How a VAR works
A VAR signs a reseller agreement with the vendor that sets a discount off list price, often with deeper discounts at higher partner tiers. The VAR then sells to its own customers, signs them to its own contract, invoices them and usually provides first-line support.
What makes the reseller "value-added" is the work around the product. A VAR might install and configure it, connect it to the customer's other systems, migrate data, train staff or bundle it with other products into a complete solution. Customers buy from a VAR because they want one firm to deliver the whole project.
How VARs differ from other partners
A referral partner introduces a prospect and your team sells and bills. A reseller sells and bills, but adds little beyond the product. A VAR sells, bills and delivers services. That makes VARs valuable for products that need setup or integration, and common among IT resellers and managed service providers. The affiliate vs referral vs reseller guide compares the models side by side.
What vendors need to run a VAR channel
VARs sell deals themselves, so they need deal registration to protect their work, clear pricing and discount schedules, technical training and, in larger programs, market development funds for their own marketing.
Example
Kestrel Foods wants inventory software connected to its warehouse system. It hires Cobalt Consulting, a VAR for the software vendor.
Cobalt registers the deal, buys the annual license at a 25% discount off the $20,000 list price, paying $15,000, and resells it to Kestrel at $20,000. It also charges $18,000 for integration and staff training. Cobalt earns $5,000 in margin and $18,000 in services, invoices Kestrel for $38,000 and handles first-line support. The vendor records $15,000 of revenue from the deal and supports Cobalt from behind.