A Detailed Guide on Software Reseller Model

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There's a unique way companies can sell software and make profits. This exciting approach to selling and distributing software is called the Software Reseller Model.

For instance, when a company develops software, it can allow resellers to handle the sales instead of selling it directly to customers. Resellers purchase the software in bulk and then sell it to end users, earning a profit. Additionally, resellers often provide extensive customer support and services to help their clients.

If you’re considering becoming a software reseller, that’s a great choice! However, knowing that the role involves more than just selling software. Resellers must also handle tasks like software setup, customer support, and answering questions.

You might need assistance getting the best software deals at the best prices. This is where assisted buying services and procurement platforms come in. These services employ expert negotiators to secure optimal software deals and ensure the buying process is smooth and efficient.

This guide will explain the key benefits of becoming a software reseller and walk you through the process. Additionally, you’ll discover CloudEagle.ai, a tool that will help you in your reseller journey.

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TL;DR

• The Software Reseller Model allows companies to sell software through intermediaries, expanding market reach and providing customer support.
• Resellers purchase software licenses in bulk and sell them at a markup, often offering additional services like setup and training.
• Different reseller models include direct, indirect, tiered, and white label, each with unique structures and benefits.
• Key advantages include wider reach, reduced workload for software creators, localized expertise, and added value through support services.
• Challenges involve managing vendor relationships, balancing pricing, navigating licensing agreements, and maintaining product knowledge. Tools like CloudEagle.ai can streamline procurement and enhance negotiation efforts.

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What is a software reseller?

A software reseller is a strategic partner that purchases software licenses from developers or vendors and subsequently sells them to end-users. This role is crucial for expanding market reach, especially in areas where direct sales may be impractical due to regional, language, or logistical barriers.

Software resellers typically operate with a profit margin by marking up the software’s price above the wholesale cost. They add value by offering tailored services such as software implementation, integration with existing systems, user training, and ongoing technical support.

Their deep expertise in the software and its applications ensures that customers receive not just the product, but also comprehensive support and solutions that align with their specific needs. By leveraging resellers, software creators can tap into established sales channels and benefit from localized market knowledge.

Here’s how it works:

1. Purchase: The reseller buys the software, usually in bulk. They often get a discount or a special deal from the original creator.
2. Sell: The reseller then sells this software to their customers, often at a higher price than they paid. It helps them make a profit on each sale.
3. Support: Many resellers also help their customers by setting up the software, providing training, and answering questions. This extra support can be very helpful, especially with complicated software.

Software resellers and distributors might seem similar to people, but some essential differences exist.

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Who are software distributors?

Software distributors manage the distribution and sales of software products from developers to end users. Their role involves various tasks such as marketing, selling, and providing customer support for the software they distribute.

They often work with software developers to understand their products, manage inventory, and handle transactions. Distributors can also offer added value through services like training and technical support.

Software distributors connect creators with a broader audience, streamlining sales and offering localized support. Their work ensures that software reaches users efficiently and effectively, significantly impacting the industry.

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Why do customers want to work with resellers and distributors?

Resellers purchase software from distributors and sell it directly to customers, often adding value through services such as support and customization. In contrast, distributors buy software in bulk from developers and supply it to resellers, handling logistics and broader distribution.

Here are some key reasons people want to work with them:

1. Expertise and support: Resellers offer customers personalized recommendations and technical support. For instance, a reseller specializing in accounting software can assist a business in selecting the right features and configuring the software to fit its specific financial processes, ensuring a smoother implementation and practical use.

2. Product availability: Distributors maintain a broad inventory of software products from various developers. It ensures customers have access to a wide range of solutions. For example, a distributor might provide various cybersecurity tools, helping resellers pick the best one for a client’s needs.

3. Efficiency in distribution: Distributors efficiently handle the logistics of getting products from developers to resellers. For example, they can streamline shipping processes and ensure the timely delivery of software licenses. It reduces potential delays that could impact customers' operations.

4. Value-added services: Resellers often provide additional services such as training, customization, and ongoing support. For example, a reseller might conduct a training workshop on effectively using a new project management tool or customize the software to fit a company's specific workflow better.

5. Broader market reach: Distributors work with multiple resellers. It expands the market reach of software products. Customers in various regions or sectors can access specialized software through different resellers, increasing the product’s visibility and availability. For example, a distributor’s network can help a niche data analytics tool reach clients across diverse industries.

6. Bulk purchasing benefits: Distributors frequently negotiate bulk purchasing deals with software developers, resulting in cost savings that benefit resellers and, indirectly, their customers. For example, a distributor might secure discounted rates on a software package through bulk buying. It allows resellers to offer more competitive pricing to their clients.

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How does the software reseller model work?

The software reseller model allows businesses to sell software through intermediaries, known as resellers. Here’s a simple, step-by-step explanation of how it works:

1. Software creation: A company, often called the software creator, develops software. This could be anything from a business tool to a SaaS app.

2. Partnering with resellers: Instead of selling software directly to every customer, creators often collaborate with resellers. This approach helps overcome challenges such as language or regional barriers. Resellers are skilled in selling and supporting software, making the process more efficient and effective.

3. Reseller purchase: Resellers buy the software from the creator, often in bulk. Because they are purchasing a large quantity, they might get a special deal or discount.

4. Reseller sales: The resellers then sell the software to their customers at a markup to earn a profit. However, they also offer extra services, like setup help or training, to make the software more valuable.

5. Customer support: The software resellers are responsible for helping their customers with the software. This means they handle things like installation, troubleshooting, and answering questions.

6. Ongoing relationship: The reseller continues to provide support and sometimes updates or upgrades to the software. They keep in touch with their customers to ensure everything is running smoothly.

Differences between software resellers and value-added resellers (VARs)

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Types of software reseller models

Different types of software resellers exist. Here are the main ones:

1. Direct reseller model

In the “Direct Reseller Model,” a reseller buys software directly from the software creator and sells it directly to end customers. This model is the most straightforward because it involves only the software creator and the reseller.

How do these models work?

Suppose a company called TechSoft develops a popular project management tool called ProjectPro. TechSoft wants to expand its reach but handles only some sales directly. To do so, it partners with a reseller named OfficeSolutions.

OfficeSolutions buys licenses for ProjectPro directly from TechSoft at a discounted rate. They then sell these licenses to small businesses at a higher price, providing customer service and support. OfficeSolutions benefits from the markup they add to the cost, while TechSoft benefits from the increased distribution without having to manage every sale.

Advantages

• Resellers have complete control over the sales process and customer interactions.
• Potential for higher profit margins since resellers set their prices.

Pros

• Ability to offer customized solutions and support.
• Build strong, personal relationships with customers.

Cons

• Resellers must handle all aspects of sales and support.
• Requires significant time and resources to manage the sales process and customer service.

2. Indirect reseller model

The “Indirect Reseller Model” involves a layer of intermediaries between the software creator and the final customer. The software creator sells to a distributor, who then sells to resellers, and these resellers sell to the end users.

How do these models work?

Let’s consider DataGuard, a company that creates a sophisticated cybersecurity tool named SecureNet. Instead of selling SecureNet directly to resellers, DataGuard sells it to CyberFlow. CyberFlow is a middleman and supplies SecureNet to various resellers, such as SecureTech and NetSafe.

These resellers then market SecureNet to businesses, offering additional services like setup and training. The indirect model helps DataGuard reach a broader market by leveraging the distributor's and resellers' networks.

Advantages

• Access to a broader customer base through a network of intermediaries.
• Less direct involvement in sales and customer support, reducing operational burden.

Pros

• Easier to scale sales efforts through multiple resellers.
• Resellers often have local market knowledge and customer relationships.

Cons

• Limited control over the sales process and customer interactions.
• Profit margins may be lower due to reseller commissions or margins.

3. Tiered reseller model

The “Tiered Reseller Model” involves multiple levels of reselling, creating a hierarchy or tier structure. Each tier in the hierarchy resells the software to the next level, often adding value or additional services.

How do these models work?

Imagine AppMasters, a company that develops a comprehensive data analytics tool called DataWizard. AppMasters sells DataWizard to a top-tier reseller called Analytica, which in turn sells the tool to a second-tier reseller named DataInsight.

DataInsight sells DataWizard to smaller regional resellers or directly to end customers. Each level of the tiered model adds a layer of distribution, allowing the software to reach a wider audience through a structured chain of reselling.

Advantages

• Allows multiple levels of resellers, expanding market reach effectively.
• Each tier can earn commissions or bonuses, motivating them to drive more sales.

Pros

• Access to a broad network of resellers at different levels.
• Each tier’s incentives align with increased sales efforts.

Cons

• Managing and coordinating between multiple tiers can be challenging.
• Commissions and bonuses across tiers may reduce overall profit margins.

4. White Label Reseller Model

In the “White Label Reseller Model,” resellers purchase software and then rebrand it as their own product. The original creator’s brand is hidden, and the end customer sees only the reseller’s branding.

How do these models work?

Let’s say TechCreations has developed a versatile customer relationship management (CRM) software called ClientCare. A reseller named BizManage buys ClientCare and rebrands it as BizCRM.

BizManage then markets and sells BizCRM to businesses, presenting it as their proprietary solution. Even though TechCreations created the software, end users only know it as BizCRM, which helps BizManage build its brand identity and customer loyalty.

Advantages

• Resellers can rebrand the software with their logo and name, offering a customized product to their customers.
• Quick to market with a pre-built product, saving time on development.

Pros

• Ability to create a unique product offering under your brand.
• Focus on marketing and sales rather than software development.

Cons

• Less influence over the software’s features and updates.
• Reliant on the original creator for software maintenance and improvements.

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Key benefits of the software reseller model

The software reseller model benefits both software creators and resellers, including:

1. Wider reach

When software creators work with resellers, their software can reach a broader audience. Resellers have established networks, relationships, and customer bases to which the software creator may not directly access. This wider reach helps increase the software's visibility and potential sales.

2. Less work for software creators

Managing all aspects of software sales—from marketing and sales to customer support—can be overwhelming for software creators. When they work with resellers, these responsibilities are shared.

Software resellers take on the tasks of marketing, selling, and sometimes even providing initial customer support. This allows software creators to focus on what they do best: developing and improving the software.

3. Local expertise

Software resellers often have deep knowledge of their local markets, including specific customer needs, preferences, and buying behaviors. This knowledge allows them to tailor their sales strategies and support to suit local customers better.

For example, a software company based in the U.S. might partner with resellers in Europe who understand European business practices and compliance requirements. These resellers can provide localized support, making the software more relevant and more accessible for customers in different regions to adopt.

4. Added value

Software resellers often provide additional services beyond just selling the software. These services can include setup assistance, training, customization, and ongoing support. By offering these extras, resellers enhance the overall value of the software, making it more attractive to customers.

For example, a reseller might sell a project management tool and offer custom integration with existing systems, user training sessions, and 24/7 support. This added value can differentiate the software from competitors and increase customer satisfaction.

5. Increased sales opportunities

A network of resellers can help the software creator explore more sales opportunities. Each reseller might target different market segments, industries, or geographic regions, broadening the potential customer base.

For instance, a company developing cybersecurity software could partner with resellers specializing in different verticals like healthcare, finance, or retail. Each reseller can introduce the software to their specific sector. This will lead to more sales opportunities that the software creator might have yet to reach.

6. Focus on core activities

Software creators can focus on development and innovation by outsourcing sales and support to resellers. This division of labor lets them invest more in improving the software and adding new features.

For example, a software company specializing in artificial intelligence can use its resources to advance its technology while resellers handle the sales process and customer interactions.

7. Risk sharing

The reseller model helps distribute the financial risks associated with selling software. Resellers take on some of the marketing costs, customer acquisition costs, and other risks related to generating sales. This means that the software creator doesn’t bear the full burden of these costs.

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Challenges and Risks in the Software Reseller Model

The software reseller model offers many benefits but also comes with challenges.

1. Managing relationships with software vendors

Building and maintaining strong relationships with software vendors can be challenging. Resellers must communicate and collaborate effectively to stay informed about product updates, support issues, and other important changes. This ensures they can provide accurate information and support to their customers.

For example, suppose a reseller is not in regular contact with the software vendor. In that case, they might need to be made aware of important updates or changes to the software, which can lead to service disruptions for their customers.

2. Balancing margins and pricing strategies

Resellers must balance pricing the software competitively and maintaining healthy profit margins. They must account for their costs while ensuring their pricing remains attractive to customers. Setting prices too high may drive customers away while setting them too low might erode profit margins.

For instance, if a reseller overestimates the market rate and sets a price too high, they may lose potential sales to competitors. Conversely, pricing too low might not cover the costs of added services or support, reducing profitability.

3. Navigating complex licensing agreements

Software licensing agreements can be complex. These documents have various terms and conditions regarding usage, distribution, and compliance. Resellers must understand and manage these agreements to avoid legal and operational issues. Misunderstanding or mismanaging licensing terms can lead to legal disputes or compliance issues.

4. Maintaining product knowledge and training

Resellers must keep up-to-date with the software’s features, updates, and best practices to provide effective support and successfully sell the product. Ongoing training and product knowledge are crucial.

Suppose a reseller is not knowledgeable about the latest features or changes to the software. In that case, they may struggle to address customer queries or provide accurate information, impacting customer satisfaction and sales.

Streamline SaaS procurement with CloudEagle.ai

CloudEagle.ai is an all-in-one SaaS management and procurement tool. Its procurement features make it one of the best tools for managing SaaS in the market. From having different procurement workflows to getting assistance from negotiation experts, you can close valuable SaaS deals.

The tool transforms how organizations handle software procurement by making it simpler, faster, and more cost-effective. It achieves this through several key features that enhance the procurement process.

Streamlined procurement workflows: The tool provides procurement workflows to automate the software procurement process. It manages the entire process from start to finish, including handling approval requests more quickly and efficiently.

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You can customize these workflows to match your organization's needs, ensuring everything runs smoothly without unnecessary delays. This automation reduces paperwork and administrative tasks, so you can get the necessary software without wasting time or missing essential steps.

Integration with Slack: One of CloudEagle.ai's most user-friendly features is Slack integration. This allows team members to request software directly through Slack using Slackbot.

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Instead of juggling multiple tools or switching between different systems, you can manage all your software requests in one place. This makes the process more convenient and keeps everything organized within the familiar Slack environment, which helps your team stay focused and productive.

Assisted Buying: If you lack the time or bandwidth to handle software negotiations, CloudEagle.ai’s assisted buying feature can be a helpful solution. You will get expert guidance to select the right software, negotiating contracts, and managing vendor relationships.

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Our team of negotiation experts brings deep industry knowledge. They ensure you secure the best deals and choose the software that best suits your needs.

With this support, you don’t have to navigate the complexities of software procurement alone. Instead, you can rely on CloudEagle.ai’s expert negotiators to make well-informed decisions and achieve optimal results.

Price benchmarking: Another valuable feature of CloudEagle.ai is price benchmarking. The tool helps you to compare your current software pricing with industry standards and historical data from over 2 billion transactions. This comparison lets you determine if you’re getting a fair deal or paying more than necessary.

The tool enables you to negotiate more effectively and make cost-efficient purchasing decisions by analyzing market trends and benchmarking prices. This insight ensures that you get the best value for your software investments.

Self-service app catalog: CloudEagle.ai also provides a self-service app catalog. This is a curated list of vetted software options where users can browse, read reviews, and gather detailed information about various applications.

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It allows departments to independently find and request the necessary software while keeping the procurement process transparent and under control. This feature helps different teams handle their software needs without adding extra work for procurement teams.

By integrating these features, CloudEagle.ai streamlines SaaS procurement, reduces administrative burdens, and helps organizations achieve better control over their software investments. The result is a more efficient procurement process that aligns with organizational goals and optimizes software spending.

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Conclusion

Software resellers expand the market reach and grow the business without directly handling all sales and support. By partnering with resellers, software creators can tap into new networks, enhance market presence, and concentrate on developing their products.

Such a reseller model offers great benefits like wider reach and reduced workload but comes with challenges such as managing relationships and pricing. Addressing these issues with clear communication and proper support can lead to successful partnerships and growth for software creators and resellers.

To enhance this process, resellers can use procurement tools like CloudEagle.ai. The tool streamlines software procurement, secures top SaaS deals, and provides valuable benchmarking data. It also offers comprehensive support, including assisted buying, to ensure resellers get the best deals and are well-prepared for negotiations.

Schedule a demo with CloudEagle.ai to discover how you can maximize benefits in your software procurement process.

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