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Return to July 2022 ChannelPro Digital Edition
July 20, 2022 |

Mastering Marketplaces

Online IT buying sites are increasingly popular with end users. What does that portend for the channel?

WAY BACK IN 2014, an MSP in Dallas named Juan Fernandez came upon a then-radical recipe for making himself utterly indispensable to his SMB clients.

“I can sell them the product, the services, the hardware, the whole thing,” he says, recalling the moment of inspiration. Better yet, he realized, he could sell it all on one monthly invoice at one recurring rate.

The term didn’t really exist at the time, but Fernandez, who is today CEO of consultancy the MSP Growth Coalition, had stumbled upon what’s now popularly called “everything as a service.” And all he needed to bring his vision to life was an online tool for provisioning, billing, and managing the new offering.

Juan Fernandez

“We knew what we wanted to do. We knew how we wanted to deliver it. We just needed to get the programming set up,” Fernandez says.

Back then, that was a heavy lift. These days, everyone from hyperscale cloud providers like Microsoft and Amazon Web Services to distributors like Ingram Micro and D&H to vendors like ConnectWise and Tackle offer ready-made online marketplaces stocked with all the resources you need to bring XaaS to your clients seamlessly.

They are, without question, powerful and convenient tools, but many experts think they’re more than that. They’re the key to success and survival in IT.

Point-and-Click Easy

Properly understood, a marketplace is more than just an ecommerce site., most famously, lets you buy Dell hardware plus maybe some accessories and services. Marketplaces, by contrast, are tools for aggregating, deploying, and supporting solutions that include customized blends of cloud software and other products from multiple suppliers.

“You can literally buy 10,000 pieces of software on the Salesforce AppExchange,” observes Jay McBain, chief analyst at Canalys. “The average sale has seven layers to it from six other ISVs that have no relation to Salesforce other than being API-integrated and on their marketplace.”

Good luck researching, quoting, and buying all those items on seven different websites, and then calculating one, accurate total each month for products with seat-based pricing in some cases and usage-based pricing in others that may or may not be billed in arrears.

“MSPs are trying, and they’re having trouble every single month,” says Sam Demulling, vice president of the ConnectWise Sell quoting solution at managed services software maker ConnectWise. “It’s a very tedious process.”

Jay McBain

Marketplaces, by contrast, are often easy enough for end users to operate on their own, and they sell technology exactly the way businesses increasingly want to buy it.

“Whether you’re buying a toothbrush, a razor, you’re buying a car, you’re buying a computer, it doesn’t matter anymore. The future is going more to this monthly subscription model,” McBain says.

Like everything else cloud-related, COVID-19’s arrival in 2020 poured rocket fuel on that trend. “There was more growth in marketplaces in the first three months [of the pandemic] than there was in the last 10 years combined,” says McBain, citing data from McKinsey. “It got to the point where one-third of U.S. GDP was running through marketplaces.”

And there’s nothing transitory about that phenomenon. “We’re predicting $25 billion going through these marketplaces by 2025,” says McBain, who forecasts “hockey stick” growth through the end of the decade.

The bottom line, observes Tackle CEO John Jahnke, is that your customers are spending more and more time on marketplaces, so you should too. “We want to meet buyers where they want to buy, and increasingly buyers are saying they want to buy through these cloud provider marketplaces,” he notes.

Controlling Complexity

Still, if end users want marketplaces, and good marketplaces are self-serve easy, where does that leave channel pros?

Don’t worry, Jahnke says. Marketplaces make IT providers more relevant than ever. “We’re in the Moore’s Law era of software,” he observes, noting that there are tens of thousands of products on marketplaces already.

“There’s a lot more coming, and it’s only going to increase complexity for the end consumer,” Jahnke notes. “The partners who understand the complexity and can help their end customers eliminate it and navigate it by using the easiest tools will ultimately thrive in this era.”

John Jahnke

Of course, no matter how easy those tools are, most of the marketplace users Demulling knows in the channel balk at empowering—or abandoning—all their customers to place online orders alone. “They want to be able to kind of control it on a customer-by-customer basis to make sure they’re only turning it on for the ones that they feel most comfortable with making the right decisions,” he says.

According to McBain, that’s a perfectly good model. “Twenty-four percent of the deals done through marketplaces today are third-party assisted,” he says, noting that placing marketplace orders for your customers can be a form of white-glove service. “You can be the one who walks in and manages the procurement on their behalf.”

A trickier question is whether to create a white-label marketplace using tools from distributors like TD SYNNEX, for example, or transact directly on third-party sites like Microsoft’s Azure Marketplace. Fernandez leans toward hosting a site of your own. “I think what you’ve got to look at is what’s the biggest value-add for me,” he says. “Is the biggest value-add for me to bring business to somebody else or is the biggest value-add to bring business to myself?”

Fair point, McBain says, but cutting yourself off from third-party sites means cutting yourself off from businesses that prefer to buy there. “The majority of Microsoft Azure purchases are done direct,” he says.

Trying a combination of both routes is obviously an option, but Jahnke cautions against using more marketplaces than you can easily manage, especially if you’re new to marketplaces generally. “I’m a big believer in focus,” he says. “If you’re starting a marketplace business, don’t go try to do them all.”

How many vendors a marketplace supports, how tightly and securely integrated those vendors are, and how much automation the site provides in areas like provisioning, billing, and renewals are all variables to consider when deciding which marketplace to begin with. Make sure the marketplace operator offers onboarding assistance like ConnectWise does too, suggests Vicky Bruns, the vendor’s manager of marketplace and vendor specialists.

“We try to make sure that they really understand what they’re getting into and really know how to get full utilization of the products that they’re purchasing,” she says.

The time to start asking such questions is now, though. Marketplaces are still an emerging technology, Jahnke notes, and early adopters have a brief opportunity to get an edge on their competitors.

“We’re in the third inning of cloud. We’re on the first out of the first inning of marketplaces,” he says. “It’s an exciting time.”

Image: iStock

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