In this week's edition, we have an exciting lineup of insights and analyses that will leave you inspired and informed about the ever-evolving world of partnerships. We've delved into the two most significant trends shaping the industry -
☁️ cloud marketplaces and 🤖 AI and had the pleasure of speaking with Jay McBain, Chief Analyst at Canalys, who is both a leading expert in partnerships and an early AI enthusiast from his time at IBM.
Additionally, we've dissected the four essential stages of the partnership journey through a case study on one of the most successful SaaS companies - ServiceNow.
To top it off, we've highlighted valuable partnership insights and cloud trends from recent research on the cloud market by Ofcom.
Without further ado, let's dive into the future of partnerships. Continue reading for the key insights and check out full video for more details.
Marketplaces: The Center of Go-to-Market Strategy in SaaS?
The rise of cloud marketplaces such as AWS, Google Cloud, and Microsoft Cloud has shifted the focus of many companies towards integrating marketplaces into their go-to-market strategy. With B2B marketplaces expected to reach a staggering $17 trillion by 2030, this channel is becoming increasingly important for businesses to explore.
Key Points:
B2B marketplaces are predicted to handle $17 trillion by 2030 (McKinsey), and while that prediction might be wrong, it highlights their growing influence in the global economy.
Cloud marketplaces like AWS, Microsoft, and Google are experiencing rapid growth of 86% YoY compounded, with AWS on track to become a top 10 global distributor in less than two years.
Many companies have seen up to 600% YoY growth rates in these marketplaces.
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The Power of the Long Tail in Marketplaces
Marketplaces that offer a variety of products and services across different layers of the market are more likely to be successful. This is because customers are looking for a one-stop-shop where they can find all the necessary components for their projects, and marketplaces with a vast selection can cater to this need. In fact, the top 20 cloud marketplaces are expected to cover 80% of the $45 billion market.
“A marketplace is something with scale. It's very difficult because the average buyer is going to buy seven things. The average infrastructure deal through AWS, for example, has seven layers. The average SaaS deal through Salesforce or HubSpot, ServiceNow, has seven layers. The average security deal today has seven layers.”
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Competition and the Future of Software Distribution
As cloud marketplaces become more dominant, they are redefining how software is built and sold. Companies will have to decide which marketplaces to join and prioritize, as getting on multiple platforms can be time-consuming and resource-intensive. This presents a challenge for smaller, industry-specific marketplaces, as businesses are more likely to focus on the larger, more established platforms.
“On the software side, you've got 200,000 ISVs. There's a gravity effect that you can't go and get into marketplaces that easily… When I ran a startup, it took me six months to get on the App Exchange and I had to take some of my best developers and data scientists off the product to go and jump through the security hurdles to do that.”
Ultimately, businesses will need to carefully weigh their strategy of joining major cloud marketplaces, but it's a go-to-market channel that grows at a significant rate and should be absolutely considered.
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Mastering Marketplaces: Strategies for Growth-Stage Companies
As marketplaces continue to gain traction and reshape the way businesses sell and buy software, growth-stage companies must consider adapting their partnership strategies to succeed in this new landscape. Marketplaces may require a different skill set and longer-term strategy, but their growing influence cannot be ignored.
Key Points:
Listing on marketplaces requires three essential skills: proper listing, winning the SEO battle, and understanding the community play.
Being present in marketplaces is critical to reaching target addressable markets and creating a frictionless buying experience for customers.
Channel programs can be adapted and integrated into major marketplaces, making the transition smoother for businesses.
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Skills for Success in Marketplaces
To succeed in marketplaces, companies need to develop three key skills:
Proper Listing: Ensuring products are listed correctly, with the right keywords, images, and videos, is crucial for visibility.
Winning the SEO Battle: Companies must optimize their listings to appear on the first page of marketplace search results, similar to winning the Google SEO battle.
Understanding the Community Play: Each marketplace has a unique community, and businesses need to tailor their marketing strategies to fit each ecosystem.
“How you get in and do all the guerrilla marketing and do all the grassroots bottoms-up marketing possible to draw people into your marketplace listing changes from marketplace to marketplace. And these are the three skills that are required at winning in marketplaces.”
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The Importance of Marketplaces for Growth
As more customers choose to buy through marketplaces, companies must adapt to ensure they are serving their target addressable market (TAM) effectively. By understanding their serviceable addressable market (SAM) and the growth rates of different routes to market, businesses can make informed decisions about their go-to-market strategies.
“For every year you [stay off of marketplaces], your market SAM drops because the remaining routes to market and go-to-market are not growing as fast as marketplaces.”
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Integrating Channel Programs into Marketplaces
Adapting existing channel programs to work within major marketplaces can help businesses create a seamless buying experience for their customers. With marketplace fees at cloud hyperscalers now dropped to 3%, companies can maintain their front and back-end margins while executing a robust channel program across various routes to market.
“You can actually lift your program and move it into these major marketplaces and deploy your program just as you would through normal indirect sales.”
In conclusion, growth-stage companies must consider integrating marketplaces into their partnership strategies to capitalize on the rapidly growing channel and reach their target customers effectively.
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The Impact of AI on Partnerships: Digital Twins and the Future of Partner Management
Artificial intelligence (AI) is transforming various aspects of our lives and businesses, including partnerships. The development of AI technologies like ChatGPT could revolutionize how we approach partnerships, making them more efficient and personalized.
Key Points:
AI has evolved significantly over the years, with advancements like Deep Blue, Jeopardy's Watson, and now ChatGPT.
Microsoft's investment in OpenAI has led to the development of the co-pilot concept, where AI can act as a "digital twin" for individuals and businesses.
AI's impact on partnerships will come from streamlining tasks, analyzing data, and creating AI-friendly content that enhances partner engagement.
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The Evolution of AI
AI has come a long way since IBM's Deep Blue defeated grandmaster Garry Kasparov in chess in the mid-90s. Over time, AI has demonstrated its ability to beat humans in various games and, more recently, its potential to compete with college graduates in entry-level jobs across various fields.
“ChatGPT has shown us that every entry-level job coming out of college, whether you're an analyst like me, whether you're a paralegal, whether you're a junior accountant, it doesn't matter what you took in college, the engine behind Chat GPT can compete with you for that first job.”
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AI as a Digital Twin in Partnerships
Microsoft's concept of the "co-pilot" envisions AI as a digital twin, a personalized assistant that can efficiently complete tasks on behalf of its user. In the context of partnerships, this could mean:
Analyzing partner programs and comparing them with competitors to make informed partnership decisions.
Reviewing and summarizing complex documents, like terms and conditions or business books, in a short amount of time.
Enhancing security by vetting emails and links before they reach your inbox.
“In partnering, you're going to have a digital twin... I want my ChatGPT digital twin to go do that [read terms and conditions, analyze partner programs].”
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The Future of AI and Partnerships
AI will not only change the way we approach partnerships but also how we create and consume content. Businesses will need to adapt their content to be AI-friendly and prepare for a new version of SEO, where ChatGPT condenses and delivers information in an easily digestible format.
“Companies are going to have to get smart in terms of how they create AI-friendly content and how they compete in the responses that ChatGPT. It's another version of SEO.”
As AI continues to advance, its impact on partnerships will become more significant, streamlining tasks and making the partnership process more efficient and personalized.
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AI in Partnerships: The Balance Between Personalization and Automation
AI is transforming the partnership landscape by offering new ways to engage with partners and manage relationships. The key to success, however, lies in finding the right balance between adopting AI-driven approaches and maintaining personalized relationships with partners.
Key Points:
Companies like Microsoft and Google have adopted different approaches to AI, with Microsoft going all-in and Google being more cautious.
As a partnership manager, understanding the level of AI adoption each partner is comfortable with is crucial.
AI can enable hyper-personalization, but respecting partners' preferences is critical to maintaining strong relationships.
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Balancing AI Adoption and Partner Preferences
“If you're in partnership roles, I'd want to know that every one of my partners and every person that works at my partner are different.”
To be successful in managing partnerships, it is essential to understand and respect each partner's preferences when it comes to AI adoption. This could range from partners who are open to working with AI-driven co-pilots to those who prefer more traditional, relationship-driven interactions.
“As an analyst, I'm using ChatGPT every day… we should all be innovating in the way we do our jobs and the way we execute partner relationships.”
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Winners and Losers in the AI-Driven Partnership Landscape
AI is not only about specific companies winning or losing; it is a building block for businesses to innovate and grow. Companies that can collect and utilize a rich data lake for AI to learn from will emerge as winners in the AI-driven partnership landscape.
“One of the surprise winners of all this, though, is collecting the data lake of which the AI system can learn.”
Examples of such winners include Gong, a company that records conversations and analyzes them to provide valuable insights. By combining this data with other sources like Microsoft Office, AI can gain a comprehensive understanding of the user's needs and preferences, enabling it to serve as an effective co-pilot in managing partnerships.
In conclusion, AI has the potential to revolutionize partnerships by enabling hyper-personalization and automation. However, the key to success lies in finding the right balance between AI adoption and maintaining personalized relationships with partners.
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