What is a cloud marketplace?

A cloud marketplace is an online storefront where customers can purchase software and services that easily integrate with or are built on the cloud provider’s offerings. It also offers cloud-native applications that customers can purchase and manage on the platform. Major software and cloud service providers–including Red Hat, Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft Azure–have cloud marketplaces.

Cloud marketplaces initially served as online stores where customers could buy, click, and deploy software. For example, customers could purchase an image of the desired software through the AWS Marketplace and deploy it on their virtual machine (VM) instances on AWS.

It was a convenient purchasing method for many cloud users at the time: it didn’t require contacting sales, it provided consumption-based billing, and software costs were based on usage. However, this method only offered software via  the consumption-based model. While this was ideal for start-ups and many small and medium-sized businesses, changes were required to address larger enterprises.

Flexible purchase options are crucial for large enterprise customers that are more accustomed to negotiating annual or multiyear enterprise contracts and potentially reluctant to adopt pay-as-you-go pricing structures. To better serve enterprise needs and optimize cloud spend, cloud marketplace platforms evolved into one-stop shops for third-party software and integrated flexible billing models—including pay-as-you-go, software subscriptions, and private, negotiated offers with the software vendor. 

AWS Marketplace, Microsoft Azure Marketplace and Google Cloud Marketplace are the largest cloud service providers. Each provider’s marketplace carries their own products, cloud solutions and professional services as well as those of independent software vendors. For example, many of Red Hat’s products–including Red Hat® Enterprise Linux®, Red Hat® OpenShift®, and Red Hat® Ansible® Automation Platform–are available for purchase through these marketplaces.

They also all have flexible purchase options to buy software as a service (SaaS) subscriptions that function on VMs in their environments, and they can seamlessly integrate with cloud provider application program interfaces (APIs).

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Cloud marketplaces offer several benefits for the enterprise. One of the biggest advantages of using a cloud marketplace is committed spend. This is a predetermined annual spend with the service provider that is often negotiated with a discount. According to Tackle, nearly half–43%–of buyers say taking advantage of their committed spend with cloud providers is their top reason for purchasing through a cloud marketplace, up from 20% in 2020.

Organizations can look at the services available in the provider’s marketplace and use the allocated funds to make purchases that will best integrate with their hybrid cloud strategies. 

These marketplaces can help simplify the procurement process. All purchases are made through a single cloud vendor, rather than routing thousands of products through different vendors for approval. 

Cloud marketplaces also provide a single source of billing and invoicing, which can be especially helpful for those looking to centralize budgets. The cloud marketplace provider bills the customer and is then billed by the third-party vendor for use of the product. This minimizes administration around procurement, saving time and professional resources that can be assigned to other high-value workloads.

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The best procurement option for each enterprise should be determined by its overall usage, scale, and needs. While the below scenarios can serve as a starting point and help provide direction, it is important to note there is no one-size-fits-all purchasing method: 

• Pay-as-you-go: For smaller enterprises with consistent usage and a committed number of reserved VM instances, a pay-as-you-go model may be the best option for you. 

• Subscription model: SaaS subscriptions can be a great option for organizations wanting to put some of their committed spend toward the flexibility of a subscription should their needs change. With this model, you only provide payments for expected usage over an established period of time (e.g. monthly, annually, every three years, etc.).

• Annual contract: Organizations that experience significant peaks and valleys of use–such as retailers that see increased usage during events like Cyber Monday–are often better served by negotiating an annual contract.

• Private offer:Organizations with existing vendor contracts or established relationships with trusted providers could benefit from a private offer. In this case, the software purchase is negotiated with the vendor sales representative. The customer is then moved online to the cloud marketplace to fulfill the purchase.

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