A Value Added Reseller (VAR) agreement for software is like a partnership between two companies: one that makes the software (let’s call them “Software Company”) and another that wants to sell it (let’s call them “Reseller Company”).
Here’s how it works:
The Software Company creates a software product. The Reseller Company sees the software and thinks it would be useful for their customers, but they also see a chance to add even more value. This could be in the form of additional features, services like training or support, or packaging it with their own products.
They come to an agreement, which is the VAR agreement. In this agreement, the Reseller Company gets the rights to sell the Software Company’s software, usually along with their added value.
So, to put it simply, a VAR agreement for software is a deal where one company can sell another company’s software, often with their own enhancements, and they share the revenue from those sales. This is beneficial for both companies. The Software Company gets more sales and exposure, and the Reseller Company can offer a more valuable product to their customers.
Original Equipment Manufacturer (OEM) agreements and Value-Added Reseller (VAR) agreements are both licensing agreements in the IT world, allowing a company to bundle another company’s software with its own product. However, there are key differences between these two types of agreements.
In an OEM agreement, the distributor is often a manufacturer of hardware equipment. This type of agreement is for a company to license its software products to an original equipment manufacturer. The OEM can then bundle the licensor’s software with its own products, which can include hardware, software, mobile devices, or other technology. The resulting integrated product is then resold to customers, typically under the OEM’s brand name.
For example, a computer manufacturer like Dell might enter into an OEM agreement with Microsoft to include Microsoft’s Windows operating system pre-installed on its computers. When you buy a Dell computer, it comes with Windows already installed. In this case, Dell is the OEM and the computers are sold under Dell’s brand name.
On the other hand, a VAR agreement involves a company, known as a value-added reseller, that adds features or services to an existing product, then resells it as an integrated product or complete “turn-key” solution. This could involve either hardware or software. Similar to an OEM agreement, a VAR agreement allows a software company to license its software products to a value-added reseller. The VAR can bundle the licensor’s software with other products or components and sell the integrated product to end-users, typically under the licensor’s brand name.
For instance, a VAR might take a CRM (Customer Relationship Management) software, add custom features or integrations specific to a certain industry, and then sell the whole package to businesses in that industry. In this case, the product is usually sold under the original software licensor’s brand name.
In summary, while both OEM and VAR agreements involve bundling and reselling products, the key differences lie in the nature of the distributor (equipment manufacturer vs value-added reseller), the type of products involved (typically hardware for OEMs and potentially both hardware and software for VARs), and the branding under which the final product is typically sold (OEM’s brand for OEM agreements and licensor’s brand for VAR agreements).