Inside Shopify's Cloud Marketplace Strategy & Snowflake's Cloud Commits
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 adopt the perspective of a cloud customer and discuss key aspects of cloud commitments you may be underestimating. You'll gain insights from our Cloud GTM Leader course session on Google Cloud Marketplace strategies to accelerate growth. We'll explore why Shopify, a leading tech platform in its own right, joined the Google Cloud marketplace. Lastly, I've invited two VPs of Alliances, who are standout members of our course, to share their perspectives on the evolution of Cloud GTM. Let’s dive in.
3 Key Aspects of Cloud Commits You May Be Underestimating:
Magnitude of the contracts customers sign with hyperscalers
Constant YoY growth of commits that companies sign up for
Commits are binding contracts, not just declarations.
Let's zoom in on Snowflake, a telling example.
Commits Magnitude
In early 2023, Snowflake, a leader in cloud data warehousing, inked a striking $2.5Bn cloud infrastructure agreement, spanning 5 years, with a hyperscaler.
“In January 2023, we amended one of our third-party cloud infrastructure agreements effective February 1, 2023. Under the amended agreement, we have committed to spend an aggregate of at least $2.5 billion from fiscal 2024 to fiscal 2028 on cloud infrastructure services”
To put this $2.5Bn commitment in perspective, it was larger than Snowflake's $2.1 billion annual revenue for the fiscal year ending January 31, 2023. Notably, this is with just one hyperscaler, while Snowflake collaborates with all three - AWS, Microsoft Azure, and Google Cloud.
Rate of Growth
This commitment drives nearly doubling Snowflake's annual cloud spend over these 5 years, marking an 86% increase. The average YoY growth is 17%, broken down as follows:
$350 million in FY 2024
$450M in FY 2025
$500M in FY 2026
$550M in FY 2027
$650M in FY 2028
Commits are Binding Contracts
These commitments are not just goals but enforceable contracts. Snowflake explains:
“We are required to pay the difference if we fail to meet the minimum purchase commitment during any fiscal year, and such payment can be applied to qualifying expenditures for cloud infrastructure services during the term of the amended agreement.”
Most Enterprises have Commits
For those in cloud alliances or leveraging cloud marketplaces, these trends are significant.
Most enterprises are likely to have similar commitments with at least one, often two hyperscalers (check my post on multi-cloud)
While these commits offer bulk discounts, they also bind companies to specific spending targets, often effectively incentivizing accelerated cloud migration. The 17% YoY growth is a prime illustration of this trend.
Cloud Marketplace Advantage
A strategic advantage (a “loophole”?) that hyperscalers created for companies: the ability to apply commits towards third-party SaaS purchases via cloud marketplaces. Why? Because this not only drives their cloud consumption but also creates stickiness and a network effect.
Snowflake itself has excelled in selling on cloud marketplaces - it has generated $1Bn in sales of its software via the Amazon Web Services (AWS) marketplace.
The scale of commits and the impact of cloud marketplace is already incredibly significant.
Have you started leveraging this trend yet?
Strategies to Accelerate Growth in Google Cloud Marketplace
Did you know that Google Cloud marketplace witnessed an explosive 10X acceleration in 2020-2022 and continues growing 100% YoY today? Subhash Jawahrani, Principal BDM, Data Analytics at GCP Marketplace shared in our course insights on the GCP marketplace as a strategic growth driver for ISVs.
Incredible Growth of Google Cloud Marketplace
Today, GCP Marketplace is a multi-billion dollar per year transaction platform, expanding at 100% YoY. Its growth in 2023 alone was remarkable:
Annual Contract Value (ACV) increased ~140%
Co-Sell Bookings surged by 200%
ISV benefits from using its GCP marketplace are significant. On average, they experienced in 2023:
32% increase in their deal size
42% deal acceleration via the marketplace
70% of AI startups began their journey on Google Cloud, indicating a strong GCP preference
Subhash explains, “Sometimes it can be as simple as just a procurement part of it, but a lot of the time it's engaging with the Google sales team, as soon as the deal cycle within the account."
Marketplace as a Catalyst for GCP Adoption
The marketplace, previously an accelerator for existing partnerships, now itself attracts ISVs to initiate partnerships with GCP. Companies value customer access, commit utilization, and procurement benefits.
GCP sets itself apart by allowing 100% commit drawdown through its marketplace:
“Compared to our competitors, at Google Cloud…if a customer buys $100,000 of your product, they can retire $100,000 against their commit”
Crafting Successful Google Partnerships
Subhash highlights that successful partnerships often see CROs setting the marketplace goals and driving initial wins: “where they say, “hey, I'm going to take the goal for revenue”, and especially from the marketplace perspective, they say, “hey, I'm going to drive the first 25 wins through marketplace.”
Other key elements for success include:
Building a superior customer experience, requiring buy-in from product and engineering teams
Integrating seamlessly with GCP native services
Offering complete, differentiated solutions
The Art of Co-Selling
Subhash emphasizes the importance of initial self-effort in co-selling, using a baseball analogy:
”You have to get to first base by yourself. But once you get to the first base, we will make sure that you get to the home plate... a lot faster.”
The benefits of turning marketplace into a habit could be remarkable:
“I had a couple of partners who just for one year did upsell. That means for any deal that went through marketplace…one partner did 10% upsell, another partner did 25%. And that increased their marketplace to like 300 or 400%.
The biggest thing that it changed - the behavior of their sales from going direct to 100% the other way…
Every opportunity would be registered with a cloud service provider, as well as every deal they would think about, going through marketplace.”
Shopify’s Bold Jump to Google Cloud Marketplace
Why did Shopify, a $100Bn company growing at 26% YoY, join the Google Cloud marketplace? This seems counterintuitive for a company that itself is a robust platform with 13K apps, including winners like $8Bn Klaviyo in its ecosystem.
Back in 2009, Shopify made a bet on the ecosystem business model just 3Y in its journey. It built exceptional developer-friendly APIs and launched a highly successful agency-focused referral program. These steps help Shopify to rapidly gain traction, becoming one of the largest e-commerce platforms and a leading advocate of the ecosystem concept in tech.
Shopify Partners at Scale, Paying $0.7Bn/year
The company boasts a market cap of $100 Bn+ and owns 10% of the US e-commerce market.
Shopify App Store features 13K+ apps, and in 2023, Shopify paid $729M to partners developing apps that benefit their merchants.
In 2023 Shopify's revenue grew by impressive 26% to $7Bn, and it's App Store figures climbed by 30% YoY.
Leveraging Cloud Marketplace to Accelerate Growth
In January, Shopify deepened its partnership with Google Cloud, starting to offer its products on the GCP marketplace and emphasizing this move in its communications. But why?
It's a strategic play for capturing the enterprise market. Shopify's President, Harley Finkelstein, explained, “Just as we developed a robust ecosystem for entrepreneurs and SMBs, these partnerships further underscore our strategic positioning as a key player in the enterprise sector across all facets of commerce.”
Cloud marketplaces have become an essential part of the enterprise GTM playbook. Shopify highlights the high growth potential with the GCP marketplace: “enterprise customers are using Google Cloud Marketplace at outstanding rates. Third party transactions in 2022 were up 500% and spending more than $1 million increased sixfold.”
3️⃣ Reasons for Joining the GCP Marketplace
By joining the Google Cloud Marketplace, Shopify expands its support for the commercial needs of enterprise customers, “allowing them to easily buy, build, and integrate with the right technology to power unique commerce experiences.
Those businesses can now unlock key benefits including:
streamlined purchasing,
simplified billing,
and the ability to leverage Shopify spend towards existing Google Cloud purchase commitments.”
By partnering with Google Cloud and other partners, like system integrators “from Deloitte to EY to Accenture to Cognizant,” Shopify is fostering impressive growth in large accounts, even in uncertain economic conditions.
25% of its Large Accounts are growing >40% YOY
18% of its Mid Market Accounts growing >40% YOY
Just as Salesforce recently made waves listing its products on the AWS marketplace, Shopify's partnership with the GCP is poised to be a game-changer, setting a new standard for cloud marketplace adoption.
What are your thoughts?
Cloud GTM Leader Member Insights: Yeva Roberts @AllCloud
Delighted to spotlight Yeva Roberts, VP of Strategic Alliances, North America at AllCloud - a standout member in our course.
Yeva shared with us her insights on partner growth in marketplaces, emphasizing early adoption, niche specialization, and aligning strategies with hyperscalers.
Exchanging experiences and insights with members like Yeva is what creates unique value in our course and community. In her own words:
Journey and Importance of Cloud Marketplaces: It’s Still Early
There are still operational challenges hyperscalers are addressing to make the process of buying and selling on marketplaces more equitable. Just last month, AWS announced that vendors can now resell third-party professional services on the marketplace.
Early marketplace adopters (resellers) are reporting growth in deal sizes 4x to 5x from customers wanting to use their spend commitments and faster deal cycles. Consider it validation to double down on creating your marketplace strategy.
Find Riches in Niches
Niche down to differentiate from the pack. Create pockets of success with hyperscalers by doubling down on your superpowers and proof points.
Success breeds success. Build your champions and you will scale quickly. It can feel counterintuitive but the partner landscape is far too competitive to stay generic.
Get Comfortable with Being Uncomfortable
Focus on level setting expectations that your marketplace go-to-market motion is a long term strategic investment that will mature with marketplace adoption.
My advice is to push to align your marketplace GTM strategy with that of the hyperscalers’. In parallel, focus on driving marketplace adoption by educating yourself, your executives, sales and marketing teams on when and how to best position your marketplace solutions to customers.
Future of Cloud Marketplaces: It’s Not a Zero Sum Game
I believe the competitive landscape within cloud marketplaces will evolve to being driven by the meritocracy of ideas and solutions not solely by market dominance or exclusive partnerships.
Partnership leaders who foster collaboration across their services and technology partnerships, are more likely to thrive on cloud marketplaces by driving faster value to customers.
Would you recommend our course to others?
10 out of 10, I recommend the Cloud GTM Leadership Course to anyone looking to level up.
While hyperscalers continue to broaden the scope of marketplaces to be more inclusive to different types of partners, it’s great to have a supportive community like this that you can bounce ideas off of and validate what’s working/what’s not.
Thank you for creating, Roman and team!
Cloud GTM Leader Member Insights: Francesca Bowen @Darktrace
Thrilled to spotlight Francesca Bowen, Global Vice President of Cloud GTM at Darktrace, an outstanding member in our course. Francesca shared with us her insights on 📈 accelerating traction in cloud marketplaces and their future.
Having GTM leaders like Francesca from Darktrace, a renowned company powering cyber risk reduction with AI for 9000+ global organizations, adds immense value to our community. Her insightful questions and course participation were exceptional. Let's hear from Francesca:
Your Partnerships and Cloud Marketplace Journey
Our journey started with cloud via deep technical alliances and technical integrations. As our customers and partners mature in their cloud journey, we are aligning to their journeys ever evolving needs within the Cloud Ecosystem.
In 2024 Cloud GTM is a key pillar of Darktrace’ partner led growth model, inclusive of our channel partners. Darktrace is focused on co-sell and marketplace transactions, as well as best-in-breed integrations to deliver the most impact to our customers.
Getting Traction: What Tactics Have Proven Effective for You?
Communicate the value of cloud marketplaces to your executive stakeholders across product, revenue, and marketing and create a sense of urgency to get started on the journey.
Be very clear on the outcomes your team will drive, the metrics that will be used to measure them and the impact that will be made on the business.
Hire alliances sales, marketing, operations and/or invest in cloud GTM tools.
Be sure that you are creating the correct incentives for action within your partner organization. Cloud Alliances should work together with channel partners, never against them.
Advice on Cloud Marketplaces: Your Top Recommendation?
You get out what you put in - invest in marketing, sales and operations.
Insight from the Course: What Resonated or Changed Your Perspective?
A robust operations process is non-negotiable. Put in the hard yards early or risk not being able to physically close deals at the end of your quarter.
Future of Marketplaces: Your Predictions for Cloud GTM?
The only direction is forward for the future of cloud marketplaces. Leading indicators from the channel community - the VARs, GSIs, MSSPs and Distributors - in leveraging marketplace to bring together multi partner offers and services demonstrate the exponential growth opportunity.
The future will allow partners to package solutions, install, configure and automatically integrate within the customers cloud services accelerating the adoption of tools and partner services.
👨🏻🎓 Cloud GTM Leader Course: Your Feedback?
The course is highly valuable for a company thinking about setting up their marketplace business, in the early stages or looking to mature and scale their efforts. The seasoned speakers have provided invaluable advice to avoid mistakes and accelerate this route to market.
What Makes Cloud GTM Leader Course Stand Out?
Top-Notch Industry Insights: With our roster of incredible speakers, we'll continue to bring unique VP-level insights from experts in cloud marketplaces. They will guide you through the cloud GTM frameworks, strategies and tactics, diving into what's effective and what isn't in the rapidly evolving cloud marketplaces.
Our Weekly Mastermind Sessions is a collaborative space for you to strategize and tackle common cloud GTM challenges together.
Finally our vibrant Slack Community is a platform to continue these insightful discussions, gain further support, and build a network that extends beyond the live sessions.
Very last chance to join our Cohort 4
The first sessions in our 5-week course are starting soon - last chance to join us for this cohort or join the waitlist for the next.
Questions? Reach out at courses@partnerinsight.io