Driven by the pandemic, SaaS Marketplaces are rising in popularity as a unified virtual storefront where various vendors can provide cloud-based product and service offerings. As their role continues to expand and evolve, technology and consulting service providers who can seize opportunities in this area are well-positioned to become valued partners and mentors for enterprise clients and SaaS vendors. Learn more about the growth areas for service providers and the promising future outlook for SaaS marketplace solutions in this blog.
As the SaaS market has ballooned beyond US$120 billion, the role of SaaS marketplaces is getting noticed. Last month Salesforce celebrated 10 million installs of its AppExchange marketplace, Microsoft AppSource reached over 100 million users globally, and AWS marketplace has over 2,000 software vendors. While these statistics are not new, they are getting noticed now due to increased pandemic-fueled digital selling.
What is happening in SaaS marketplaces?
SaaS marketplaces have significantly evolved from their primitive infant days. Not only do they offer access to hundreds and even thousands of SaaS offerings from their partners, but they also add value today by improving the contracting process, vetting applications, and providing transparent billing and similar value-added services. Though they still represent a small dent in the overall enterprise buying process, some marketplaces believe these may become the default.
Software and platform vendors such as SAP, Oracle, ServiceNow, Salesforce, AWS, and Microsoft are proactively investing in these strategic initiatives. While most marketplaces ease enterprises’ integration challenges, many of them generally focus solely on add-on products for their platforms, Application Programming Interfaces (APIs), integrations, or plug-ins and not applications outside their ecosystem.
What does this mean for technology and consulting services providers?
With multiple pre-built and tested integration and API on SaaS marketplaces, a logical assumption is that technology service providers will struggle because SaaS consumption will become easier. However, the reality is entirely the opposite. Most service providers have listed some offerings on leading marketplaces, but that is not enough. The following three broad opportunities exist for service providers:
- Enterprise guide: Most B2B sales continue to be traditional. However, the pandemic has shifted the focus to a digital sales model, including SaaS marketplaces. Enterprises need considerable help in building their adoption strategy SaaS marketplaces, ensuring risk and governance, monitoring consumption, embedding security, and driving SaaS adoption. All of these needs add to the existing pie providers get from enterprises. In addition, service providers can tap into the committed cloud spend of enterprises to extract more value from cloud investments
- Leveraging large SaaS partnerships: Large SaaS vendors plan to build sticky relationships with clients through the marketplace offering. The listed products generally enhance these underlying platforms, and therefore, service providers who are strategic partners for the SaaS vendor stand to benefit. This can lead to not only consulting, implementation, and support work but also to running business processes for the enterprises. In partnership with the large SaaS vendors, Business Process as a Service (BPaaS) can be offered, bringing together multiple listed offerings and delivering them as a full stack in an outcome model (e.g., reducing day sales outstanding, impacting trade dispute spend, faster invoice processing, etc.). The service provider can build an industry-aligned solution using the marketplace offerings of large SaaS vendors and its partners
- Driving innovation with smaller SaaS vendors: As a result of prioritizing their channel arm, 90% of service providers’ pipelines are generally with the top five to eight partners despite working with several hundred software vendors. Small SaaS vendors do not get the needed attention because their deal sizes are small (often $100-200K Annual Recurring Revenue.) With marketplace, service providers can bring together offerings from different smaller SaaS suppliers (e.g., industry offerings or enhancing an existing large SaaS platform). Service providers can become the gateway for enterprises to consume multiple SaaS offerings in an integrated manner and provide the needed governance discipline across business functions. They also can build attractive service packages that tie to these solutions and bundle SaaS and professional services
Most SaaS marketplaces have a significant presence of Managed Service Providers (MSPs), resellers, and other channel alliance partners. Technology service providers need to proactively invest to partner with multiple SaaS vendors to become their preferred channel to engage with the marketplace. They can provide value-added services of implementation, customization, data integration, and run after the purchase process. In addition, technology service providers can integrate their offerings with SaaS vendor solutions and host them on the marketplace. They can also partner with other vendors to create unique solutions with SaaS providers delivered on the marketplace. Some service providers may also build their own marketplace targeting specific areas such as application modernization or cloud migration.
What will happen going forward?
As a sub-segment of Cloud marketplace, SaaS marketplaces are part of the broader digital selling trend witnessing rapid growth due to the pandemic. These marketplaces will keep evolving beyond adding more listings to enhance contracting, leverage Artificial Intelligence (AI) to search for bundled and efficient options, and provide other benefits. The market will aggregate around large marketplaces, much like cloud and social media.
Enterprises will continue to evaluate these platforms to reduce cost, friction, and integration challenges. B2B commerce has already made organizations comfortable in using the principles of marketplace buying. SaaS marketplaces are one more addition to this journey.
If vendors can provide a seamless experience, transparent pricing, resolve disputes, and offer hyper-personalization after sales, the industry will witness significant momentum. Therefore, technology and consulting providers need to work closely with sellers, buyers, and platform vendors to drive their businesses. They will have to rethink their contracting, pricing, cataloging, and go-to-market (GTM) models to align with SaaS marketplaces. As SaaS gets more industry-aligned, the role of technology and consulting service providers will morph into becoming mentor-plus partners for their enterprise clients and SaaS vendors.
What have you experienced with SaaS marketplaces? Please feel free to write to me at [email protected].
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