VARs purchase products or services from a company and then customize them for specific customer needs. This might include installing or configuring the products, providing training or consulting services, or developing custom solutions that integrate with the products.
How a VAR Adds Value
A value-added reseller follows a simple chain. It buys a core product from a vendor, adds something the customer cannot easily do alone, then resells the finished package and stands behind it.
The added part is the whole job. Investopedia describes a VAR as a firm that takes a core hardware or software product, builds a package of add-ons around it, and then installs, tests, and maintains it for the customer. The vendor usually hands the VAR a product discount to push sales through this channel, so the reseller can price the bundle and still earn a margin.
Where that margin comes from matters. Investopedia notes that most of a VAR's margin comes from the value-added products and services, not the underlying product, which is marked up only a small amount. A VAR often buys through a value-added distributor (VAD) rather than direct from the vendor, the same way it might buy through a broadline distributor.
VAR vs Reseller vs MSP
These three roles get mixed up because they all sit between a vendor and a customer. They differ in what they add and how long the relationship lasts.
| Plain reseller | Value-added reseller (VAR) | Managed service provider (MSP) | |
|---|---|---|---|
| What it adds | Little or nothing, sells for margin | Bundling, install, customization, support | Ongoing management of the customer's systems |
| Engagement shape | Transaction | Project, finite | Continuous, contract-based |
| Revenue pattern | Margin on resale | Fees on the project and services | Recurring monthly revenue |
InterWorks frames the line cleanly. A VAR bundles hardware and software and oversees a finite, project-based implementation, and once the project is done the transaction is finished, with the customer owning the software license afterward. An MSP instead runs the customer's systems over a long-term contract for recurring revenue. Some VARs add maintenance agreements and edge toward the managed service provider (MSP) model for that steadier income.
Frequently Asked Questions
What is the difference between a reseller and a value-added reseller?
A plain reseller buys a product and sells it on for a margin, with little added. A value-added reseller adds real work on top. Per InterWorks, it bundles hardware and software, oversees the implementation, and supports the result. The customer pays for that expertise, not just the product.
What is an example of a value-added reseller?
A clear example is a firm that sells a vendor's software but also configures it, integrates it with the customer's other tools, trains the staff, and handles support. Investopedia notes that VARs are most prominent in IT, where they customize and maintain hardware and software for the end customer.