All these agreements have something in common, the entity that is selling the Product is NOT the same entity that developed the Product. As a result, they are often not able to properly modify the product for your specific use. They may also not be the party that is providing support for the Product. That division of functional responsibilities is not universal, sometimes the reseller, distributor or OEM may have intimate familiarity with the Product, and often vendors require the reseller to provide 1^st call support to the customer. Technology reseller arrangements are not one size fits all, but this is a general overview of each and certain common issues that may be associated with each form of Reseller Arrangement.

Value Add Reseller Agreement (“VAR”) is the most common form of software or technology reseller. They have been a staple of the hardware and software resale marketplace for years. In a mature vendor the VAR program is often used to add specific geographic sales coverage in remote areas the vendor does not have a local presence. Most major Vendor have agreements with prominent VARs internationally to represent their Products in that geography. Another area that vendors often rely upon VARs is for specialized vertical marketplace coverage, for instance perhaps healthcare, where the VAR may have subject matter expertise in that vertical marketplace. The VAR agreement might designate the authorized VAR Territory to that vertical Markets; for instance, doctors, medical centers and hospitals located in NY, NJ CT and MA might be such a vertical Territory. VAR Agreements vary significantly, some early VAR Agreement required the VAR to create a marketing business plan that documented how the VAR intended to develop the Territory for Product sales. The VAR Agreement might also require that the VAR send a few people to their Product sales training or Product support training. Typically, the training class would be provided by the Vendor free of charge, but the VAR would need to cover their own travel, room & board expenses. More recently VAR Agreements have morphed into simply selling the Product under the Vendor’s designated Agreement or EULA. Often the VAR Agreement is driven by a single opportunity and the concept is simply to leave the door open for more follow-on sales opportunities in that area under the same framework. These later-day VAR Agreements often just make the Vendor responsible for all the associated warranty and support directly under the Terms of Sale (“TOS”) or End User License Agreement (“EULA”).

Deal Registration. A good VAR Agreement should include a VAR deal registration. It’s typically first come, gets the registration to help ensure that the Vendor and the VAR are not working on the same sales opportunity. However, the registration is typically not binding until accepted by the Vendor. With more established Vendors, it’s important to also ensure that multiple VARs are not working on the same opportunity. Aside from the obvious sales-expense inefficiency for the selling parties this generally leads to dueling discounts, where the parties try to distinguish by offering a lower price on the same Product. Generally, the Vendor agrees that during the registration period, the vendor will not directly solicit the prospective customer, nor will any other VAR be eligible for a discount on a sale to that prospective customer.

Sales Referral it can be frustrating under a VAR Agreement where the Product is highly technical, and the vendor is required to essentially provide extensive pre-sales support to make the sale. The vendor feels they are just sacrificing margin while still left with all the same direct sales responsibilities. Under these circumstances it may be helpful to include a sales referral provision, so the VAR earns a lower one-times sales referral fee.

Trial License Many VAR Agreements provide the VAR with a non-productive use trial license to demonstrate the Product; or in some instances the Vendor would provide the VAR with access credential to use a vendor hosted trail. These help the VAR to effectively present the Product to the Customer. Related to that same concept, often the VAR is given a right to identify themselves and an authorized VAR of that Vendor, to include the vendor logo on their website and a right to reproduce (or purchase from the vendor) Product sales literature for support of their sales effort.

• Directly competitive product representations, handling both products, are generally prohibited.
• Commission on renewals coverage varies as does commissions on Professional Service
• Commission on sales initiated by VAR but close after expiration or termination, coverage varies, often there is a post-term window
• Advance Notice of price changes, limited term price protection, coverage varies, typically 30 but as much a 90-days

Distribution Agreements are most often associated with traditional hardware products, however with highly technical software products, often including significant impletion and configuration options software distributors are very common. Often the distributor takes on an expanded role in the Vendor’s supply chain with a stated purpose of developing/maximizing the Products acceptance within a stated territory. Typically, other VAR level resellers would secure their product through the Distributor for sales in that Territory. Distributors are often larger companies and unlike VARs it’s not unreasonable for a Distributor to distribute directly competitive products. Typically, distributors sell/distribute the product to VARs, they don’t sell to end users. Often, they are much larger and offer complimentary services such as a Distributor finance option; they may also offer Profession Services that VARs may elect to use as subcontractors.

OEM Agreements can take on many forms. Sometimes the Vendor allows a 3rd party to “White-Label” their Product; so, it’s an identical Product sold under a different name. However it is more common to see the OEM offering a slightly different version of the Product that might be customed to better address a very specific market segment, a specialized market focused offering as opposed to a generalized market offering. So, the billing system may have been customized to provide Doctor’s office billing, whereas the standard Product was a general-purpose billing system. The level of customization can vary from a few relatively minor revisions to a substantially new and separate product. Where the OEM Product requires development and customization the issue becomes who will be funding that development effort. If the OEM opportunity is significant enough, and the demand easily understood, the Vendor may agree to incur that expense, but they would typically require the OEM to commit to a minimum sales quota, in return. The OEM conversely would seek an exclusive in the stated OEM marketplace. Nothing is standard or set in stone, but these are a few of the OEM dynamics in play, the specific OEM Agreement would inevitably be very custom to the specific opportunity.