Azure, Google & AWS cloud commits at $400 billion. 2 ways rollups can play this mega-trend

Disclaimer: Views expressed here are the author's own and based on public sources. The article is intended for informational purposes only. This is not financial advice. Please consult a professional for investment decisions.

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Searching for the next big trend in software rollups? Look no further than the marketplaces operated by the 3 cloud “hyperscalers” AWS, Google Cloud, and Microsoft Azure! 

A 60 second investment case goes like this:

• Public cloud spend increasingly dominates tech budgets: having topped $800B this year, it is forecast to grow by 19% CAGR

• Enterprise customers optimise their cloud bill by entering into “cloud commits” - essentially minimum spend in exchange for discounts. Combined, cloud commits for the Big 3 vendors have reached $400B

• Customers can use a % of these commits towards buying third party applications like Wiz or CrowdStrike from “cloud marketplaces”

• This is not Monopoly money! Cloud marketplace transaction volumes have been doubling every year, reaching an estimated $30B in 2024

• Think Salesforce AppExchange or Atlassian Marketplace - but with 10x bigger scale

Do you want examples? Here you go. 

Last autumn, CrowdStrike became the first cybersecurity Independent Software Vendor (ISV) to exceed $1B in lifetime software sales through the AWS Marketplace. It is experiencing similarly rapid growth on Google Cloud Marketplace. 

In this article, we cover:

1. How cloud marketplaces work, and why they matter tremendously to ISVs

2. Cloud marketplace ranking: Microsoft Azure marketplace > AWS > Google Cloud?

3. Two ways to play this mega-trend from a rollup perspective

What are cloud commits, how do they work - and why do they matter to ISVs?

Public cloud tends to get very expensive, very fast. According to Statista, 36% of enterprise customers spend $12M+ on public cloud. 10% spend $60M+. One way to control these runaway costs is to commit to a minimum spend, for a term duration of one or several years. Businesses end up "burning down" their cloud commits in order to meet the usage quota. 

Who doesn’t love multi-year deals? 

Cloud marketplaces are a bedrock of the hyperscalers' customer retention strategy. These marketplaces are essentially curated digital catalogues that:

• Allow customers to discover, purchase, deploy, and manage third-party software, services, and data solutions

• Simplify procurement, billing, and deployment on the chosen cloud

  Increasingly, customers think of software spend as part of their cloud commits. And why wouldn’t you shop on the AWS marketplace when you owe that money to Amazon anyway? 

Marketplace listings cater to the most niche of audiences: a natural stomping ground for VMS. How about Völur Carcass Value Optimization: “AI software for meat producers to maximize carcass value and ensure optimal use of each animal”?

Because the commits in question are absolutely enormous, so are marketplace volumes. In 2024, $30B (+100% YoY) was transacted across the AWS, GCP and Azure marketplaces, according to the market research firm Canalys. 

That’s a lot of cash flowing to independent software vendors, or ISVs. Not all of this cash is net new business, but just coming in via new distribution channels. 

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