Five Interesting Thoughts from…Nick Heddy
Marketplaces are increasingly where SaaS vendors sell and SaaS buyers buy. Here’s why, and what it means for MSPs, according to Pax8’s president and chief commerce officer.
Online marketplaces play an increasingly large role in how software is bought and sold. Indeed, more than a third of IT providers worldwide generate more than 20% of their revenue through marketplaces at present, and 87% expect to sell more through marketplaces in the next five years, according to recent research from Pax8, an MSP-only marketplace operator.
That business model makes Pax8 president and chief commerce officer Nick Heddy the perfect guest to discuss what marketplaces are and why they matter to MSPs on Channel Mastered’s MSP Chat podcast. Here are five of the many insightful observations he shared.
1. A marketplace is basically a UI for relationships among partners and end users. By extension, MSPs that don’t transact through marketplaces are relying on outdated and eventually obsolete techniques for interacting with clients and vendors.
“If you’re not delivering a UI for a vendor to manage a partner relationship, for a partner to manage a customer relationship, and for a customer to manage the relationships with the services that they’re consuming, then I would say that you’re not thinking in a futuristic way,” Heddy explains.
2. Buyers increasingly demand the convenience that marketplaces provide. The best reason to use marketplaces, Heddy argues, is that they’re what your customers want. That’s true now, he continues, and growing more true every day.
“Customers and decision makers are getting younger and younger. They’re used to ordering things on their phone, on their laptop, setting it up for an auto renewal,” Heddy says. MSPs who want to “meet their customers where they’re at” almost have no choice but to include marketplaces in their business strategy.
3. Businesses are more apt to consult a marketplace than an MSP when researching software. “75% of buyers aren’t reaching out to a managed service provider, even their managed service provider, until they’ve already gotten to the point of making a buying decision,” Heddy says. Marketplaces streamline that research process and give end users an easy way to make a purchase, while enabling MSPs to profit from that sale.
4. Vendors that sell software directly to end users rather than through partners lose a lot of customers. In fact, something like 30% of their customers end up ditching them every year, according to Heddy. “Which means as a SaaS vendor, if I’m going direct to that customer—and it’s expensive to acquire that customer—every three years I’m churning my entire base. That’s not a great investment for anybody,” he says.
It’s also totally unnecessary, Heddy adds. Vendors that sell through Pax8 churn just 3% of customers annually on average.
5. Hyperscaler marketplaces are better suited to big businesses than SMBs. Amazon, Microsoft, and Google (aka the cloud “hyperscalers”) all operate marketplaces that sell billions of dollars of partner software a year, often through pre-paid spending commitments. That model works well for large businesses with large budgets and knowledgeable IT managers, Heddy contends, but less well for everyone else.
“I would describe hyperscaler marketplaces as an amazing place for enterprise companies to burn down some of their large commits and purchase other things,” he says. SMBs need the experience and expertise only an MSP can provide. Want to hear more of Heddy’s insider take on marketplaces? You’ll find our whole conversation with him right here.
