Briefing at a Glance

  • Microsoft saidin a partner update on Fridaythat it is shifting Azure IP co-sell to a marketplace-first model. Over the next year, eligible independent software vendors (ISVs) will move from self-reporting Azure infrastructure service usage to selling SaaS solutions directly through Microsoft Marketplace.
  • Microsoft's previously used Partner Reported Azure Consumed Revenue co-sell model will be retired within the company's current fiscal year, which began on July 1. Partners already transacting through the marketplace are urged to continue expanding existing business. ISVs with gaps in their marketplace portfolios are advised to contact their partner development managers.
  • "This is a clear signal from Microsoft to its ISVs: Marketplace is now the primary sales channel for any ISV building on Azure," said Alastair Edwards, chief analyst at Omdia. "By shifting the focus of co-sell support from Azure consumption to Marketplace, Microsoft's message to ISVs is loud and clear—embrace Marketplace or risk becoming irrelevant."

Deep Dive

As buyers increasingly turn to hyperscaler marketplaces, Microsoft is pushing partners to build business on that platform and has built features and incentives to support it.

Microsoft sees this marketplace-first move as a way to align partner incentives with its broader strategy of placing the partner ecosystem on that platform. According to the announcement, for ISVs this will bring consistency, better deal validation, and stronger automation capabilities.

Since 2022, ISVs transacting through Marketplace have been eligible forAzure credits and go-to-market resources, which are provided through formal incentive programs. Last month, Microsoft launched an AI Marketplace revamp for ISVs, previewing anintelligent discovery generative AI interfacethat allows customers to search for software using natural language prompts.

"This is really about customers using matching words to find your app or software," Cyril Belikoff, Microsoft's vice president of cloud and AI, told Channel Dive. "If you know your customers, you'll know the words they use when searching."

Microsoft said last week that Marketplace is its preferred path to achieving "scalable, consistent co-sell execution." Phasing out parallel co-sell channels within its ecosystem is another step toward further centralizing the role of the Marketplace platform.

"This reflects a broader industry trend where hyperscalers are increasingly directing software sales to their marketplaces," Peter Woest, director of cloud marketplace partnerships at Westcon-Comstor, told Channel Dive. "We've already seen AWS adopt a similar marketplace-first strategy."

According to Omdia (a sister company of Channel Dive), this strategy of tying third-party solutions to hyperscaler infrastructure while allowing customers to use cloud credits to purchase ISV products is working. The analyst firm expects cloud marketplace transaction volume to grow from approximately $30 billion in 2024 to$163 billion by the end of the decade。

For partners beyond the ISV space, the outlook is equally positive. Omdia expects that by 2027, more than half of cloud marketplace transactions willflow through the channel。

"Marketplace adoption is accelerating," Edwards told Channel Dive. "As enterprises face budget pressures from soaring prices for IT products and solutions, being able to consume their pre-committed cloud spend becomes increasingly attractive."