In a rapidly expanding market of SaaS buying options, suppliers are always looking for easier ways to reach their customers. By the same token, IT product and service providers want ways to expand their offering and meet customer needs. And it goes without saying, customers want to find the best price, with less stress.
Out of these related business objectives, the reseller market was born. What started as a hardware-focused practice has evolved to include the software buying process. Many customers turn to resellers to streamline the process and get things done quickly. But is a software reseller the best way for you to get what you need?
To answer this question, it helps to get a better understanding of the software reseller agreement: Its origins, limitations, and how SaaS buying works after the deal is done.
With this in mind, we’ve put together some of the basics behind buying through a software reseller, shed light on the relationship between suppliers and resellers, and offered some guidance on when and how you should consider going the reseller route.
What is a software reseller agreement?
If you haven’t purchased licenses through a software reseller before, the concept seems simple. You get what you need through a marketplace or catalog of offerings, ideally with advice from a reseller knowledgeable in your industry or vertical.
Certain suppliers like this because it can increase their distribution channels and market reach, while (depending on the agreement) potentially lowering their support burden.
Resellers like diversifying their portfolio for customers who buy SaaS software, hardware, and peripherals, as it helps them position themselves as a one-stop-shop.
They position themselves as time-savers, centralizing the process and allowing clients to bundle their needs into a single transaction or account. Additionally, value-added resellers (VARS) may offer extra services, such as setup, hardware sales, consulting, or training. In some cases, while the license sale might mean a small commission or a wash, their ability to package these licenses with other services can bring in steady revenue.
There are downsides to the software reseller model that can make these arrangements less beneficial to customers.
While the appeal of time savings is strong, in truth, resellers can’t offer the flexibility that comes from working directly with a supplier. Their reseller agreement with the supplier becomes a limiting factor in the deal.
What does a software reseller agreement look like?
To understand how the reseller model affects the bottom line for buyers, it helps to understand how the relationship between supplier and reseller works. As an affiliate, the software supplier has certain expectations for deals made on its behalf.
In return, the reseller will earn commission on sales, as well as other perks like an expanded reach. For instance, having a reseller page hosted on the supplier website, or having supplier-branded badging to display throughout the reseller’s marketing materials.
Some of the factors controlled by the reseller agreement and software reseller program may include:
- Pricing: Resellers are not in control of pricing. As a term of the agreement, suppliers will determine factors such as the commission and list pricing. This means that resellers have very little control over discounting or volume benefits when striking a deal. Their pricing is a matter of contract. This can make SaaS buying more expensive.
- Branding: Because resellers do not own the software they’re selling, the supplier will have brand standards and use requirements. These agreements determine when and how a supplier will represent the relationship. For instance, a “white label” agreement will allow the reseller to offer the software product with its own branding.
- Consulting rights: Suppliers are careful about the relationship formed between the reseller and the end customer. For this reason, a supplier will often outline what (if any) outside services a reseller can offer the buyer (services like setup, consulting, etc.). In some cases, this may be the motivation for the reseller relationship, but this varies by reseller contract terms.
- Purchase and resale method: The method of resale is outlined in the contract. In some cases, the reseller is only buying licenses directly from the software manufacturer. In others, the reseller will facilitate the purchase, but the delivery of licenses will happen directly between the software supplier and the customer.
- Customer-specific obligations: Depending on the software reseller arrangement, the reseller may be responsible for the end-user paperwork. It will also outline the supplier’s responsibility to offer support to licenses purchased through a reseller. It’s important to understand what level of service your reseller will be able to offer after your purchase, how, and by whom support is handled. You must be sure your reseller is knowledgeable enough to handle issues should they arise. This support should also extend to the service-level agreements put in place when purchasing software.
- Deal registration: While deal registration may not be a customer-facing practice, for those shopping for competitive rates (for instance, the “three bids and a buy” approach) it’s an important sales practice to understand. Engaging with a software reseller might result in “deal registration” in which the partner locks in the deal with the supplier during talks. It’s a lead verification practice that ensures partner and supplier relationships remain strong. However, it might make the SaaS buying process harder for customers exploring their options.
When do you need a software reseller?
There are times when you need to engage with a reseller. In some cases, your desired software solution may only be available through a reseller. You may want or need a service or consulting package in connection with your licenses.
Outside of these types of situations, buying SaaS software directly through the supplier is the best way to get a fair price and maintain control of the negotiation process.
How to save money when you buy SaaS software
Although streamlining is an attractive part of the process, taking the time to establish a bidding and buying process directly with the supplier can save you thousands of dollars. The upfront time investment of developing a good SaaS buying process pays dividends for years to come.
Direct negotiation also saves you money in several ways:
- Flexibility: Suppliers ultimately have the final say in pricing. When buying through a reseller, the price is the price. Because the supplier controls the list prices available to its software resellers, any negotiation leverage is lost. Buying directly through the supplier allows you to negotiate on the specifics.
- Selection: When buying through a reseller, you are limited to the solutions they are contracted to provide. Choosing from a limited catalogue may mean missing out on the best solution for your needs. By independently vetting suppliers, you have the full range of choice available to you.
- Unbiased negotiation: When buying SaaS software through a reseller, their profit is based on the commission they earn on your purchase. While not always the case, this business model may color the advice you receive when evaluating software. You may end up buying a solution that has more features or functionality than you really need.
Empowered with a full understanding of the supplier/reseller relationship, you may find that taking the time to create an in-house SaaS buying process is the better course.
While it won’t be a “one-stop-shop,” you’ll get unbiased advice and the benefit of direct negotiation.