Many companies seek assistance in acquiring the appropriate software or technological tools for their operations. Often, they want software with extra features that make it easier to use or more useful in their industry. This is where value-added resellers (VARs) come in. Value-added resellers are companies that take a standard software product and improve it with extra features, support, and services. This is called “adding value,” and it’s why they are called “value-added resellers.”
This blog will explain what a value-added reseller is, how value-added reseller software works, and the different types of value-added reseller models. It will also discuss the benefits and potential drawbacks of value-added reselling, and we’ll provide examples of successful value-added resellers, including PureVPN’s white-label reseller program.
What is a Value-Added Reseller?
A value-added reseller is a business that buys a product from a manufacturer, improves it with additional services, and then sells it to customers. For example, a VAR might take a basic software solution, add customer support, training, or specific features for a certain industry, and then sell it as a complete package. This is especially popular in the technology industry, where software resellers and IT resellers often add services like customization, installation, or integration with other systems.
For companies that need specialized features or support, value-added reseller companies offer more than just a product. They offer a solution designed to fit the customer’s unique needs. VARs have become important in the world of technology and software as they help bridge the gap between standard software products and customized, industry-specific solutions.
Value-Added Reseller Business Models
There are several value-added reseller models that businesses use to meet the needs of their clients. Here’s a look at the most common models:
Direct Sales Model
In this model, the VAR sells directly to the end-user after adding value to the software. For example, a tech reseller may sell cybersecurity software to a business after adding customized settings for extra security. This model is popular among IT resellers and technology resellers who work directly with clients.
Distribution Model
Here, the value added reseller software acts as a distributor for the software, meaning they don’t just sell to the end-user but may also work with other resellers. This allows the VAR to reach a broader audience, as they are selling through multiple channels.
White-Label Reseller Model
In this model, the value added reseller software rebrands with their own company’s branding, making it look like their own product. This is common with software resellers who want to maintain brand consistency. PureVPN offers a white-label program where partners can rebrand their VPN software and offer it as their product to clients.
Managed Services Model
Some value added reseller software are also MSPs, which implies that they not only sell the product but also manage it for the customer. This involves regular updating, maintenance, and troubleshooting services. In industries such as cybersecurity, this would be a great option for businesses that need constant support.
Each model offers different benefits based on the needs of the VAR’s customers and their business goals. The value added reseller contract often defines the level of services provided and whether the VAR will handle things like customer support, software updates, or product customization.
What is Value Added Reseller Software?
Value-added reseller software refers to the software products that VARs enhance with extra features, support, or services before selling. This software often includes customizations for specific industries, integrations with other business tools, or added support and training. VAR software gives end-users a complete package that fits their needs better than the standard version.
For instance, if a VAR focuses on healthcare, it might add compliance tools or data security features to standard accounting software to make it suitable for healthcare providers. This makes the software more valuable and useful in the specific industry, adding to the overall value added benefits for customers.
How Value Added Reselling Works
The process of value-added reselling involves several key steps:
Selecting the Product
A VAR chooses a product or software that they believe will have a positive impact on their targeted customers. Most of the VARs work with technology resellers that deal with popular software, such as cybersecurity tools and business management solutions, among others.
Adding Value
This is usually the most important step, which involves adding extra features, customization, or additional services by the VAR to make the product more attractive to their customers. For instance, a software value-added reseller can add encryption of data to a product for clients concerned about security.
Selling the Solution
When the product is prepared, it is marketed and sold to clients by the VAR. They may sell their products through their network, online platforms, and even direct sales. Most of the time, they sign something called a VAR contract with the actual software vendor, comprising all the details regarding the price that has to be paid, and the service level, among other agreements.
Providing Ongoing Support
Many VARs offer support services for their products. This may include training, troubleshooting, or regular updates, which help build long-term relationships with clients.
Expanding with Partnerships
To reach more clients and offer a wider range of solutions, VARs often form partnerships with other VARs or software vendors. This allows them to offer more comprehensive packages, sometimes known as VAR solutions.
Pros and Cons of Value Added Reselling
Value added reselling offers plenty of opportunities, but like any business model, it has its advantages and disadvantages. Here’s a look at some of the main pros and cons:
Pros of Value Added Reselling
Increased Revenue Streams
By reselling and adding extra services to existing software, VARs create new sources of income. This can be especially profitable when working with high-demand software, like top cybersecurity VARs, which offer products that require constant updates and support.
Customizable Solutions for Clients
VARs offer clients customized solutions that meet their specific needs, setting them apart from generic software providers. This level of personalization helps VARs build strong, long-term relationships with clients who may get different attention from large software vendors.
Reduced Development Costs
Since the VAR doesn’t create the product from scratch, they save on development costs. This allows them to focus on marketing, support, and customer relationships, making it a more cost-effective business model.
Brand Building and Market Reach
With options like white-labeling, VARs can present software under their brand, strengthening their market presence and trust with customers. This is especially beneficial for technology resellers and IT resellers looking to create a consistent brand image.
Flexibility with Different Business Models
The VAR model allows businesses to choose from a range of services they can offer. Some VARs focus solely on selling, while others act as Managed Service Providers (MSPs), offering additional support and management services.
Cons of Value Added Reselling
Dependence on Vendor Stability
VARs rely on their vendor partners to keep the software updated, relevant, and stable. If the vendor faces issues or decides to discontinue a product, the VAR might also lose their revenue source.
Competition in the Marketplace
The VAR industry can be highly competitive, especially in sectors like IT resellers and tech resellers. Standing out requires strong marketing and a well-differentiated product offering.
Upfront Investment in Customization and Support
Although development costs are saved, VARs often invest in customization, branding, and customer support. This upfront investment requires careful planning and good customer service to make it profitable.
Managing Customer Expectations
VARs are responsible for the client relationship, and if issues arise with the software, clients turn to the VAR for support. This can be challenging if the VAR needs more support or technical expertise.
VAR vs. OEM
To understand the difference between Value Added Resellers (VARs) and Original Equipment Manufacturers (OEMs), it’s helpful to examine how each operates within the sales and product distribution process. While both deal with third-party products, their roles and approaches to adding value differ significantly.
Original Equipment Manufacturers (OEMs) are companies that produce products, often components, which are then sold to other companies who integrate or rebrand them as part of a larger offering. OEMs focus solely on manufacturing and typically do not provide additional services, customization, or support beyond the product itself. Their goal is to create a product that other companies can use as a base in their products or services. For instance, an OEM might manufacture the components of a laptop, like the screen or keyboard, which are then assembled by another company, branded, and sold as a complete product.
Value Added Resellers (VARs), in contrast, go beyond simply reselling a product. They purchase software or hardware from a vendor and enhance it with additional services such as customization, integration with other systems, and ongoing support. VARs provide a tailored product experience by adding services that make the product more suitable for specific industries or business needs. Unlike OEMs, VARs often interact directly with end-users, ensuring that the product fits the unique requirements of their clients.
Example: OEM vs. VAR in Action
Imagine a company producing the hardware for a security camera. An OEM would manufacture the camera and sell it to other companies without modifications or additional services. A tech reseller or systems integrator would then use that hardware as part of a larger product or solution they offer.
A VAR, on the other hand, might purchase this camera from the OEM, integrate it with a customized software solution that includes remote monitoring, and offer technical support for installation and troubleshooting. In this scenario, the VAR turns the camera into a comprehensive security package, benefits of added value provide end-users the OEM would not offer.
VAR vs. MSPs
While VAR Value Added Resellers and MSP Managed Service Providers share similarities in reselling software and technology solutions, MSPs go further in terms of continuous management and client support. Let’s take a closer look at each:
VARs typically resell software or hardware with customizations, enhancements, and support added. They will often provide services to include training, installation, and one-time setup to allow the clients to derive greater value from the product. Ongoing product management is not typically provided by a VAR. Their involvement often concludes after selling the product and setting it up, with further support usually only when required.
MSPs, on the other hand, provide end-to-end managed services for the clients. These range from mere setup to continuous monitoring, maintenance, and updates of software or technology. An MSP takes full responsibility for the operational aspects of the software so that it functions smoothly and efficiently. This model is most in use where clients need constant, proactive support. A few examples include cybersecurity, whereby threats evolve on a daily basis and require vigilance at all times.
Example: VAR vs. MSP in Practice
Let’s take the case of a company whose offering includes network security. The VAR may sell the network security software to the client, customize it for the specific needs of clients, and provide initial setup assistance and training. After installation, the involvement of a VAR is usually limited to troubleshooting or further customization as requested.
An MSP would sell the same network security software but would also continuously monitor and manage it on behalf of the client. The updates, security threats in real time, and optimal functioning of the software would be the concern of the MSP. The MSP model acts like an outsourced IT team for the client; hence, it is more of a hands-on investment than a one-time transaction.
How Some Value Added Resellers Are Now MSPs
In industries like cybersecurity and cloud computing, the line between VARs and MSPs has blurred. Many traditional VARs have transitioned into MSPs to meet clients’ increasing needs for continuous support and hands-on management. Here’s why this shift is happening:
Higher Demand for Security
As more businesses focus on data security, VARs in fields like cybersecurity have adapted to offer ongoing monitoring and management. These top cybersecurity VARs have grown their businesses by taking on more MSP responsibilities.
Flexible Service Models
The largest proportion of clients would want to outsource the maintenance of their software entirely. With resale vs resell, VARs can offer flexible solutions that may serve clients’ needs, ranging from setting up software to full maintenance.
Recurring Revenue
Most MSPs enjoy a monthly fee covering ongoing support, hence assuring them a steady revenue stream. This is one of those major features that make the recurring model quite appealing to the value-added resellers in search of more predictable revenues.
As more VARs transition to MSP roles, they help bridge the gap between software providers and end-users, giving clients the tools and support they need to succeed.
Value Added Reseller Examples
There are many successful value added reseller companies across different industries. Here are some well-known examples:
PureVPN
PureVPN offers a white-label VPN program, allowing VARs to rebrand and resell its VPN services. This enables VARs to provide secure internet access under their brand without developing the VPN infrastructure. The PureVPN white-label model is popular among IT and tech resellers who want to add cybersecurity solutions to their portfolio.
Cisco Systems
Cisco’s partner VAR program allows resellers to sell Cisco’s networking and security solutions with added customer support. Many IT resellers work with Cisco, customizing network solutions for businesses of all sizes.
Microsoft
Microsoft’s reseller programs allow partners to sell software such as Office 365 and Azure, often with added customization or support services. VARs in this program can also offer integration and training, creating a complete solution for business clients.
Dell Technologies
Dell has a strong VAR solutions program that lets partners sell hardware and software, often with added configuration and maintenance services. This program is popular among technology resellers in the hardware space.
Salesforce
As a CRM software provider, Salesforce offers a reseller program where partners add services like consulting, training, and integration. VARs in this program often work with clients to ensure Salesforce meets specific business needs.
Conclusion
Value-added reselling has become an essential model for companies that want to grow without building new products from scratch. VARs provide value by customizing software, adding services, and creating solutions that meet the specific needs of their clients. Through models like software value added reseller programs, companies can offer unique products that align with their brand and help clients achieve their goals.
Solutions like PureVPN’s white-label option make it easy for VARs when they decide to expand their portfolio into cybersecurity without having to manage the backend process. With important features like custom branding, security, and scalability, PureVPN’s program is a support system for technology and IT-based resellers to grow and enhance their service portfolio.