AWS Marketplace Partner Report: Margins, ROI And Benefits

From services and resale margins to overall partner benefits, CRN breaks down a new report by Forrester on the AWS Marketplace as it relates to channel partners.

The AWS Marketplace is becoming a new go-to-market for many solution providers with 1,300 AWS channel partners currently transacting on the digital marketplace.

Some of these partners are seeing up to 45 percent professional services gross margins, while also increasing deal sizes as customers seek to spend their cloud commitments via the AWS Marketplace, according to a new report by IT research firm Forrester.

“B2B customers are seeking flexibility and to streamline procurement, easily research and vet, and simplify management,” said Forrester in its new report. “With the channel partner capabilities of AWS Marketplace, AWS channel partners can acquire net-new customers and ISV partners to drive profits.”

The Partner Opportunity For AWS Marketplace

The findings are based on Forrester’s new report titled “The Partner Opportunity For AWS Marketplace SIs, GSIs And Resellers.” The research firm interviewed 27 representatives of 14 existing AWS Marketplace channel partners with experience collaborating with AWS to build, innovate and scale marketplace practices. Partners include systems integrators, global systems integrators (GSIs), resellers, MSPs and professional services partners. They were mostly global businesses based in North America, Europe and Asia with annual revenue ranging from less than $100 million to more than $25 billion.

The primary AWS Marketplace revenue stream partners are participating in is reselling software via Channel Partner Private Offers along with subsequent services. Launched in 2012, the marketplace is an online software store that aims to help customers find, buy and quickly start using software and services that run on AWS.

The AWS Marketplace now has over 15,000 transactable listings from more than 3,500 ISVs, 300 data providers and 1,300 channel partners. There are now more than 330,000 active AWS Marketplace subscribers across 30 regions.

From gross margins for partners to seeing faster deal close rates, here are five key findings in Forrester’s new AWS Marketplace report that every AWS channel partner should know about.

Professional Services Gross Margins: 25 Percent To 45 percent; Average Resale Gross Margins 13 Percent

Partners reported to Forrester that AWS Marketplace professional services gross margins ranged from 25 percent to 45 percent.

AWS partners on the marketplace reported resale gross margins of up to 18 percent, with average resale gross margins at 13 percent. Resale margins depend on the technology being sold. For example, partners reported higher margins around cybersecurity compared with commodity IT, which could be about 10 percent.

Interviewees said that compared with other channels, they noted similar or better margins with the AWS Marketplace.

Overall, gross margins can improve for partners year over year due to efficiency gains from training and experience, according to Forrester.

Big Source For Draw-Down On Spending Commitments; Deal Size Increases

Most AWS Marketplace deals averaged in the mid-six-figure range for one to three years or more. In addition to reselling third-party software and data with Channel Partner Private Offers, partners are selling their own unique services in AWS Marketplace.

Most commonly, partners said that their customers wanted to draw down their AWS spend commitments, which they can do by transacting via AWS Marketplace.

Forrester said customers’ AWS commitments are driving AWS Marketplace consumption as large organizations want to better manage their commitment via the digital marketplace.

One key Forrester finding is that resellers that leverage the AWS Marketplace can increase their deal size by 4X to 5X. Partners said growth in deal size stems from customers wanting to use their spending commitments, increased buying speed via the marketplace, and forming tighter relationships with ISVs, to name a few.

Partners also said that the improved ease of selling services resulted in up to a 50 percent attach rate to resale private offers.

50 Percent Faster Deal Close Rate

One of the major selling points on the AWS Marketplace is how fast a customer can find, buy and procure solutions. Many partners said the marketplace is increasing deal closing times by 50 percent.

Interviewees told Forrester that their organizations realize faster sales cycles with AWS Marketplace compared with traditional purchase channels due to its streamlined procurement process as well as customer dissatisfaction with traditional procurement. For example, partners cited outdated operational processes such as using purchase orders.

Speed is also driven by the mutual alignment between AWS, ISV and channel partner customers. Partners cited that their customers were AWS customers, their ISV partners were AWS Marketplace partners, and their organizations typically had a pre-existing relationship with AWS.

AWS Marketplace ROI: 234 Percent

Forrester aggregated all of the partner data it collected and combined the results into a single channel partner to illustrate the financial impact and business opportunity for partners on the marketplace. The company dubbed this as a “composite partner organization” and found it was able to achieve a 234 percent return on investment (ROI).

“[We] found that a composite partner organization experiences total present value gross profits of $3.62 million over three years versus investments and overhead expenses of $1.08 million, adding up to a net present value of $2.54 million and an ROI of 234 percent,” said Forrester.

In addition to larger deals and a faster buying process, partners on the AWS Marketplace can access funding and incentives such as funded head counts from the AWS Marketplace team to drive revenue and build a successful practice that leads to higher ROI. These opportunities have the potential to offset costs and enable further practice growth.

Partners also highlighted net-new business driven by the marketplace. They said new customers insisted upon using AWS Marketplace, they formed new ISV relationships, and the resulting go-to-market and co-selling opportunities drove new software resale business.

Interviewees said their organizations maintained and grew the number of ISVs they worked with due to the AWS Marketplace partnership, which resulted in an increased number of qualified opportunities.

Not only did interviewees say the AWS Marketplace partnership drove new business, but it also helped them maintain and grow existing business with easier renewals compared with traditional channels.

AWS Marketplace Partner Benefits: Better Relationship And Support

Overall, the AWS Marketplace helps partners improve their experience with customers via a quick and agile procurement process, cost savings, AWS-committed spend retirement, and by forming a stronger relationship with the AWS Marketplace team. There are also financial incentives including funded head counts from the AWS Marketplace team.

Support from the AWS Marketplace team helps partners get their practice off the ground and helps them stay up to date with news, updates and best practices. These partners also have opportunities to become a member of the AWS Partner Advisory Council.

Partners told Forrester the support their organizations received while evaluating AWS Marketplace factored into their decision. They said they expected that they would receive strong support and have opportunities for feedback over the lifetime of the partnership.