Hello everyone. Alex Smith here with the Futurum Group. Today, we’re going to be sharing with you some of our predictions going into 2025. I’m specifically going to be talking about Cloud Marketplaces and the role that we expect them to have in the technology industry. In fact, we think Cloud Marketplaces will become as important as a route to market for the software industry, as traditional distribution has been for the hardware industry. There’s really three main reasons why that’s the case.
The first has to do with marketplace fees, which have been coming down over the past decade. You go back a number of years when marketplaces first came on the scene, and fees were around 20%, north of 20%. Now, they’re around 3% for many as standard, and even as low as 1.5%, depending on marketplace, depending on the scenario. At this price point, they’re operating in a similar margin stack to what traditional distributors would offer for their customers. Overall, it is becoming a more cost-effective route to market. Vendors can bake this fee into their pricing, they can offer their sales force, comp neutrality, many do. That, again, makes it overall a more cost-effective route to market compared to what it was in the past. That’s driving some momentum.
The second factor has to do with cloud commits. By this, we mean long-term commitments that customers make to spend in the hyperscaler environment. Increasingly, this part of this commit can be used on third-party software products that exist in the cloud marketplace. That is an additional way for customers to burn down these long-term commits. This commit amount continues to grow. Across the three leading hyperscalers, that number now stands north of $400 billion.
What you see here effectively is a ready-made economy for software companies to be able to tap into, because they are dollars that have already been committed to spend and in many cases, if they cannot spend it on their compute needs with the hyperscalers, then they’re looking to spend that on their software needs through that same vehicle. The way to tap into that is through these marketplaces. I think what you’ll see now is the next evolution of that, where when the hyperscalers are going to discuss their commit contracts, they will not only be talking about the compute and storage needs that they are providing, but they will also be talking about the software needs that that customer has too, and say, “Why don’t you bake that into your commit plans going forward?” I think that will be more tailwind for the cloud marketplaces as well going forward.
Then the final factor has to do with the role of channel partners. Increasingly, what you’re seeing is that the hyperscaler marketplaces are creating programs and policies and other forms of enablement to allow channel partners to be a part of this overall marketplace engine. We mentioned earlier that as the overall marketplace fees come down, that leaves more room again in the margin stack for the channel partners to be involved as well. In fact, you’re seeing now north of a third of all marketplace deals involving some kind of channel partner, some marketplaces leaning much more heavily into that motionย than others.
This also means that the software vendors themselves can include their traditional partners as part of their overall marketplace strategy, so that the partners are not competing with what they want to do on the marketplace front. We expect channel partners to play an increasingly important role in marketplaces going forward as well.
Again, the three drivers, fees coming down, the growth of committed spend, and the increasing role of channel partners will all drive cloud marketplaces going forward. A call to action to the vendors out there that might be watching this is, as you are thinking about your go-to-market strategy overall, really consider the role and the importance that you place on the hyperscaler marketplaces, as well as the role that your traditional partners will play as part of that marketplace strategy, because really they will go hand in hand to be one of the fastest growing route to markets collectively for the software industry overall.
