A value-added reseller (VAR) is a company that resells software, hardware and networking products and provides value beyond order fulfillment.
That enhanced value can take a number of forms. Traditionally, a VAR creates an application for a particular hardware platform and sells the combination as a turnkey solution. In many cases, such bundles target the applications of a specific vertical industry.
In addition to IT solutions, many VARs offer professional services as their key value-add. For example, a VAR may provide consulting, design, implementation and training services around the hardware, software and networking components it resells.
VARs offering such professional services in addition to products are often referred to as solution providers. Such companies typically form channel partnerships with one or, more often, multiple product vendors for assistance in building and marketing solutions. A product vendor, in turn, may seek out relationships with VARs, providing a reseller program as part of a broader channel strategy.
Partnering with vendors
Value-added reseller firms sometimes work directly with an IT vendor, but small VARs, in particular, may find that some vendors will only sell to them through a two-tier distribution model. If that's the case, a VAR will source products through a distribution partner. Other vendors sell only through distributors, so VARs must purchase products via the two-tier model regardless of size.
To work with vendors, reseller partners have to become authorized and meet a set of requirements. For example, vendors can require their partners to hit certain revenue targets on an annual basis or to achieve technical and sales certifications through training programs. In exchange for meeting these targets, the vendor will typically provide their VAR partners with incremental financial rewards, support, and other benefits and resources.
Benefits of working with a VAR
Organizations will often turn to VARs for assistance with complex IT projects that are too demanding or time-consuming for in-house resources.
Each VAR has its own portfolio of product offerings and skill sets. Some VARs have expertise working with organizations in specific industries, such as healthcare or financial services, and therefore understand the unique technical and regulatory requirements of their customers.
A VAR can also act as a single point of contact between multiple IT vendors, making it easier for organizations to purchase and manage a variety of technologies. VARs are frequently referred to as trusted advisors, and many seek to establish long-term relationships with their customers.
VAR vs. MSP
The VAR business model has evolved over the years, with the VAR-to-solution provider shift offering one example. More recently, VARs have become managed service providers (MSPs).
As product margins decline and competition among solutions providers intensifies, VARs have looked to managed services as a source of recurring revenue and improved profitability.
VAR vs. OEM
In the IT industry, original equipment manufacturer, or OEM, is a term used to describe a variety of companies and their relationships within a complex IT supply chain. The term can be ambiguous in usage, and a clear distinction between OEMs and VARs can sometimes be difficult to pin down.
A VAR may become a pure-play MSP or may add managed services as a line of business to complement its VAR operation.
One of the advantages of transitioning to a managed services business model is that VARs reduce their dependency on product revenue. However, pure-play MSPs are rare, and many VARs continue to rely on a mixture of product and services sales.
A VAR may also seek to become a cloud reseller or consulting firm, although that transition can prove challenging. A security reseller, for example, may be steeped in legacy on-premises technologies and may not have the structure in place to accommodate the pay-as-you-go nature of the cloud model.