some offer services to manage platforms, but not the platform itself. We’ve categorised them clearly below.

Let’s take AppDirect as an example. Founded in 2009, this fast growing company is seen by many as the classic model to enable Cloud Service Commerce. AppDirect offers businesses a white label cloud marketplace platform, which they can customise to their needs, which has built-in cloud service usage metering, billing management and software integration. So AppDirect is enabling white labelled marketplaces, which we highlighted as E in the table above.

Additionally, AppDirect builds relationships with sellers, so they are a true broker of

services. Customers using the AppDirect platform have access to a range of pre-agreed relationships with sellers that allow a portfolio of cloud solutions to be presented in their marketplace. AppDirect call these seller relationships ‘syndicated services’.

AppDirect has grown its business by enabling cloud service marketplaces for larger companies, like IBM and Deutsche Telecom, not so much the smaller resellers who are the main focus for companies like Ingram. But this is changing, and will bring AppDirect into closer competition with traditional technology distributors.

We could say that AppDirect is the ‘classic’ Cloud Service Commerce model, with balanced focus on white label marketplace enablement, metering and billing management, plus syndicated cloud service software.

Jamcracker, which has been in business since 1999, is like AppDirect a marketplace platform provider and syndicated cloud service broker. Jamcracker has a ‘Technology Partner’ program which engages companies that develop solutions to enhance or integrate with Jamcracker technology. Jamcracker also has a ‘System Integrator’ program to promote specialist consultants able to support customers who want to deploy Jamcracker. It’s important to see both Technology Partners and System Integrators are part of the Cloud Service Commerce ecosystem.

Redmond-based ComputeNext is also a marketplace platform provider and syndicated cloud service broker. The ComputeNext ‘Kiosk’ service offers a white label marketplace platform and access to syndicated Microsoft cloud solutions. ComputeNext ‘Enterprise Cloud Brokerage’ services manage provisioning of cloud services to employees in large corporations. Cloud service usage metering and policy governance within large enterprises is an emerging and important sub-category in the Cloud Service Commerce arena. It’s particularly relevant with hybrid cloud models, where enterprises are deploying a mix of on and off premise technology infrastructure, and where employee self-service is changing the role of the IT function.

We also see an emerging group of Cloud Service Commerce consultants, who don’t offer a platform, but who provide design and integration services to support businesses that are creating marketplaces. Jamcracker ‘System Integrator’ partners are larger examples of these. There are many smaller examples, like Nephos Technologies.

Right now it’s hard to be clear on the Cloud Service Commerce landscape, but perhaps the following emerging areas can be added to our list:

VENDOR MARKETPLACES

• (A) On line catalogue marketplaces like IBM Cloud Marketplace

• (B) SaaS solution extension marketplaces like Salesforce AppExchange

• (C) Platform as a Service software marketplaces like Microsoft Azure Marketplace

DISTRIBUTION MARKETPLACES

• (D) Distribution marketplaces for resellers like Tech Data StreamOne

• (E) White labelled marketplaces created by resellers

CLOUD SERVICE COMMERCE

• (F) Classic: white label marketplace, billing, syndication like AppDirect

• (G) Corporate: internal provisioning and governance like ComputeNext

• (H) Consulting: integration services, no platform like Nephos

Trends and Futures

We’ve summarised below bChannels view on where this fast moving landscape is headed, and who might be the possible winners and losers.

• Marketplaces have been developed by vendors around the particular needs of specific end user customer segments. As a result, as yet there is not a lot that ‘joins up’ across customer segments. Solution extension marketplaces (B) are usually aimed at small or mid-market business, as are distribution marketplaces (D) though this is changing. Cloud Service Commerce (F to H) has tended to be aimed at larger enterprise, though this is changing too.

• Distributors, born in the cloud service brokers, and some vendors, are jostling for position to become the ‘go to’ resource for cloud provisioning in their sector. A lack of standards for marketplaces is slowing landscape consolidation, so it will take time for leaders to emerge. Some vendors are struggling with the apparent lack of brand and commercial control associated with moving from a simple catalogue to a multi-vendor marketplace.

• The ability to offer technically seamless cloud service delivery might be a defining factor. Having strong usage metering and unified billing technology is not enough. This might lead to consolidation of the Cloud Service Commerce, and the emergence of larger companies able to compete meaningfully with large System Integrators. We see extension of PaaS Marketplaces (C) to include integration and value added services as a key trend.

• We should not forget that large marketplaces succeed or fail based on ease of use and search engine capability, whether they be business or consumer marketplaces. It’s easy to see major new entrants into the landscape, like Google or Alibaba. Cross over of purchasing behaviour from home to work is highly relevant here and companies with established business and consumer brands might have an advantage.

In Conclusion

The marketplace landscape is not quite the ‘wild west’, it’s beyond that, but it does not represent a mature commercial model. Not yet. We expect the model to evolve, and we expect consolidation of providers. We also expect significant new entrants, perhaps with a consumer heritage.

References

• https://en.wikipedia.org/wiki/Alibaba_Group

• http://www.wsj.com/articles/alibaba-invests-in-next-generation-of-e-commerce-search-1464699604

• http://insightsmagazineonline.com/Assets/2015/February/Cloud-marketplace-feature#.V5eu_LgrKDs

• https://www.ibm.com/marketplace/mobile/us/en-us

• https://appexchange.salesforce.com/

• https://aws.amazon.com/marketplace

• https://azure.microsoft.com/en-us/marketplace/

• http://www.techdata.com/content/tdcloud/index.html

• https://www.youtube.com/watch?v=PRY3EjpLu6I

• http://www.ingrammicrocloud.com/marketplace/

• http://www.channelpronetwork.com/news/tech-data-adds-customizable-storefront-and-apis-streamone-cloud-e-commerce-platform

• http://searchcloudprovider.techtarget.com/feature/Cloud-brokerage-Are-cloud-brokers-tomorrows-system-integrators

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