- An IT reseller is a company that buys technology products or services from a manufacturer, distributor, or wholesaler and then sells them to customers.
- IT resellers may be direct or value-added resellers.
- IT reseller agreements are quite different from standard software agreements because of the complexities of including a channel partner.
- Though IT resellers are sometimes the only available option for buying certain software, more often than not, it is better to buy directly from the software developer.
With the rise in cloud computing and a rapidly expanding market of SaaS buying options, suppliers are always looking for easier ways to reach their customers. Likewise, IT product and service providers want ways to expand their offerings and meet customer needs. And it goes without saying; customers want to find the best value.
Out of these related business objectives, the IT reseller market was born. What started as a buying practice focused on hardware products has evolved to include the software buying process. As a result, many customers turn to resellers, such as CDW, SHI, Softchoice, and Insight to streamline the process and get things done quickly. But is an IT 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 offer some guidance on when and how you should consider going the reseller route.
What is an IT reseller?
An IT reseller (also called a channel partner or retailer) is a company that buys technology products or services from a manufacturer, distributor, or wholesaler. It then sells them, often through an e-commerce marketplace, to the customer — most often the IT department of a company. The two main types of IT resellers are direct resellers and value-added resellers (VARs).
Sometimes, a supplier can be both a direct and value-added reseller, depending on which products or services you're buying.
Some SaaS suppliers only offer their products through IT resellers. This approach is a win-win for the supplier and gives them a competitive edge because it increases their distribution channels and market reach while (depending on the agreement) potentially lowering their support burden.
IT reseller businesses 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 customers to bundle their needs into a single transaction or account. VARs may offer extra services, such as:
- Price discounts
- Extended warranties
- End-user training
- Marketing and advertising
- Priority support levels
- Installation or implementation services
While there are many advantages for the SaaS supplier and IT reseller, there are downsides to the software reseller business model that can make these arrangements less beneficial to customers.
What does an IT 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 motivate 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 an IT reseller?
There are times when you need to engage with an IT reseller. In some cases, your desired SaaS product may only be available through a reseller.
Some tech suppliers, like Cisco and Adobe, offer the option to purchase directly, with stipulations, or through a reseller. For example, Cisco requires a certain annual spend volume to buy direct, while Adobe offers direct buying only in certain countries.
Outside of these types of situations, buying SaaS software and other technology products and services directly through the supplier is the best way to get a fair price and maintain control of the negotiation process.
Save money when you buy SaaS with direct negotiation
Although streamlining and saving time may be attractive reasons to consider an IT reseller, 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.
Want the benefit of a one-stop shop for your SaaS needs without using IT resellers? Let us show you how we can help. Contact Vendr today.