Dive Brief:
- Microsoft is moving Azure IP co-selling to a cloud marketplace-first model, the company said in a Friday partner update. Over the next year, qualified independent software vendors will shift from self-reporting Azure infrastructure services usage to selling SaaS solutions directly through Microsoft Marketplace.
- The Partner Reported Azure Consumed Revenue co-sell model, previously used by Microsoft, is ending during the company’s current fiscal year, which began July 1. Partners that already transact through the marketplace were urged to continue growing their current business. ISVs with marketplace gaps in their portfolio were advised to contact their partner development manager.
- “This is a firm signal from Microsoft to its ISVs that Marketplace is now the priority sales motion for any ISV platforming on Azure,” Omdia Chief Analyst Alastair Edwards said. “By shifting the focus of co-sell support from Azure consumption to Marketplace, the message is loud and clear to ISVs — embrace Marketplace or lose relevance.”
Dive Insight:
As buyers gravitate to hyperscaler marketplaces, Microsoft is pushing partners to build out their presence on the platform and creating features and incentives to make that happen.
The company framed the marketplace-first move as a way to align partner incentives with its broader strategy of housing its partner ecosystem on the platform. For ISVs, it will create consistency, ensure better transaction verification and provide stronger automation capabilities, according to the announcement.
ISVs that transact through the marketplace have been eligible for Azure credits and go-to-market resources offered through a formal rewards program since 2022. Last month the company initiated an AI marketplace makeover for ISVs, previewing an intelligent discovery generative AI interface that lets customers search for software using natural language prompts.
“This is literally a customer looking for your app or software using the words that match,” VP of Microsoft Cloud and AI Cyril Belikoff told Channel Dive. “If you know your customer, then you’re going to know the words they’re using to search.”
Marketplace is the company’s preferred path for “scalable, consistent co-sell execution,” the company said last week. Sunsetting competing co-sell channels within its ecosystem is another step toward centralizing the role of its marketplace platform.
“This reflects a broader industry trend, with hyperscalers increasingly steering software sales towards their marketplaces,” Peter Woest, Cloud Marketplace Partnership Director at Westcon-Comstor, told Channel Dive. “We’ve seen a similar marketplace-first approach from AWS.”
The strategy, which ties third-party solutions to a hyperscaler’s infrastructure while giving customers the flexibility to use cloud credits to procure ISV products, is working, according to Omdia, a Channel Dive sister company. The analyst firm expects cloud marketplace transactions, which netted roughly $30 billion in 2024, to increase to $163 billion by the end of the decade.
For partners outside of the ISV sphere, the outlook is similarly sunny. By 2027, Omdia anticipates that more than half of cloud marketplace transactions will flow through the channel.
“Marketplace adoption is accelerating,” Edwards told Channel Dive. “As IT budget pressure intensifies for enterprises with rampant price inflation on IT products and solutions, the ability to burn down their pre-qualified committed cloud spend becomes even more attractive.”
