SaaStr Podcast #414: “How to Leverage the Cloud Giants to Scale to 100 Million ARR and Beyond”

 

Ep 414: To help revenue and sales leaders navigate and identify ways to leverage cloud marketplaces, join Sapphire Ventures, Snowflake, Sumo Logic, and Crowdstrike to understand: How to successfully sell enterprise software through the major cloud marketplaces, what investments and alignment you need at your company need to be successful transacting on cloud marketplaces, and how to cultivate and enable a successful co-sell relationship with cloud marketplaces.

Panel:

Colleen Kapase, VP of WW Partner & Alliances, Snowflake
Jessica Alexander, Senior Director Cloud Technology & OEM Partnerships, Crowdstrike
Jabari Norton, VP WW Partner and Alliances, Sumo Logic
Rico Mallozzi, Sr. Director of GTM Ops, Sapphire Ventures

This episode is an excerpt from a session at SaaStr Scale. You can view the full video here.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Colleen Kapase
Jabari Norton
Rico Mallozzi
Crowdstrike

Transcript:

Announcer:

This is SaaStr’s Founder’s Favorite series, where you can hear some of the best of the best from SaaStr speakers. This is where the cloud meets. Up today, how to leverage the cloud giants to scale to 100 million ARR and beyond with Snowflake, CrowdStrike, Sumo Logic, and Sapphire Ventures.

Rico Mallozzi:

I kind of want to talk about and help frame this conversation. So for the audience, cloud giants are turbocharging startup sales, and the predominant reason for this is because they’re fundamentally changing IT budgets at the customers that we’re all selling to. What you’ll see in that cloud spend box is actually Gartner’s 2020 estimate for infrastructure as a service spending for companies, which was $50 billion. I would say probably it’s safe to say that it will probably be north of that as a result of what happened this past year and the acceleration of the move to cloud for a lot of organizations. And if you also look at the platform as a service category, that’s also an additional $50 billion of spend, and that’s typically with those same vendors. And what’s also interesting about that is these are the two fastest growing IT spend categories in CIO’s portfolios with 24% year over year growth. And IDG just recently released the 2020 Cloud Computing Survey that showed over one third of IT budgets are spent on cloud computing technologies.

Rico Mallozzi:

And for companies with over a thousand employees, that’s over $158 million of spend. And unlike staff spending, which is equally as large, roughly around $100 billion, that spend is distributed across thousands of vendors, oftentimes. But with cloud computing spend, it’s concentrated typically with one primary vendor. And it’s one of the three large cloud vendors that we all know: Microsoft, AWS, and Google. And as a result of this large concentration of spend, these large cloud vendors have created cloud marketplaces that allow you to take that $158 million of committed spend and actually use it to procure startup solutions and other ISV solutions on their respective marketplaces. As a result of this, marketplaces have exploded in growth, and here’s some facts and figures. Azure’s marketplace has over 4 million monthly visitors. AWS’s marketplace has seen 1.5 million subscriptions transacted and Google’s marketplace has seen 3X growth in SaaS sales.

Rico Mallozzi:

So marketplaces are fundamentally changing, go to market motions for a lot of enterprise technology companies. And with that being said, today we’re going to discuss how you assess that, how you become successful on these. And we’ll also share maybe even some of our failures and best practices with this go-to-market channel. So we’ll start with the assess phase. How do you understand really if cloud marketplaces are right for your startup? And Jessica, I’ll start with you. Can you explain at a high level, the different ways to partner with these cloud providers and why cloud marketplaces is such an interesting opportunity for startups?

Jessica Alexander:

Sure, absolutely. We found that aligning with the cloud service providers in two key areas, obviously the co-selling mechanisms that their sellers offer, as well as alignment with integrated billing through their marketplaces. As Rico mentioned earlier, we’ve seen a big transition as well within our enterprise customer base. During this time of remote workforce, budgets are tightening and a lot of our enterprise customers are using their pre committed cloud security contracts to buy enterprise software and software from ISVs. So the ability to do flexible payment plans, financing, retire that pre-committed spend has been a really significant a way for us to accelerate and amplify our transactions.

Rico Mallozzi:

Yeah, I definitely agree. We often see with companies that this is a way to kind of circumvent the budget conversation, because if you can position their cloud budget as a way to access that for your solution, you’ve kind of short-circuited where they have to identify that spend. Jabari, can you talk about some of the benefits experienced by leveraging cloud marketplaces in your go-to-market motion?

Jabari Norton:

Yeah, for us from a cloud marketplace standpoint, there’s been a significant amount of benefits, both around kind of deal acceleration and opportunity acceleration, especially as you’re getting to the end or towards quarter end. As we’re all driving to marketplaces, customers already have marketplace agreements and also have already done a number of transactions, so it really accelerates that last mile, which can hang you up. It makes a difference between hitting a quarterly number and not. But also it’s allowed us to get much closer to our provider, I mean, we host and run 100% on AWS, but pull data from everywhere. And it’s really allowed us to just align closer to our customer’s most strategic partner and where they’re going long-term with regards to that. So those have been the two things, both deal acceleration, but also allowing us to get closer to our most strategic partner.

Rico Mallozzi:

And Colleen, do you share those insights or is there anything else to add around that?

Colleen Kapase:

Yeah, I would just add when you’re thinking about your customer segment, I think some people think about marketplaces as more the commercial transactional, but that wasn’t actually the start that we had at Snowflake, and we’re both on AWS’s and Azure’s marketplace. We actually started with private offerings, if you will, more towards the enterprise size customer. So I think just opening your aperture when you’re thinking about marketplace, not assuming it’s just a small commercial SMB market sales. Actually we were, I would say pleasantly pulled there by a lot of our enterprise customers. And I think also just assessing your sales strategy, don’t think you can put it up on the marketplace and it’s just going to fly off the shelves, if you will. There’s still quite a bit of work that you need to do in terms of getting through that co-sell motion that Jessica put in place in your own sales teams, driving the opportunities as well. So I think that’s key in your assessment phase as well.

Rico Mallozzi:

Yeah, I think oftentimes people look at marketplaces as like a storefront, like an eBay, but it’s much more like a PayPal. This is a go to market tool, a way to procure technologies and you can use it to your advantage, but don’t expect to just set it up and then leads are going to come through the door. The funnel is actually inverted. You need to get those transactions to kind of get that high velocity movement going. So Jabari, I’d like to also talk about like how do you suggest one company look at cloud go-to-market fit, right? There’s many cloud marketplaces out there. We’re going to talk about some of the resources that are required to be successful on them. For you, what was your decision process and why’d you move forward with the marketplace that you moved forward with?

Jabari Norton:

Yeah, for us, I mean, the fit was pretty straight forward. Like I said, we run 100% of our platform on AWS, so the fit was great. It was pretty easy to drive that from our side. But I think the other thing that we started to see, and Coleen and Jessica touched on that, is that our customers were asking for it. It was tough for us to try and figure out, “Okay, how do we make this thing really work? And what’s the process and how is it going to conflict with our current resell channel, et cetera?” So there’s a lot of nuances that as you start to get into not only the assess phase, but the build phase of that.

Jabari Norton:

But I would say for any startup, mid-size late stage company, if you have clients that are deploying and running in the cloud, which I would imagine most of you are, do it and start now. Start early. The earlier start the better. There’s some things you have to work out and some nuances with regards to that, but everybody should align with cloud marketplaces. It is going to be the way for the future and it’s catching a lot of steam. And there’s just a lot of opportunity for SaaS providers or ISVs in general to take advantage.

Rico Mallozzi:

No, I totally agree. I think you have to assess whether cloud is strategic for your company. And then also, how are you strategic to the cloud vendor itself? Do you improve consumption habits for customers that are using those cloud connect technologies? Do you improve the cloud experience, maybe accelerate their move to the cloud? If so, then you have a very compelling value proposition that I think you could actually take to the cloud vendor themselves to get them excited about your activity on the marketplace. One thing I want to do is turn the tables. Can we explain to the audience, Jabari, why buyers find it attractive to use cloud marketplaces? Just so we understand. Obviously it’s great if there’s a lot of sellers, but if there’s no buyers then we’ve got problems. So why do buyers find cloud marketplaces attractive?

Jabari Norton:

Yeah, we found a couple of things that buyers like. So one is consolidation of vendors. Vendor sprawl is difficult, especially with large enterprises. So being able to align with the cloud marketplace to consolidate vendors is one. Two is, as Colleen and Jessica pointed out, budgets are tightening, people have committed spends with the cloud providers, being able to leverage that committed spend to then get to the next level and thus reduce your overall discounts is important with regards to that. And I think three is just, whether that’s a budget or making it easier from a CFO perspective, or if there’s other budgets that you can tap into, it’s just the ease of procurement is much easier with the cloud marketplaces. In a lot of cases you put together a quote, there’s a simple link they click through and you’re done. And that’s it. And it’s all taken care of on the backend.

Jabari Norton:

So if you think about how do you reduce friction in a sales cycle? That’s what we’re all trying to do, go to frictionless. It’s not frictionless, but it’s trying to smooth out as many of the bumps as we can with regards to that. And from a buyer’s perspective, that really helps them because at the end of the day, they need to get the software in, running so they can get to their outcome. So the faster they can get through that procurement process from the time of decision, the better. So those are really the things that we found the buyers have really enjoyed that process and working with them. And it’s a company they’re familiar with. It’s typically one of their biggest vendors, so really nice.

Rico Mallozzi:

Most strategic vendor… It provides, especially if you don’t have as big a presence of brand as the three companies we have here today, it provides an essence of kind of credibility for you as a startup, because AWS has to approve certain security standards or Azure has to approve certain security standards for you to be on their marketplace. So you can use that when you talk to the customer, “Hey, look, we met the minimum thresholds that this marketplace required for us to be listed.” And I saw an interesting study from Deloitte that one in three procurement officers, shocker, want to consolidate vendor spend. So this provides an excellent opportunity for them to do that because they have visibility now for a lot of their spend for IT per se. So let’s move. We’ve assessed as a group that cloud marketplaces may be an attractive opportunity for your company, but now you need to go build it. This isn’t a listing that takes one day to fill out a form. It’s quite the endeavor.

Rico Mallozzi:

So Jessica, I’ll come to you. Can you provide us like what type of cross-functional alignment is needed internally at a company to kind of get on a marketplace and be successful there?

Jessica Alexander:

Sure, absolutely. I was lucky, we had our CEO’s endorsement very early on that this was something that would be the future of how people buy, but it was a very small tiger team. And what we found was there can be some friction from channel folks or other teams that maybe don’t understand what a cloud marketplace is and how it will disrupt or change the overall business. So it’s super important. We aligned with finance, with sales operations, as well as the sales leaders to say, here are some impacts that a cloud marketplace could have on our business and what would your metrics or successful outcomes be? And we started small, we didn’t want to boil the ocean in one day. We started with getting our security competency, we were an advanced technology partner and we put one marketplace listing up.

Jessica Alexander:

We started really small, very surgical and then iterated. So I would say that cross collaboration among broader teams and definitely starting small and being able to iterate quickly with a small group of people that… We had two people who were running kind of our marketplace process, as well as the co-selling with AWS. And through that, we were able to iterate very quickly and reduce friction, adapt in a way that supported not only our customers and the way they wanted to buy. I think Colleen made a great point earlier. We thought we were going to get all these fabulous organic offers that just would come in self-service and be net new business for us. And that wasn’t the outcome that we had. We had great uptake on the private offer process, and being able to reduce daily sales outstanding for finance, and accelerate our transaction speed for sales. So that would be my recommendation is start, start small, but make sure that the other stakeholders in the company’s business are included as well, because it will be disruptive. And it will require a collaboration across the organization at the leadership level.

Rico Mallozzi:

Yeah. Jabari, you and I talked about this previously and you said I needed the big three, the big three Cs. Can you say who those big three Cs are? And then I also liked, another way you phrased it is we wanted to remove friction for our direct sellers if they’re going to use this channel. So can you talk about that as well?

Jabari Norton:

Yeah, the three Cs… and Jessica got to start with her CEO, which is a great. Our start, and I suggest that everybody we talk to, start with your CRO, then get your CFO, and then work together with your CEO. Those are the three, if you can get those three and it’s really kind of the triad that you need to help drive it top down, because it’s going to be extremely disruptive in a positive way, but boy, there’s some work to be done, and there’s going to be some things that you have to kind of smooth out. So that’s one, those are the three Cs, CRO, CEO, and CFO. And then really as we looked at it, marketplaces and what you do have to look just like any other transaction. They have to look like a partner transaction, a direct transaction, however you guys drive your business, it has to look the same from the time a sales rep puts in an order or gets a quote and then drives an opportunity. Because anything that’s different, sellers don’t want to do with regards to that.

Jabari Norton:

And so how do you make that frictionless as possible? And so we really had to rechange a lot of our internal operations process and we had to get our VP of ops on board. And once again, you get a little pushback and you start back with the Cs and push down to get that through. So extremely, extremely important. Once you’ve assessed, now you’re going to build, get those folks on board. You’re going to have to get them on board anyway, do it early.

Rico Mallozzi:

And how long do you suggest for this to kind of mature and start working for a company?

Jabari Norton:

I think it’s a six to nine month endeavor. I think. I mean, there’s a lot of things that have happened faster or that have accelerated that. I think it’s six to nine months now. It took us longer than that, but I think we were earlier in that cycle, so I think the cloud marketplace teams have gotten better. I think it’s at least six to nine months.

Rico Mallozzi:

Yeah. Good advice. It’s definitely an investment that requires that kind of executive level visibility. Colleen, can we get a little bit tactical on the actual kind of go to market? Can you kind of provide us with an overview of how you built your team around the marketplace strategy? Do you have partner sales managers that cover the cloud marketplaces? How many people are actually dedicated to the cloud vendors themselves and what are the key activities that they’re kind of leading? That would be super helpful.

Colleen Kapase:

Yeah, because I think the journey doesn’t stop once you’re on the marketplace. And by the way, I’ll just share, Rico, one place not to find yourself in is your CRO asking you two weeks to the close of quarter, “Hey, we can’t do this deal unless we get on fill in the blank marketplace. So can you make that happen in a couple of weeks?” That’s not going to happen. So just watch for that one, because if you do have a customer making that a requirement, it’s not something that you can… I think it took us about 12 weeks to actually, with full court press, get on there. So just thoughtfulness from a planning standpoint. But once you’re on the market place, the work doesn’t stop there. We’ve actually built out a field cloud team. And a lot of this depends on your go to market, but we are selling jointly with the AWS and the Azure, et cetera sellers too.

Colleen Kapase:

So we have regional cloud sales leads, both across the US, and supporting Europe as well. And their job is to really be the glue bringing the organizations together between us and them and bringing the sellers together supported then by some of the, for instance, like AWS or Azure marketplace sales leads to help drive some of those opportunities. And some of these are very, very large, significant, hairy opportunities. So that support is needed. We run a QBR, how are we doing on marketplace monitoring our fees and those people help with it. But there are resources that we put in the field to support this as well. So it’s not just a corporate top down initiative. And I think some folks sort of asked, “Did you have to change your product to get on the marketplace or your pricing?”

Colleen Kapase:

Just insights, we did not, but we’re 100% cloud oriented, very usage based, and the billing is actually built into Snowflake, our product, so that wasn’t necessary, but that might be something else you as a vendor, depending on if you’re 100% cloud oriented or have an on-prem piece you may not need to look at. And there is some work around APIs as well to be done. We used a third party to help us because speed was important for us to get that opportunity I was referring to plus everything else that came down. That helped us move fast too, so it’s both the corporate support, legal, and I agree, the finance support as well is critical, but that field interconnectivity in essence is critical too.

Rico Mallozzi:

Yeah. And I would also say, regardless of the field, is how you go about compensating this channel. If you can neutralize the channel from a compensation perspective with your direct sellers, that always helps. I’d also say that there’s different take rates with the marketplaces and they vary by company, but there’s also ways you can get creative where sometimes those take rates can be used for your cloud consumption credits. So just to kind of explore all those things with your Amazon partner leader, because there are ways where they can help lessen kind of the take rate by doing unique structures like that. So I want to jump to our last section. Can you share, Colleen, maybe what are the KPIs that you’re using to kind of measure success on the cloud marketplace? How do you measure success there?

Colleen Kapase:

I think that’s a good question. We do measure sales cycle. So just time to transaction and look at the difference of marketplace versus not. We do find that oftentimes this can move faster, so that’s a huge KPI for us. And then we measure just percentage of business going through the different various marketplaces and the growth on that. And I know you asked earlier is COVID affecting this, I would say absolutely, and we’re seeing that growth increase quite significantly on marketplaces. I think it’s just an easier transaction on both sides. So those are the two things that we’re looking at. We also measure the number of joint registered deals that are approved between us and the AWS seller.

Colleen Kapase:

So we talk about how do you enable and how do you sell with them, leveraging their registration programs and getting that approval is huge, I think, because then you’re signifying to both sales teams, we’re going to work together and we’re sort of coming out holding hands, if you will, in front of the customer, which especially for someone who both competes and partners with, that’s really important to us. And so those three things are what we’re measuring and looking at.

Rico Mallozzi:

I have heard other companies also kind of measure deal size compared to a direct channel and the cloud vendors, because ideally if you can tap into that cloud budget, you may be able to have a more expansive story around how much of a solution that they can leverage to be successful. So that’s another measuring stick I’ve heard of some cloud leaders using. Jessica, I wanted to ask you, I think we mentioned it before, getting listed on the cloud marketplace is the starting line, not the finish line. And because of that, it requires a lot of work after day zero and day one. Can you talk about how important it is to be plugged into their product and technical integrations and how closely you align your technology teams to make sure that you’re always integrated to their latest product set?

Jessica Alexander:

Absolutely. We found that as a company, CrowdStrike is transitioning from a buying persona of an endpoint to a cloud workload. And so, our product really needs from a customer adoption standpoint, to be integrated into the cloud service provider fabric. So whether it’s deployment automation around monitoring, monitoring VPCs and accounts, as well as containers and you see two instances compute, having those service integrations with the native cloud fabric helps our customers consume and adopt our products a lot faster. And it makes the experience much more positive for a dev ops persona or a cloud security architect who is tasked with deploying not only the underlying infrastructure, but also the security that goes on top of it. So we’ve doubled down our investment and hired very aggressively a technical team that is responsible for what we call tip of the spear.

Jessica Alexander:

And they are very tightly aligned with the various service product managers at the cloud service providers. So that we’re on the forefront of all the services that align with customers consuming our products. And we find that this creates not only… we were discussing earlier, like, do your products pull consumption for cloud services? I mean, that’s a big component of it. And we found that it helps drive consumption of not only our own products, but also the cloud service provider products as well. And that’s a key component to that better together story is having that outcome with a persona that, “Hey, this is a great product and it just integrates with what I’m doing already.” So we found that to be very impactful and are continuing to invest in the technical team supporting those integrations.

Rico Mallozzi:

This was super interesting. So if I was going to summarize today’s top takeaways on scaling through cloud giants, it’s first and foremost, assess your go to market cloud alliance fit, right? Identify what are the cloud vendors that are strategic to you, strategic to your customers, and then align and build resources around that. And to build off that point, invest the resources. This is a cross-functional initiative. It requires support from marketing, support from sales, support from the technology team, from your ops team. So make sure you have alignment broadly across your organization around this strategy. Remove the friction, right? Direct sellers, they do not want friction in their opportunities. If anything, position this as an accelerant for their sales opportunities. And then lastly enable, enable, enable. Enable internally and enable externally because you always have to be in that education mode to get this flywheel going.

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Published on July 12, 2021

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