Value-Added Resellers (VAR)

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Value-Added Resellers (VARs)

Definition

A value-added reseller (VAR) is a company that purchases third-party products—typically hardware or software—and enhances them with additional services or customized components before reselling to end users. VARs are especially common in the information technology (IT) industry, where they provide integration, installation, support, and consulting on top of core products.

How VARs work

  • Buy core products from manufacturers or distributors.
  • Add value through services such as customization, system integration, installation, training, maintenance, and technical support.
  • Resell the combined solution to end customers, often targeting specific industries or use cases.
  • Frequently participate in manufacturer reseller programs that offer authorization, training, certifications, and volume discounts.

Common value-added services
* System design and integration
* Installation and configuration
* Custom development or bundling
* Managed services and ongoing support
* Training and documentation
* Troubleshooting and maintenance

Example: IT reseller programs

Large IT vendors (e.g., Cisco) run reseller programs that require authorization and certification. These programs typically:
* Verify that resellers have the necessary personnel and infrastructure.
* Offer tiered certifications (e.g., select, premier, gold) based on capabilities.
* Provide vendor training in areas like networking, cybersecurity, IoT, and data centers.
* Conduct periodic audits to maintain quality and standards.

Advantages

  • Single point of contact: VARs can act as the main customer-facing resource for purchasing, implementation, and ongoing support.
  • Tailored solutions: They translate generic products into industry- or customer-specific solutions.
  • Increased customer retention: Ongoing services and support create recurring revenue and stronger customer relationships.
  • Higher margins on services: Most profit is earned from the added services rather than small markups on physical products.

Disadvantages

  • Limited control over core products: VARs depend on manufacturers for product features, quality, and updates.
  • Pricing constraints: Product costs are set by manufacturers; VARs may rely on manufacturer discounts to influence retail pricing.
  • Dependence on vendors: Changes in vendor policies, certifications, or supply can directly affect a VAR’s business.
  • Potential transparency issues: Resale pricing and vendor relationships can sometimes be opaque to customers.

Key takeaways

  • VARs enhance third-party products with services or customizations, delivering complete solutions to end users.
  • They play a crucial distribution and integration role in the IT ecosystem and often participate in vendor certification programs.
  • Their main strengths are solution expertise and service-driven margins; their main risks are vendor dependence and limited control over product attributes.