What Is an Independent Software Vendor (ISV)?

Every large software platform has the same problem. It can't build every product its customers want. A CRM vendor can't write the best tax-compliance add-on, the best field-service app and the best e-signature tool at once, and a cloud provider can't ship a purpose-built application for every industry. So the platform owners invite other companies to do it, and give them distribution, funding and technical help in return.

Those companies are independent software vendors, or ISVs. This article defines the term, separates it from the partner types it's often confused with, walks through how an ISV partnership actually works, and sets out the benefits and risks on both sides. The program details come from the vendors' own current pages, and where a fee isn't published, we say so rather than guess.

What an Independent Software Vendor Is

An independent software vendor is a company that builds and sells software of its own, where that software either runs on or integrates with another vendor's platform, and where the ISV is a separate business from the platform owner. Two words in that definition matter.

Software of its own. The ISV owns the product, the roadmap, the customer relationship and the pricing. It isn't reselling someone else's code.

Independent. The ISV isn't a division of the platform company. It makes its own commercial decisions, usually serves customers of several platforms and has to earn its place on each one.

Microsoft's ISV Success program uses a version of this definition in practice. Its eligibility rules describe a project that is B2B focused, built on or integrated with Microsoft Cloud, externally available and intended for repeat sales. AWS's ISV Accelerate describes its audience as AWS Partners offering software solutions that operate on or integrate with AWS through AWS Marketplace. Different words, same shape: a vendor with its own product, attached to someone else's platform.

Salesforce frames the same split from the other side. Its ISV partner page distinguishes apps and integration partners, who integrate with existing Salesforce environments and sell through the marketplace to current customers, from platform partners, who build a specialized, branded solution on the platform and manage their own distribution.

ISV vs Other Partner Types

ISV gets used loosely, so it helps to pin down what it isn't. Technology partner and OEM partnership each get their own articles in this collection; here is the short version of the distinction.

Two points trip people up. First, "ISV" says nothing about whether the product is cloud or on-premises, or whether it's sold as a subscription. A SaaS company with a Salesforce integration and a desktop application vendor that ships for Windows are both ISVs relative to those platforms. Second, ISV status is relative to a platform. The same company can be an ISV to Microsoft, a technology partner to a smaller vendor and a competitor to a third.

For the resale side of the map, see distributor vs reseller and referral vs affiliate vs reseller.

Key Facts: Independent Software Vendors

• Microsoft describes ISV Success as a 12-month program, available within the Microsoft AI Cloud Partner Program, for software development companies that intend to publish to Microsoft Marketplace (Microsoft Learn).
• To renew ISV Success, a partner must have published an offer to Microsoft Marketplace or upgraded an offer to transactable since starting its latest engagement (Microsoft Learn).
• Microsoft charges a 3% standard store service fee when customers buy a transact offer from Microsoft Marketplace (Microsoft Learn).
• AWS ISV Accelerate requires one or more software products in general availability on AWS Marketplace, at least 5 launched opportunities and at least 15 qualified opportunities in the past 12 months (AWS).
• Google says it offers a standard revenue share on Cloud Marketplace sales for products that meet its requirements and pass a business case review, but the page doesn't state a percentage (Google Cloud).
• Salesforce's ISV path runs through five steps: join the Partner Community, build the solution, execute a commercial agreement, complete a security review and publish the listing (Salesforce).

Why Platform Owners Court ISVs

A platform is only as useful as what customers can do with it. ISVs extend that surface area for the platform owner at the ISV's expense, not the owner's. The incentives line up in four ways.

Breadth without headcount. A platform vendor can't staff a product team for every vertical. ISVs fill the long tail: a compliance tool for dental clinics, a scheduling add-on for logistics, a reporting layer for nonprofits.

Stickier customers. A customer who has installed three third-party apps on a platform has more to lose by leaving it. The ecosystem becomes a switching cost the platform owner didn't have to build.

Consumption. For cloud providers, an ISV's product running on their infrastructure drives usage. That's visible in how the programs are built. Microsoft's expanded ISV Success benefits are judged on factors that include Marketplace Billed Sales and Azure Consumed Revenue, so the program rewards ISVs whose products pull spend onto Azure.

Sales leverage. AWS ties the incentive to its own field team directly: ISV Accelerate puts solutions in front of AWS Account Managers, who receive incentives for co-selling through AWS Marketplace Private Offers. The platform's sellers have a reason to bring the ISV into a deal.

None of this is charity. Platform owners court ISVs because ISVs make the platform worth buying. That's worth remembering when you negotiate what you get in return.

How an ISV Partnership Works

The details vary by platform, but most ISV relationships follow the same sequence.

1. Build. The ISV develops its product on the platform's APIs, SDKs or infrastructure, or integrates with them. Some platforms provide benefits at this stage. Microsoft's Core Package, for instance, includes Azure sponsorship ($5k USD usage), a standard support plan and one-to-one consultations on design, publishing and listing optimization.
2. Qualify. The platform checks the product and the company. Salesforce requires a security review before publishing, and its ISV page lists a security review as a step in the path. Google requires that products be production-ready, enterprise-ready and primarily hosted on Google Cloud.
3. List. The ISV publishes on the platform's marketplace so customers can find and buy it.
4. Sell and co-sell. The ISV sells directly, through the marketplace or alongside the platform's sales team. Co-sell is where the program rules get specific, which the programs section below covers.
5. Share revenue. When the marketplace processes the transaction, the platform keeps a fee or share.

The commercial mechanics are the part executives most often get wrong, so it's worth being precise about who sells what. On Microsoft Marketplace, a transactable offer means Microsoft facilitates the exchange of money for a software license on the publisher's behalf. Microsoft's own page says that when this happens, the publisher keeps the designation of seller, provider, distributor and licensor. Google describes the customer benefit of its marketplace this way: one bill for all of your products and services, plus the Google Cloud services the customer uses. The marketplace handles billing, but the ISV still owns the contract.

Current ISV Programs

These are the four programs most ISVs encounter. Program names change often, so treat this as a snapshot of what each vendor's own page says now, and check the page before you plan around it.

A few observations from the pages themselves.

Microsoft ties benefits to marketplace performance. Beyond the Core Package, ISV Success has expanded and advanced tiers. The expanded package lists an extra $20,000 USD of Azure sponsorship, totaling $25,000 USD with the Core Package, plus 50 hours of technical consultation, for invited participants. Advanced benefits require a Certified Software Designation. The practical lesson: free help at the start, bigger help for ISVs that already sell.

AWS makes co-sell a gated program. Eligibility for ISV Accelerate includes a minimum of 5 launched and 15 qualified opportunities in the past 12 months, plus at least $2,000 in recognized AWS account revenue at enrollment. An early-stage ISV with no AWS pipeline won't qualify, so the program is a growth lever, not an entry point.

Salesforce and Google disclose less. Neither page states a percentage. Salesforce says its commercial model is built on shared success and that the revenue-share fee is reinvested into the platform and programs. Google says its standard share applies to products that pass a business case review during its internal product validation process, and that it might offer an adjusted share to products that don't. If a fee matters to your model, get the figure in writing from the vendor's partner team.

One more naming note. Salesforce's ISV page now presents AgentExchange alongside AppExchange as its listing channels. If you're reading older material that talks only about AppExchange, expect the program wrapper to have moved.

Benefits for the ISV

Distribution you couldn't buy. A marketplace listing puts the product in front of buyers who already hold a budget with the platform. For a small vendor, that can shorten the path to a first enterprise customer.

Procurement shortcuts. Marketplace purchases can draw on a customer's existing platform agreement, so the buyer doesn't have to set up a new vendor relationship. AWS's page says it handles metering, billing, collections and disbursement of payments for sellers, which removes some of the finance work.

Co-sell credibility. When the platform's own reps recommend a product, a customer's trust in the platform rubs off. That's the main prize in the AWS and Microsoft programs.

Technical support. Design reviews, sandboxes and credits lower the cost of building. This matters most before the first sale.

Co-sell deals also raise the question of who gets credit for a deal. The mechanics are covered in our article on deal registration.

Risks for the ISV

Platform dependency. If most of an ISV's revenue arrives through one platform, that platform controls the ISV's fate. Rules, fees, program names and eligibility change, as the naming shifts across these four programs show. An ISV that built its entire business on one marketplace has handed over its pricing power.

Channel conflict with the platform. Platform owners sometimes build features that overlap with ISV products. The ISV's only defense is to be better in a narrow area or to be on several platforms.

Fees and margin pressure. Even a modest marketplace fee reduces what's left after costs. Whether it matters depends on the ISV's gross margin. Fees are only one input: a marketplace listing can also lower the customer acquisition cost if it replaces paid marketing. Run both numbers before deciding.

Compliance and review overhead. Security reviews, hosting requirements and technical validation take engineering time. Google, for example, requires products to be free from vulnerabilities and malicious code, and Salesforce requires a security review before listing.

Program requirements that must be maintained. Several programs impose ongoing conditions. Microsoft ISV Success renewal requires another offering to publish to Microsoft Marketplace and a $1,550 USD renewal fee, according to its page. Benefits can lapse if the ISV stops meeting them.

Risks and Benefits for the Platform Owner

The platform owner takes on risk too. A poor-quality app can damage the platform's reputation, which is why review processes exist. Security failures in a third-party product can reflect on the platform. And the owner has to decide how much to share: too little and ISVs go elsewhere, too much and the platform's own economics suffer. This tension explains why programs gate their best benefits behind sales performance.

Where ISV Partnerships Fit in a Partner Strategy

For a company that sells software, ISV relationships are one of several ways to grow through other companies. They differ from resale and referral in that the partner brings a product, not just a sales motion. They sit alongside the models described in partner-led growth and the channel sales model, and they're a distinct option from a channel partner program, where the partners are mostly sellers. A balanced approach, covered in multi-channel growth strategy, usually keeps any single platform from carrying too much of the revenue.

If you're the platform owner, the questions are what an ISV needs to build well, what you'll give for free and what you'll reserve for proven performers. If you're the ISV, the questions are which platform your buyers already use, what the listing costs in fees and engineering time and what happens to your business if the terms change.

Related Reading

• Partner-led growth
• Channel sales model
• Multi-channel growth strategy
• Channel partner program
• Deal registration
• Gross margin
• Customer acquisition cost
• Distributor vs reseller
• Referral vs affiliate vs reseller