A value-added reseller (VAR) is a company that purchases a vendor’s product and enhances it with additional services, configuration, customization, or complementary products before selling the combined package to end customers. The “value-added” distinction separates VARs from commodity resellers who simply pass products through at a markup. VARs earn higher margins because they deliver expertise and services alongside the product.
The VAR business model
VARs operate as independent businesses that build their revenue around one or more vendor relationships. The business model involves several activities:
- Product acquisition. The VAR purchases the vendor’s product (or is authorized to transact it) at a partner discount, either directly from the vendor or through a distributor, depending on the channel model.
- Enhancement. The VAR adds value through one or more of the following:
- Configuration and customization. Tailoring the product to the customer’s specific requirements, workflows, or industry regulations.
- Integration. Connecting the vendor’s product with the customer’s existing systems, data sources, and business processes.
- Complementary products. Bundling hardware, software, or services from other vendors to create a complete solution.
- Professional services. Providing implementation, migration, training, and optimization services.
- Ongoing support. Offering first-line technical support, managed services, or help desk coverage.
- Sales. The VAR sells the enhanced solution to end customers, typically under their own brand or as a co-branded offering. The customer’s primary relationship is with the VAR rather than with the vendor.
- Delivery. The VAR deploys the solution in the customer’s environment, trains users, and provides post-sale support. Many VARs also offer recurring managed services contracts that generate predictable revenue.
The backbone of the technology channel
VARs are the backbone of the technology channel. They serve as the local, trusted advisors that end customers rely on for technology decisions. Their importance stems from several factors:
- Market reach: VARs give vendors access to customer segments and geographies that the vendor cannot serve efficiently through direct sales. A vendor with 2,000 VARs has 2,000 local sales teams in the market.
- Customer trust: Many buyers (especially in the mid-market) prefer purchasing from a local partner they know rather than from a large vendor. The VAR’s reputation and relationship history carry weight.
- Solution context: VARs do not sell technology in isolation. They understand the customer’s business and position the vendor’s product as part of a solution to a specific problem, a consultative approach that increases deal sizes and customer satisfaction.
- Vendor leverage: For the vendor, VARs multiply revenue without proportionally increasing headcount. The vendor invests in enabling VARs and earns revenue through their transactions.
Revenue composition and operating models
VAR businesses vary widely in size (from 5-person shops to multi-hundred-employee firms) and specialization. Understanding the common operating models helps vendors design effective programs.
Revenue composition
A typical VAR’s revenue comes from multiple streams:
| Revenue stream | Description | Margin profile |
|---|---|---|
| Product resale | Vendor product sold at markup | Low to moderate (10-30%) |
| Professional services | Implementation, migration, training | High (40-60%) |
| Managed services | Recurring support, monitoring, management | Moderate to high (30-50%) |
| Custom development | Bespoke integrations, extensions, applications | High (50%+) |
The trend across the VAR community is a shift from product-margin-dependent models toward services-led models. Product margins have compressed over time, so VARs increasingly rely on services revenue for profitability.
What VARs need from vendors
- Margin protection: VARs invest in training, pre-sales, and customer relationships. If the vendor’s direct team or an online marketplace undercuts the VAR on price, the value proposition of the partnership collapses. Deal registration, pricing policies, and rules of engagement must protect partner investment.
- Partner enablement: VARs need product training, sales tools, demo environments, and technical certifications that prepare them to sell and deliver effectively. The vendor that makes enablement easy and accessible earns more VAR mindshare.
- Demand generation support: MDF, co-branded campaigns, and lead sharing help VARs fill their pipeline. VARs that only receive product discounts without marketing support will grow slowly.
- Responsive channel team: When a VAR has a deal in progress and needs pricing, a technical question answered, or a deal registration approved, speed matters. Slow vendor responsiveness costs deals.
- Product roadmap visibility: VARs build their business around the vendor’s product. Surprises on pricing changes, product discontinuation, or competitive feature gaps damage the relationship. Regular roadmap briefings build trust.
Common challenges
- Vendor-partner conflict: When the vendor’s direct sales team competes with VARs for the same accounts, trust erodes. Clear territory or account segmentation and enforced rules of engagement mitigate this.
- Over-reliance on one vendor: VARs that derive most of their revenue from a single vendor face concentration risk. Diversification across two or three strategic vendor relationships provides stability.
- Keeping pace with technology: Products evolve quickly, and VARs must continuously invest in training and certifications to maintain their technical edge. Vendors that make certification renewals overly burdensome risk losing VARs who cannot justify the ongoing investment.