AWS Marketplace channel partners rev software, service sales
Partners are building a new route to market on AWS Marketplace. One has surpassed $1 billion in total sales and another expects to soon generate half its revenue there.
Presidio, a technology services and solutions provider, started selling its offerings on the AWS Marketplace shortly after the cloud-based digital storefront opened to professional services sales in December 2020. Last month, four and a half years later, the New York-based company surpassed $1 billion in sales on the marketplace. It appears to be the first IT service provider to cross that threshold, although more than half of its sales are for software.
Presidio's marketplace wares include cloud migration, disaster recovery and AI agents among other products and services. It also offers software from vendors such as Cisco, CrowdStrike, Palo Alto Networks and Zscaler for use in the AWS cloud.
The company's AWS Marketplace presence provides a way to reach customers and help them aggregate their IT purchasing. Yet the marketplace isn't simply an adjunct to Presidio's go-to-market approach -- it's become an alternative channel.
"We have another, completely different approach in terms of a route to market," said Kevin Corace, vice president of sales, enterprise licensing and business development at Presidio.
Services gain marketplace traction
AWS launched its marketplace in 2012 around software, and some independent software vendors (ISVs) generate enormous sales volumes on the platform. CrowdStrike in 2023 was among the first ISVs to eclipse the $1 billion marketplace sales mark. Now, service providers are catching up.
In addition to Presidio, other IT service firms that have grown significant business through the marketplace include Accenture; Deloitte; CDW subsidiary Mission; Innovative Solutions; and Rackspace. Overall, AWS Marketplace lists more than 2,600 professional services offerings; many providers have multiple listings.
"It's one of the fastest-growing parts of the AWS Marketplace," said Matt Yanchyshyn, vice president of AWS Marketplace and partner services at AWS. He noted that the professional services expansion stems from a smaller revenue baseline than the marketplace's SaaS business, making a high growth rate easier to achieve. But the marketplace drives service sales, piggybacking off customers' software buys.
"[Service] shows up on your bill just like software does," Yanchyshyn said. "It makes procurement easier."
AWS Marketplace transactions also represent a fast-growing partner business.
"Today, about 30% of my revenue goes through the marketplace," said Justin Copie, CEO at Innovative Solutions, a systems integrator and AWS partner based in Rochester, N.Y. "I think that the scale will probably tip by the end of this year, so that 50% of all our revenue will go through the marketplace."
Looking beyond that, the marketplace has the potential to become even more influential for the company.
"I think there will be instances where we don't use the marketplace," Copie said. "Those will probably start to trail off into becoming anomalies in the next couple of years. Our bet is that the AWS Marketplace will be essential to the technology adoption process for customers."
Innovative Solutions focused its business on its AWS relationship in 2019 and signed a Strategic Collaboration Agreement (SCA) with the cloud company in 2023. Under an SCA, AWS and a partner set goals such as growing revenue or creating technical capabilities. AWS provides funding, marketing and technical support to help partners meet those goals.
Forecast: Half of marketplace sales to flow through partners
Channel partners' interest in marketplace sales isn't limited to the AWS one.
IT service providers also participate in Microsoft's Azure Marketplace and the Google Cloud Marketplace. Their presence in the three marketplaces was negligible in 2021, but they are seeing significant growth across the cloud platforms. Canalys, a market research organization, predicts channel partners will account for half of all hyperscalers marketplace transactions by 2027 -- a potential sales slice approaching $40 billion per year.
Canalys is part of tech advisory group Omdia, a division of Informa TechTarget.
Software-services combo fuels growth
Several factors fuel service provider and channel partner growth on the AWS Marketplace. Among them is the platform's software heritage. SaaS products are a key component of AWS customers' IT projects, and partners that offer software through the marketplace can wrap services around those transactions.
"The number one driver in the marketplace right now is software," Corace said. "Software makes up the majority of our marketplace sales -- but still with a healthy amount of professional services."
Innovative Solutions also uses the marketplace to combine software and services.
"When we sell professional services to a customer, 80% of the time there is a need for us to bring something to the table, typically a software solution that needs to be integrated," Copie said. "The marketplace is really when we need to go to market and sell something to a customer that incorporates both the professional services and an ISV."
Copie cited Flexera's CloudCheckr, New Relic's observability platform, IBM's Watsonx and PagerDuty's incident management offering as examples of ISV products Innovative Solutions has sold through AWS Marketplace. He expects that list to grow.
Copie said the company uses the marketplace's Channel Partner Private Offer (CPPO) feature to combine software and services. With a CPPO, ISVs authorize channel partners to maintain contractual relationships with customers when selling their software through the marketplace. This lets partners customize pricing and licensing terms -- and bundle services.
"As a partner, it takes a lot of friction out of the process," Copie said. "From a customer's perspective, it is one-stop shopping."
Corace said AWS Marketplace transactions offer customers other benefits in addition to customized offerings and the ability to buy software and deployment services together. For example, software purchases made through the marketplace, rather than directly from ISVs, are credited toward customers' AWS spending commitments. AWS Private Pricing Agreements offer discounted pricing to customers who commit to spending a certain amount on AWS cloud services over an agreed-upon time frame.
Coarce noted that customers can also navigate complex licensing agreements and obtain financing through Presidio. He added that marketplace transactions give customers much more to consider compared with traditional software reselling.
"It used to be a customer reached out to a partner and the partner just gave them a technical offering," Coarce said. "Now what you are starting to see is a partner that has the ability to stack a lot of those procurement benefits for customers."
Generation of App Store users sparks marketplace sales
Another factor behind the rise in AWS Marketplace sales is the nature of the corporate IT buyer.
"The persona who's making these buying decisions has really changed over the last few years. The CIOs of today are the App Store users who grew up with immediate access," Yanchyshyn said, referring to Apple's online store for mobile apps.
Speed is the watchword.
"It's no longer this old-school procurement motion," Yanchyshyn said. "The expectation is, 'Things are moving too fast. We want to experiment with AI. We want to experiment with cloud. We need to make buying decisions in real time.'"
Corporate acceptance of AWS as a standard procurement vehicle also contributes to transaction speed, Copie said. He cited the example of Brightline, an Innovative Solutions customer that operates a high-speed rail service between South Florida and Orlando. Brightline sought a partner to provide an AI and machine learning offering for revenue operations. The company asked Innovative Solutions to create a private offer in the AWS Marketplace through the CPPO program, rather than pursue its typical procurement process.
Copie said the latter method would have involved Brightline vetting Innovative Solutions as a new supplier. But using AWS Marketplace, where Brightline already had an account, eliminated that step.
"I would have spent probably four to six weeks going back and forth with legal, getting through their procurement process, being vetted as a vendor," Copie said. "I was able to bypass all of that."
John Moore is a writer for Informa TechTarget covering the CIO role, economic trends and the IT services industry.
