Whose contract is it anyway? How AWS Marketplace works

I get to talk with procurement teams about AWS Marketplace daily. The best part of these conversations is their delight when they see the consolidated purchasing analytics. A close second best part, though, is when some form of this question inevitably arises, “So AWS is reselling software now?” I love this question because the answer cuts to the heart of how IT marketplaces offer a new way of approaching software procurement. The answer is: no, AWS is not a software reseller. Amazon Web Services (AWS) is a marketplace provider. Software vendors, channel partners, and professional services providers are all sellers within AWS Marketplace. For example, when a customer buys CrowdStrike from SHI in AWS Marketplace, the invoice they receive says, “CrowdStrike sold by SHI.”

At this point in the conversation, most procurement teams aptly point out, “But if I’m going to the AWS Marketplace website and buying from there, I’m buying from AWS, so how are you not the reseller?” Here, the conversation takes an interesting turn.

Consider this analogy to understand the three-party nature of a marketplace. You’ve likely been to a farmers market. Have you ever thought of how they work? There’s an entity, sometimes a town, sometimes a business, that organizes the farmers market. This entity charges the vendors that participate a small fee to recover the cost of operating the market. Vendors set their offerings up in stalls on the day of the market and decide how much they want to charge for their honey, tomatoes, and so on. Market-goers buy their fresh veggies, often from many vendors, in this one centralized location, but the sale is always directly between them and the vendor. Customers may check out fresh fruit from several stalls before deciding which is the best value and fit for their need. They might even haggle over prices if they’re buying a large amount of an item, but the organizer of the market never gets involved in this negotiation.

With this construct in mind, here are the roles of each party in AWS Marketplace:

1. AWS is the marketplace provider. We’re responsible for the marketplace’s functionality for both the seller and the buyer. As a part of the buyer experience, AWS consolidates billing and provides spend analytics across many different purchases from potentially dozens of resellers and software vendors, but we are not involved with the pricing or terms you agree to with the software or service provider.
2. The software vendor is the seller, and they can designate a channel partner to make offers on their behalf. They set the list price, provide the terms that govern the purchase and use of the software, and allow you to negotiate pricing, terms, or both that are specific to your transaction through functionality called an AWS Marketplace private offer. As is the case in a farmers market, the software vendor pays the marketplace provider a small fee and is typically happy to do so for the benefit of reaching so many customers in one place.
3. The buyer is a customer of the reseller or software vendor for the SaaS product, as well as of AWS for use of our marketplace. AWS Marketplace is a free service for AWS customers to use.

With this foundation, the contractual relationships make perfect sense. The agreement between the customer and AWS governs the use of all AWS services, including AWS Marketplace. The agreement between the customer and the seller governs the purchase and use of the software. Finally, the agreement between AWS and the seller governs their use of AWS Marketplace as a transaction mechanism.

Still have questions about how contracts and procurement work in AWS Marketplace? Contact us to learn more.