Do we need enterprise software marketplaces?

When multiple buyers and sellers trade goods and services in a marketplace, participants benefit from efficiencies of scale, as their specializations of supply come together to meet customer demand. 

In enterprise software marketplaces, each participant vendor contributes specialized expertise, functionality, and scale that are essential to building a complete solution for end users—assuming of course, that no single monolithic vendor would as efficiently meet customer needs.

Before software marketplaces, end users would buy software built specifically for their own vertical, such as ‘healthcare clinic management’ or ‘point of sale terminal system’ — or hire a consultant to customize a bespoke solution, since most enterprises didn’t have a deep enough development bench to do it themselves.

Development partners are precious

Consumer software marketplaces are well known, because they live on our smartphones: Apple App Store and Google Play have the markets cornered for their OS users.

These closed economies hit app developers with a 30 percent commission on each transaction, whether for purchasing the app, or even in-app transactions such as game tokens and add-ons. Developers who don’t want to pay the toll simply won’t have their apps listed.

Needless to say, publishers don’t like the arrangement. Epic Games vs. Apple are still in court today after the popular Fortnite game got kicked off the App Store for having its own internal payment system. European Union regulators are now looking at breaking up such monopolies.

In an enterprise software marketplace, application partners are highly valued, because no vendor’s system is an island unto itself. Encouraging a developer ecosystem creates more choices for end customers, who need to add new functionality that integrates with existing systems.

Vendors now get exposure to the world’s largest cloud services market at a low cost ranging from 1.5% to 3% depending on average sales volume. Even if vendors on the AWS marketplace offer functionality that overlaps with AWS alternatives, that’s fine, because AWS still sells more cloud infrastructure either way.

Across the pond, the Atlassian Marketplace generated more than $500M in annual sales by 2022 for their partner developers. Because Atlassian didn’t impose an extreme tax, they were able to bring together a strong set of vendors building add-on software specifically customized for their suite of tools such as Jira, Confluence and Bitbucket.

The wall of modules and integrations

Most enterprise software marketplaces started out as gadget collections. They are not well-planned, arising out of a necessity to provide adapters to the most likely external systems and core systems in play within the end user’s IT environment.

Back in the turn of the century, I designed B2B marketplaces, most of which failed alongside companies like Pets.com in the dot-bomb implosion. Enterprises with tight IT budgets started to expect vendors to include SDKs and integration modules so they could hook up their existing software packages for free.

Salesforce led the way with a marketplace of add-on services to its core CRM platform. Later, we saw the rise of major business process automation, analytics and low-code app design vendors all offering a gadget wall of partner integrations in their own marketplaces.

Even citizen developers were starting to get in on the game, building solutions from a storefront of LEGO-like vendor pieces with snap-to-fit integration ease.

The rise of API, open source and AI

The widespread adoption of SaaS software and cloud services led us to an API-driven consumption model, which changes the game. Instead of building custom integration models for each platform, vendors publish an API spec, allowing developers to build services that connect to it.

Soon, walls of custom integration widgets gave way to API marketplaces, and a surrounding host of related devtest, management, identity and orchestration apps to govern their use.

Open source software underwent its own revolution, with downloadable packages on npm and API integration code in SwaggerHub and git repositories. Open source marketplaces allow developers to contribute innovative efforts to the community in order to benefit development practices as a whole.

GenAI chatbots and image generators are all the rage today, but AI models are even better at speaking the language of API connections than mastering the complex subtleties of human conversation. AIs can act as integration platforms, allowing even non-technical workers to call on a vast array of services, including other AI models behind their own APIs, with natural language queries.

The Intellyx Take

I could go on forever about the subtleties of software marketplace design and economics, which would be outside the scope of this column. 

For instance, I could talk about intra-enterprise marketplaces that allow IT departments to provision employees and provide platform engineering services to developers, with interdepartmental accounting of the value delivered against budget allocations. But enough of that.

As software marketplaces expand to meet future enterprise needs, the most successful ones will hold their vendor communities close, rather than abandon developers or suddenly game the rules against end customers.

The post Do we need enterprise software marketplaces? appeared first on SD Times.

Source: Read More