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Enterprise App Marketplaces Respond To Pain Points In Corporate IT

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The Open VC

Editor’s note: Jim Franklin is the CEO of SendGrid, a cloud-based email service. 

Enterprise application marketplaces have grown significantly in number and stature in recent years. This trend has emerged as a response to developers in corporate IT departments who are stifled by lengthy procurement processes, locked into long contracts and highly restricted when it comes to deploying exciting products offered by startup vendors.

Developers’ use of emerging technologies has too regularly been at odds with the adoption of such technologies at a CIO-level. This tension point is one of the hallmarks of the developerization of IT, an emerging trend affecting all IT departments, where the developer’s potential as a bedrock for innovation can sometimes be at odds with legacy infrastructure and outdated working practices.

In corporate IT, procurement processes have not traditionally been aligned with rapid development cycles and cloud-based services, which are easy to source and deploy. Developers that are accustomed to working in fast-moving environments with scalable, easy-to-implement products have long since been impeded by outdated procurement processes for new vendors, which slow down prototyping and time-to-market.

Frustrated by procurement, developers in corporate IT build and use solutions inside organizations without explicit organizational approval. This is known as shadow IT; they use the services they need when they need them, but this leads to the danger of teams and management losing control of deployed services.

To help developers in corporate IT departments reach their full potential and avoid the risks associated with shadow IT, the tech industry has invested heavily in enterprise app marketplaces. Microsoft, Red Hat, IBM and Samsung, among others, have responded to the calls of corporate IT departments, who long for enterprise versions of the AppStore and Google Play store.

In April, IBM launched its Cloud marketplace for customers to buy IBM cloud services and, in addition, services from certified third-party partners such as MongoDB and New Relic. In the same month, Red Hat also debuted its OpenShift Marketplace, designed to host a breadth of productivity add-ons for managing databases, email delivery services, messaging queues and application performance monitoring.

For customers using these marketplaces, for example, using the SendGrid platform for transactional email just becomes another line item on the marketplace bill and there is no lengthy procurement process to go through. Third-party providers, which include many startups, are often certified and convenient to deploy.

There is even an industry emerging for building and maintaining such marketplaces. Many, including the Samsung KNOX marketplace, are assembled and operated by the five-year old startup AppDirect. Twenty million businesses are now reached via AppDirect’s overall network and users are growing by 30% per month.

The growth of these enterprise app marketplaces represents the tech industry’s response to developers’ intent on riding the wave of the developerization of IT, deploying SaaS and cloud tools with the convenience they have come expect from consumer app stores.

However, corporate IT departments are also under increasing pressure to build mobile-first services and some legacy platforms simply do not cut it for these purposes. Consequently, we’ve also seen a slew of mobile toolkits and Mobile Backend-as-a-Service products aimed at the enterprise IT teams to help them transition to mobile quickly. This includes, for example, AWS Mobile Services, Google’s Mobile Back-end Starter and Microsoft Azure Mobile Services.

The core benefits for corporate IT departments include reduced friction in the procurement process (services just become another line item on the Microsoft Azure bill, for example), better transparency on what is being deployed (no shadow IT), and the streamlining of developer work, so that developers get what they need in a timely manner.

Additionally, this spells big opportunity for startups who join marketplaces as certified third-party providers. Before joining, startups should always evaluate whether they have sufficient field team resource to manage enterprise sales cycles at scale. Additionally, it’s important to consider carefully which particular marketplaces are right for them.

According to Gartner, an estimated 80% of organisations will use the cloud by the end of 2014. Enterprise app marketplaces will be fundamental in supporting the shift and helping developers in corporate IT to reach their full potential through easy-to-implement cloud-based services, often from startups.

What’s more, the market opportunity for cloud services is expected to exceed $250 billion by 2017 and the proliferation of enterprise app marketplaces is putting startups in a better position to get a bigger slice of this pie.

Featured Image: Bryce Durbin