What Is a Value-Added Reseller (VAR)?
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Some products sell fine from a price list. A box of printer paper doesn't need a consultant. But a network security platform, an ERP system or a clinical records application usually does. Somebody has to size it, configure it, connect it to the systems the customer already runs, train the staff and answer the phone when it breaks. Many vendors don't want to build a services team large enough to do that for every customer, so they let other companies do it and sell the product at the same time.
Those companies are value-added resellers, or VARs. This article defines the term, breaks down what the "value" actually consists of, explains in general terms how VAR economics work, and shows how a VAR differs from a plain reseller, a distributor, a system integrator and a managed service provider. It also covers how vendors structure VAR programs and what the model costs the vendor.
What a Value-Added Reseller Is
TechTarget's channel glossary defines a VAR as a company that resells software, hardware and other products and services that provide value beyond the original order fulfillment. That's the clean version. The practical version has three parts.
- The VAR buys or licenses a vendor's product and sells it to an end customer. It doesn't build the core product.
- The VAR adds something the customer needs that the vendor's product doesn't include out of the box: configuration, integration, training, support or a bundle with other products.
- The VAR owns a customer relationship. The customer usually deals with the VAR for quotes, deployment and day-to-day help, and may rarely speak to the vendor at all.
The added value is the whole reason the VAR exists. If the VAR only fulfills orders, it's a reseller. If it makes the product usable for a specific kind of customer, it's a value-added reseller. A VAR often specializes by industry (dental practices, law firms, manufacturers) or by technology (security, collaboration, data infrastructure), because specialization is what makes the services worth paying for.
What "Value-Added" Actually Means
TechTarget's definition lists the kinds of value a VAR provides: additional hardware, installation and troubleshooting, professional services such as consulting, design, implementation and training, extended warranties and service contracts, and customization and bundling of third-party products. Five categories cover most of what you'll see in practice.
| Type of added value | What the VAR does | Example |
|---|---|---|
| Configuration and implementation | Sets the product up for the customer's environment, data and workflows | Deploying a CRM with the customer's pipeline stages, fields and permissions already built |
| Integration | Connects the product to the customer's existing systems | Linking an accounting platform to a warehouse system so orders post automatically |
| Training and adoption | Teaches staff to use the product and builds the habits that make it stick | Role-based workshops for sales reps and managers after go-live |
| Support and managed services | Provides first-line help, monitoring or ongoing administration, often under a service contract | A help desk that handles tickets before they reach the vendor |
| Bundling and vertical packaging | Combines the vendor's product with other products or services into a complete offer | Software plus hardware plus installation, priced as one solution for a specific industry |
Notice that none of these is a discount or a sales pitch. They're work. That's why customers will pay a VAR a price that includes the VAR's margin, and why a VAR can survive even when the underlying product is available elsewhere at a similar list price.
How VAR Economics Work
The details are set in each vendor's partner agreement and are rarely published, so this section sticks to the general mechanics. We aren't printing margin percentages, because they vary by vendor, product, region and partner tier and a number without that context would mislead.
A VAR typically earns money from three sources.
Product margin. The VAR buys at a partner price that's below the price the customer pays. The gap is the product margin. Vendors usually set the partner price as a discount off list price, and the discount often depends on the partner's tier, certifications and sales volume.
Services revenue. Implementation, training, integration and support are billed on top of the product, either as projects or as recurring contracts. For many VARs, services are where most of the profit sits, because product margins on competitive products tend to compress while expertise doesn't commoditize as quickly.
Recurring revenue. For subscription software, a VAR may earn an ongoing margin or commission for as long as the customer renews, plus recurring fees for managed services. This turns a one-time sale into a durable income stream, and it's why VARs care about retention.
On the vendor side, discount structures commonly include some combination of the following:
- Tiered discounts. Higher tiers earn better pricing in exchange for more revenue, certifications or customer-satisfaction commitments.
- Deal registration. A partner that registers an opportunity earns protection or extra discount on that deal, so other partners don't undercut it. See deal registration for how that works.
- Rebates and volume incentives. Payments after the fact, tied to hitting targets. The partner incentives article covers the common designs.
- Marketing funds. Money a vendor contributes toward a partner's demand generation. See market development funds.
Because a VAR's pricing includes both a margin and services, the final price the customer pays is rarely the vendor's list price. That's a feature, not a flaw, but it does mean the vendor loses some control over pricing and customer experience. We come back to that in the trade-offs section.
VAR vs Reseller vs Distributor vs SI vs MSP
These labels overlap, and a single company can wear several. Here's how they differ by what the company mainly does.
| Role | Main activity | Buys from | Sells to | Where the value sits |
|---|---|---|---|---|
| Reseller | Sells the vendor's product, often with little added | Vendor or distributor | End customer | Access, convenience, local presence |
| Value-added reseller | Sells the product bundled with configuration, integration, training or support | Vendor or distributor | End customer | Services and solution design around the product |
| Distributor | Holds inventory, handles logistics, credit and onboarding for many resellers | Vendor | Resellers | Scale, supply chain and partner management |
| System integrator | Designs and builds a custom solution from multiple products and systems | Several vendors | End customer | Project design and engineering |
| Managed service provider | Runs and supports the customer's technology on an ongoing contract | Vendors and distributors | End customer | Continuous operation and monitoring |
The lines blur in the middle. A VAR that adds enough integration work starts to look like a system integrator, and a VAR that adds enough ongoing support starts to look like a managed service provider. The usual test is where the revenue and the effort go. If the customer is mainly buying a product with some help attached, it's a VAR. If the customer is mainly buying the project, it's an integrator (see system integrators). If the customer is mainly buying ongoing operation, it's an MSP (see managed service providers).
Microsoft's Cloud Solution Provider program shows how the tiers of the channel stack up in one real program. Microsoft describes an indirect model, in which distributors help CSP indirect resellers, who can purchase from a distributor that collaborates with them on marketing, customer support and billing. In the direct-bill model, partners buy directly from Microsoft and have to sell to, bill, manage and support their customers on their own. Microsoft's page also notes that CSP partners can add value by offering industry-specific solutions bundled with Microsoft products. That's the VAR idea written into a vendor program: the reseller's job isn't just to pass the license along.
For the distributor side of that picture, see distributor vs reseller. For how resale differs from referral and affiliate models, where the partner never takes ownership of the sale, see referral vs affiliate vs reseller.
Key Facts: Value-Added Resellers
- TechTarget defines a VAR as a company that resells software, hardware and other products and services that provide value beyond the original order fulfillment (TechTarget).
- TechTarget lists the typical added value as installation and troubleshooting, consulting, design, implementation and training, extended warranties and service contracts, and customization and bundling of third-party products (TechTarget).
- In Microsoft's Cloud Solution Provider program, indirect resellers purchase from a distributor that can collaborate with them on marketing, customer support and billing (Microsoft Learn).
- Microsoft's direct-bill model requires partners to sell to, bill, manage and support their customers autonomously (Microsoft Learn).
- To qualify for direct-bill status, Microsoft requires at least 12 months as an authorized indirect reseller and at least USD one million in trailing 12 month CSP transactional revenue (Microsoft Learn).
How Vendors Run VAR Programs
A vendor that wants VARs to carry its product usually builds a formal program. The pieces are fairly consistent across industries.
Recruitment and qualification. The vendor decides what kind of partner it wants (by industry, geography or technical skill) and sets entry requirements. Microsoft's program, for example, requires business verification before a partner can transact, and annual re-vetting to stay eligible.
Tiers. Many programs sort partners into levels, with benefits that rise as the partner proves capability. Microsoft's direct-bill requirements show how a tier can be built from several conditions at once: revenue history, a capabilities assessment, a managed service or IP offering, a Solution Partner designation and a support plan. Not every program is that demanding, but the principle holds. The best terms go to the partners that have shown they can do the work.
Certification and enablement. A VAR can't add value to a product it doesn't understand. Vendors typically offer training, certifications, sandbox environments and technical resources, and some tie program benefits to holding them. The partner certification and partner enablement articles in this collection cover both.
Deal protection and rules of engagement. If two VARs and the vendor's direct team can all chase the same customer, partners stop investing. Programs set rules for who can pursue which accounts, which is the subject of channel conflict.
Joint selling and marketing. Vendors often co-fund campaigns, share leads or involve their own reps in larger deals. These are covered in co-selling and co-marketing.
Measurement. A program that doesn't track partner-sourced and partner-influenced revenue can't tell which VARs deserve more investment. See partner KPIs for common measures.
Benefits for the Vendor
Services capacity without headcount. The VAR supplies the implementation and support labor. A vendor with a small professional services team can serve many more customers than it could alone.
Local and vertical reach. VARs often know a region or an industry in detail. They understand the buyer's regulations, vocabulary and existing tools, which a vendor selling globally can't replicate.
Customer adoption. Products that are configured and taught properly get used, and used products get renewed. A good VAR improves retention, not just bookings.
Lower cost of sale. The vendor pays partner margin instead of building a full direct sales and services organization in every market. Whether that's cheaper depends on the margin and the volume, but it converts some fixed cost into variable cost.
Faster market entry. Entering a new country or segment through an established VAR is quicker than hiring a team from scratch.
Risks and Costs for the Vendor
Margin dilution. Every discount a vendor grants a VAR is revenue it doesn't keep. If the VAR isn't doing real work to earn it, the program is simply a discount.
Loss of customer visibility. When the VAR owns the relationship, the vendor may not know who the customer is, how they use the product or why they churn. Good programs build in data sharing, but it isn't automatic.
Inconsistent quality. The vendor's reputation rides on the VAR's work. A poorly configured deployment that the VAR sold becomes the vendor's reputation problem.
Channel conflict. VARs, distributors and direct sales reps can end up competing. Without clear rules, the best partners quietly drift to competitors with calmer programs.
Partner dependency. A VAR that controls a key account or region has leverage. Concentration risk is real, and it's worth keeping more than one partner in every important market.
Program overhead. Recruiting, enabling, certifying and managing partners takes people and tools. Small vendors sometimes underestimate it. The partner relationship management article covers the operating side.
When a VAR Model Makes Sense
A VAR model tends to fit when the product needs real setup or integration, when customers expect local support, when the buyer is a mid-sized organization that wants a single accountable provider, or when the vendor wants to cover many verticals with specialized expertise. It tends to fit poorly when the product is simple self-serve software, when the vendor's margins are too thin to share, or when the vendor needs to own the customer data and relationship end to end.
Most companies don't pick one channel model. They combine direct sales, resellers, VARs and technology integrations. The direct vs indirect sales article compares the trade-offs, and the channel sales model article puts them in a wider growth context. For a software vendor, a VAR is one of several partner types. A technology partner integrates with your product rather than reselling it, and the two often work together on the same account.
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