Hi, it's Roman from Partner Insight. Welcome back to my newsletter, where I break down winning Cloud GTM strategies and the latest trends in tech partnerships.
Today, we'll dive into the insights from Microsoft's marketplace leader, Ryan Storgaard. We'll explore the explosive marketplace growth across segments, the surge in AI-powered solutions, significant impact of multiparty private offers and new features that are reshaping partner engagement.
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AI Explosion in Microsoft Marketplace
The keynote by Ryan Storgaard, Senior Director for Microsoft commercial marketplace, who leads the marketplace product growth team, was the highlight of our recent online event.
The Microsoft commercial marketplace is experiencing unprecedented growth, with multi-billions in transactions and a 188% YoY surge in AI and ML revenue. This surge, coupled with the integration of AI-powered solutions and professional services, signals a transformative phase for the cloud marketplace and Microsoft partner ecosystems.
Marketplace Growth is Surging Across Segments
With AI as a major driver, the Microsoft commercial marketplace is growing explosively. Ryan emphasized a significant acceleration:
“I can honestly say now is the most fascinating time… The flywheel has kicked in, it's multi-billions being run through the marketplace, which is exciting.”
The marketplace itself has evolved dramatically. Ryan shared that when he joined the Microsoft marketplace team in 2017, cloud marketplaces were seen as suitable primarily for SMBs. Enterprise sales were deemed too complex due to their customized and friction-heavy procurement processes. This has radically changed.
"Really you've seen that invert the last few years. It's just been an absolute explosion in terms of enterprise and SaaS… And really what we're seeing now is actually it's all channels, it's all segments, it's all customer types."
Marketplace Driving Forces: Customer Convenience and Purchasing Power
Ryan explained that explosive enterprise growth in Microsoft’s marketplace is driven by convenience and purchasing power.
The ability to use marketplace purchases towards Microsoft Azure Consumption Commitment (MACC) often drives initial adoption. However, customers quickly discover additional benefits like standardized vendor assessments, streamlined partner onboarding, and higher procurement efficiency.
“Microsoft Azure Consumption Commitment for a lot of customers, it’s really driving a behavior of “I have this consumption commitment with Microsoft. Oh, and eligible solutions that I purchased through the marketplace can count towards my Azure consumption commitment? That’s a game changer.” So that’s driving a lot of the growth. But what we find is once a customer starts doing that, and that kind of tends to be the initial nudge for them from a procurement perspective, they also find a lot of convenience and controls and governance.”
A recent Forrester TEI study confirms significant cost and time savings through the Microsoft commercial marketplace.
Digital Direct Sales Acceleration
The marketplace has been gaining traction in the enterprise segment for some time, but Ryan highlighted the rapid rise of self-service purchases. This has been considered a major potential growth avenue since the marketplace’s inception.
"We're also seeing is just this explosion in terms of customers just self-serving, meaning they're buying on their own without any assisted support from a seller and oftentimes buying the public price, which is different than what you see in the enterprise purchase, where there's a lot of custom terms…"
The marketplace has come full circle, making an impact across segments. This is a call to action for alliance leaders to make their offerings accessible for purchase or trials to capitalize on this trend.
“Massive” Demand for AI-Powered Solution
Ryan emphasized that one key accelerant of marketplace growth is surging customer demand for AI solutions.
“Customer demand for AI-powered solutions is absolutely massive. Huge investments that are happening… We're seeing 188% growth in AI and machine learning revenue, which we're early days here as we get this going, but exciting times to see the growth there and the customer demand, as well as our global sales organization looking for solutions that fit these customer needs."
However, with the strong customer demand for AI, their expectations are also rising significantly.
“Customer expectations - they're just really expecting this convenience. And they're expecting solutions to be powered with AI that help them innovate faster and solve their problems faster. So one of the things is you can start with building with Gen AI solutions. And we saw a 50% increase in transactable offers this year."
This presents a growing opportunity for partners to build and list AI solutions that meet changing customer needs.
AI Companies’ Marketplace Monetization
The Microsoft commercial marketplace has enabled partners to reach customers worldwide by streamlining the process of selling and scaling their solutions. It answers critical partner questions like "How do I get my solution on Microsoft price list?", "How do I access Microsoft customers?", and "How do I sell through Microsoft channel globally?"
For AI companies, the ability to access customers and monetize their products and models is essential. The Microsoft marketplace is a platform for them to monetize.
"if you go to Azure AI Studio, you can see a bunch of these different models from AI innovators like Meta, OpenAI, Mistral, Hugging Face, NVIDIA, Snowflake, Databricks, Cohere, and many, many more. These are models as a service that you can actually build and integrate into your solutions…. Under the covers, it's published to our catalog in the commercial marketplace. And that's also how the monetization works. So when customers purchase these models or ISVs purchase these models, under the covers, it's marketplace."
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Power of a Single Catalog
Microsoft's strategy meets customers where they are, ensuring seamless integration of marketplace solutions across their platforms.
The solutions catalog is accessible through the Azure Marketplace, AppSource, or in-product experiences like the Azure portal and Microsoft Teams. This strategy enables customers to discover and use marketplace solutions in their everyday tools, like M365 and Power BI, enhancing their ability to build and innovate with cutting-edge tools and AI models.
“Under the covers, it's one catalog. And then what we also do is we serve those solutions that are in our catalog in the in-product experience. If you go to portal.azure.com and you log in as an Azure customer, that's the in-product experience, you click on Marketplace and you see Marketplace solutions in there. So we're serving that catalog up into the customer experience. Switch over to Teams. If you click on Apps in Teams, that again is the catalog from Marketplace being surfaced in context in the Teams environment. And you see that with the M365, Power BI, and so on.”
Evolution of the Marketplace
Multiparty Private Offers is a “huge opportunity” in the Enterprise Channel
Many ISVs historically wanted to sell through the channel to enterprise customers with cloud commitments. In response, Microsoft launched multiparty private offers.
Since launching multiparty private offers in the US, Microsoft has seen incredible results:
"Multiparty private offers are two times larger than the average sales. And I think that should probably be a little bit unsurprising because again, that enterprise MACC sales motion is hugely strategic… This is a huge opportunity in the enterprise channel segment."
MPO is now available in the US, UK, and Canada and will gradually roll out globally. It’s a significant advantage, as Microsoft sees 2x larger deal sizes by enabling channel partners to sell through the marketplace.
Marketplace Now Transacts Professional Services
The Microsoft commercial marketplace will soon allow partners to offer and transact professional services, expanding revenue opportunities beyond software licenses. This makes it significantly more convenient for customers to access complete solutions from a single place and opens a major opportunity for partners.
“One of the things that we've just released is professional services transactability. And I know this has been a huge feedback point for a lot of you is, especially in the industry type of sales where there tends to be not just an IP sale, but there's usually like an implementation or training or a proof of concept and so on. So this is really, really exciting”.
MACC Commitments Visibility
Ryan highlighted the impressive growth of Azure enterprise deals mentioned by Microsoft CEO Satya Nadella during the Q3 earnings call. The number of Azure deals worth over $100 million increased by more than 80% YoY, while deals exceeding $10 million more than doubled. This pattern underscores the growing enterprise commitment to Azure and opens more opportunities for cloud marketplace partners.
Microsoft now allows partners to get visibility of customers’ Azure commitment through the marketplace, which is a major help for selling to enterprise.
“One of the things that we've released recently is the ability to go into partner center. And if you provide a lead, we're adding in the insight to let you know if there's a MACC customer there. And that was always a big ask from partners.”
AI Integration in Marketplace Platform
It’s only natural that Microsoft is now infusing AI in different facets of its marketplace to enhance both customer and partner experiences.
"No other marketplace is infusing AI into our commerce platform while also extending AI services to our partners. And that's really always been the Microsoft advantage and play, is approach it from a platform perspective. We want to bring the partner and the customer ecosystem and the services partners and channel partners into that. And marketplace provides the platform for that."
The Azure portal now uses generative AI to improve the solution discovery process for customers. It provides a list of solutions and related documentation, best practices, and articles, aiming to create an immersive, rich, and insightful discovery experience.
On the partner side, Microsoft is integrating AI to simplify the process of publishing offers in the marketplace, making it easier for partners to list their solutions and making them transactable. It’s still early, but the potential is clear.
Are We at the Inflection Point?
As we stand at this point, the Microsoft commercial marketplace is no longer just a route to market; it's evolving into a comprehensive ecosystem where AI, software solutions, and professional services converge. With tools like multiparty private offers and AI-assisted publishing, Microsoft is lowering barriers to entry while raising the bar for innovation.
The future of cloud partnerships lies in leveraging these marketplace capabilities to not only reach customers but to co-create value. The question now isn't whether to engage with the marketplace, but how to strategically position your offerings to ride this wave of growth.
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