Hi, it’s Roman from Partner Insight. Welcome to my weekly newsletter, where I deconstruct winning Cloud GTM strategies and the latest trends in the rapidly evolving world of cloud marketplaces.
Today, we'll delve into the latest cloud commit growth and revenue numbers for AWS, Microsoft Azure, and Google Cloud. We'll also explore how ServiceNow leverages partnerships and AI to accelerate to $10Bn annual run rate. Finally, we'll discuss insights from our Cloud GTM Leader course, focusing on the importance of “following the money” in developing cloud marketplaces and strategies for collaborating with channel partners. Let’s dive in.
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Cloud Commits Surge to $341 Billion
In a striking cloud re-acceleration, three hyperscalers collectively added a staggering $37Bn to their cloud commits in just 3 months. This extraordinary surge, larger than Google Cloud's entire annual revenue run rate ($33Bn), speaks volumes about the potential of cloud marketplaces.
Three leading hyperscalers have deepened revenue backlogs while also beating Wall Street's expectations and forecasting stronger future growth. AWS is now on track to 100Bn annual run rate, with Azure and GCP last quarter revenue growing at incredible rates of 30% and 28% respectively.
These numbers underline a deeper, long-term customer reliance on the cloud, as the adoption re-accelerated after optimization period ends and with AI among key drivers. With such significant increases in cloud commits, the next 2 years of revenue are essentially pre-booked for these giants.
💲💲 Amazon Web Services
This quarter commits (on Dec 31): $155.7Bn
Last quarter commits (on Sept 30): $133 Bn
Growth: +$22.7 Bn (+17%)
AWS's remarkable jump in commitments this quarter is akin to adding a full quarter's pre-booked revenue alongside accelerating sales. Amazon CEO Andy Jassy emphasized the strength of AWS's pipeline:
“Existing customers are renewing at larger commitments over longer periods and migrations are growing”.
💲 Google Cloud
This quarter's commits: $74.1Bn
Last quarter's commits: $64.9Bn
Growth: +$9.1 billion (+14%)
CEO Sundar Pichai highlighted that
“strong demand we are seeing for our vertically integrated AI portfolio is creating new opportunities for Google Cloud across every product area.” He also underscored the importance of co-sell in driving growth: “With ISVs, we have nearly tripled the number of Co-sell deals from 2022 to 2023”.
💲💲 Microsoft Azure
This quarter commits: $111Bn
Last quarter commits: $106 Bn
Growth: +$5 Bn (+5%)
* Microsoft only discloses its entire Cloud commits, which increased to $222Bn. With Azure comprising 50+% of Microsoft Cloud, Azure commits likely represent ~$111Bn.
While Microsoft's commit increase may appear modest, their 30% actual revenue growth this quarter outshines other players. CEO Satya Nadella stressed that
“We’re seeing larger and more strategic Azure deals with an increase in billion-dollar-plus Azure commitments.”
The Big Picture: A $341 Bn in Cloud Commitments
Collectively, AWS, Azure, and Google Cloud have amassed over a third of a trillion dollars of signed cloud contracts, expected to be consumed in the next 2-4 years.
This growth signals a continuous market shift to cloud. It also aligns with the projected 86+% annual growth for cloud marketplaces, driving them towards $100Bn in annual transaction volume in under 3 years.
As cloud re-acceleration is back, the question for CXOs and partnerships leaders is: are you effectively leveraging cloud marketplaces to access these customer commits?
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AI and Partnerships drive ServiceNow $10Bn milestone
ServiceNow's remarkable 26% growth in Q4, exceeding expectations, is making waves in the tech industry. It's a clear indication that their robust AI strategy and revamped focus on partnerships are paying dividends.
Erica Volini, Senior VP of Global Partnerships, emphasized the strategic shift:
“Last year at this time [Jan’23] we made a massive commitment to our partner community by completely transforming our partner program to ensure that partners are front and center in everything we do as a company”.
Reflecting this transformation, ServiceNow's performance has been impressive. ServiceNow is on track to exceed $10.5Bn in ARR in 2024, joining the elite ranks of SaaS companies crossing the $10Bn threshold. Company also built a sales backlog (contract revenue to be recognized in the next 12 months) of $8.6Bn.
As ServiceNow is scaling its high-performing AI products (that boast the largest net new ACV contribution), CEO Bill McDermott connects the dots between AI strategy and the company's partner-centric GTM approach.
He highlights the $3Tr AI market:
“Gartner estimates $5 trillion in tech spending in 2024, growing to $6.5 trillion by 2027… nearly all of the growth in worldwide IT spending will come from software and IT services. And when you drill deeper into the Gartner forecast between 2023 and 2027, $3 trillion will be spent on AI.”
To capitalize on this potential, CEO stresses the importance of their partner-first GTM:
“We see AI as a 360-degree strategic imperative…it's also why we are continuing to grow our strategic partnerships to ensure every enterprise can use AI as the cornerstone of business transformation.”
Today partners directly drive 21% of ServiceNow’s revenue, while influencing the majority of it. The goal is to increase partner-sourced revenue in the coming years.
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Why Marketplaces are Essential for Channel Partners
The shift toward cloud marketplace-driven growth for SaaS vendors is evident, and channel partners are now emerging as key accelerants. Darren Sharpe, Microsoft's Commercial Marketplace Lead for UK Services Partners, recently shared his insights on this in our Cloud GTM Leader course.
Cloud Marketplaces: Hubs for Modern Partnering
Darren emphasized that cloud marketplaces are now focusing on "co-selling, delivering together, and being the best partners for a customer.” This shift aligns with the trend of customers becoming buyers, not builders, seeking nearly complete solutions that are customizable at the edges. Here, partners, working alongside ISVs and cloud marketplaces, excel.
Channel Partners: The Untapped Potential
Customers are increasingly seeking ecosystems of partners that deliver the best value in their specific areas. Partners play a crucial role in guiding customers through cloud maturity, offering cloud-agnostic perspectives and technical expertise. The value of channel partners as trusted advisors is significant.
Channel partners are finding new roles and opportunities in cloud marketplaces, moving past initial competitive concerns. By working with marketplaces, they open up avenues for "digital procurement advisory" and application portfolio modernization. This approach helps channel partners not only retire customer cloud commits but also delve into more lucrative digital transformation projects.
Marketplace + Channel: A Synergistic Approach for ISVs
New ISVs typically start as cloud-partner first but aim to expand their channel footprint for scaling. Darren points out that these new SaaS organizations often begin with about 20% channel-sourced business, unlike traditional IT vendors which might have around 80%. This gap presents an enormous opportunity for SaaS companies to deepen their engagement with partner ecosystems through cloud marketplaces and increase customer stickiness and growth.
Traditional ISVs initially questioned the need for cloud marketplaces alongside existing channels. Now, however, they recognize Cloud GTM as a means to generate incremental, new opportunities and engagement.
Darren explains:
“ISVs that are maybe stuck in a network security or data center specialist organization of a partner, it's a way to modernize your message into those partner organizations. You might be transacting double digit millions with those partners today, but your cloud marketplace opportunity is to co-sell with the hyperscaler and with the cloud elements of those partners, which may well be a new part of the organization for you.”
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“Follow the money”: Mastering Stakeholder Dynamics in Cloud Marketplace Adoption
Anurag Pandey, Director of Strategy at Cisco, spearheaded the launch of Cloud GTM within the company. His journey from finance to becoming a cloud marketplace leader is nothing short of inspiring, as he shared lessons in our Cloud GTM Leader course on adopting a General Manager's perspective in building traction in marketplaces.
Anurag reveals that cloud marketplace business he managed, grew 📈 1000% in 3.5 years. This staggering growth eclipses traditional market trends, surpassing even the highest industry benchmarks. The message is clear: cloud marketplaces are not just an alternative route to market;
“the potential is tremendous, you just need to step up and take it”.
In this session, he discusses the General Manager's Perspective on Cloud Marketplaces, providing crucial insights for those leading Cloud GTM initiatives or needing to convince CEOs and CFOs of their importance.
💡 Key Insights from Anurag's Talk:
Follow the Money: In business, if it doesn't translate into dollars, it doesn't last very long. Anurag's finance background guided his approach, focusing on revenue impact and margins in cloud marketplaces.
Stakeholder Centricity: Understanding and addressing the unique values and concerns of stakeholders, from the C-suite to sales teams, is essential.
C-Suite Buy-In: Convincing the C-suite requires addressing strategic choices such as market pull, competition, cannibalization and expansion of the total addressable market.
Seller Fee Economics: Anurag demystifies the 3% seller fee, highlighting the incredible value provided by cloud marketplaces in terms of invoicing, billing, and customer reach, comparing with the modest fees charged.
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📈 Accelerate your Growth in Cloud Marketplaces
Transform your marketplace strategy with first-hand insights from Cloud GTM leaders in our 5-week cohort course. Learn in a community of great alliance leaders. Join 100+ alums from companies like GitLab, Darktrace, IDC and others.
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