VAR vs MSP: What Is the Difference and Why It Matters for Vendors

The IT channel is full of acronyms and the distinction between a VAR and an MSP is one that trips up vendors more often than it should. They are both third-party organisations that sell and deliver your product to end customers. But they operate on fundamentally different business models, and treating them the same way in your partner programme will create friction for both.

What Is a VAR?

A value-added reseller buys a product from a vendor, adds value through services, and resells the combined offering to a customer. The transaction is typically project-based: a customer has a problem, the VAR proposes a solution that includes your product, and the deal closes as a one-time or annual purchase.

The “value-added” part varies considerably. At one end, a VAR might simply configure and deploy your product for a customer. At the other, they might design and build an entire technology solution across multiple vendors, with your product as one component. The more complex the solution, the more the VAR's margin comes from their own services rather than the product resale.

VARs tend to work on discrete deals with a clear start and end. Pipeline is measured in opportunities, forecasts are deal-by-deal, and revenue is lumpy: a large project close followed by a quiet quarter is normal. Their sales team carries a quota for the year and hunts new business.

What Is an MSP?

A managed service provider delivers ongoing IT services to customers on a recurring subscription basis. Rather than selling a customer a product to own and manage, the MSP takes responsibility for managing some or all of the customer's IT infrastructure, usually for a monthly fee per user or per device.

Your product, in an MSP model, is likely being bundled into that monthly service. The MSP is not reselling your product as a discrete item: they are including it as part of a managed service stack and charging the customer for the overall service. The commercial relationship between you and the MSP may look more like a wholesale arrangement than a traditional reseller deal.

MSPs prize recurring, predictable revenue. Their business model depends on low churn and high margin on their managed services. New customer acquisition is important but so is retaining the existing base. Their sales motion is different from a VAR: less hunting, more farming. They want to expand their wallet share with existing customers rather than closing new projects every quarter.

Key Differences for Vendors

Pricing Implications

VARs typically work with your standard price list and discount structure. They buy at a partner price and resell to the customer at or near list, with their margin in between. Deal registration provides an uplift for opportunities they bring to you.

MSPs often need a different commercial arrangement. If they are including your product in a managed service bundle, they need to know their cost per seat or per device on an ongoing basis so they can price their service correctly. A perpetual licence or annual subscription structure does not map neatly onto an MSP model. Many vendors create a specific MSP pricing tier: a monthly wholesale price, often with a lower margin per unit than the VAR tier in exchange for volume and the predictability of recurring revenue.

Deal Registration for MSPs

Standard deal registration processes are designed for VARs: a partner brings an opportunity, registers it, and receives protection while they work it. For an MSP adding your product to their standard stack, deal registration becomes more complex. They may be deploying to 200 customers over the course of a year without discrete deal events.

The cleaner approach for MSPs is a named account list or territory arrangement: the MSP registers their customer base and you agree not to approach those customers directly or through other partners. Some vendors combine this with a performance commitment: the MSP agrees to maintain a minimum number of managed seats in exchange for the named account protection.

Building a Programme That Works for Both

The most effective approach is to treat VARs and MSPs as distinct partner types within the same programme, with a shared portal and shared tier structure but differentiated commercial terms and deal registration processes. Both partners see the same brand and the same portal. What changes is the agreement they sign, the pricing they access, and how deal registration works for their business model.

When you are starting out, it is tempting to have one standard agreement that covers all partner types. This works until it creates problems, usually when an MSP tries to apply a VAR deal registration process to their managed service motion and finds it does not fit. Build the differentiation in from the start.