What are the main types of channel partners?

The main types of channel partners are value-added resellers (VARs), distributors, managed service providers (MSPs), system integrators (SIs) and independent software vendors (ISVs). Many partners now blend several of these models — a VAR that also runs managed services, or an SI that has built its own IP. Distributors sit a tier above the others, aggregating vendors and reselling partners.

What is the difference between a VAR and an MSP?

A VAR resells products — usually hardware or software licences — and adds value through advice, configuration and implementation, earning primarily on the transaction and attached services. An MSP sells an outcome as an ongoing service, billed monthly or per user, and earns recurring revenue. The economics differ: a VAR optimises for deal size and attach, an MSP optimises for retention and margin over the contract lifetime, which changes what each one needs from your marketing.

How do channel partners make money?

It depends on the model. VARs and distributors earn on product margin plus attached services and vendor incentives such as rebates and MDF. MSPs earn recurring service revenue and value predictable, renewable products. SIs earn on billable professional services, so they favour products that create implementation work. ISVs earn on their own software and increasingly on marketplace and co-sell revenue. Understanding each partner's economics is the key to marketing to them effectively.

Types of Channel Partners: VARs, MSPs, SIs, Distributors and ISVs Explained

The main types of channel partners explained — VARs, MSPs, system integrators, distributors and ISVs — how each makes money, what they sell, and what they need from vendor marketing and MDF.

Why partner type matters more than the org chart

“The channel” is not one audience. It is a set of distinct business models — value-added resellers, distributors, managed service providers, system integrators and independent software vendors — each of which makes money in a different way, sells to a different buyer, and therefore needs something different from your marketing and your funding. Vendors that treat every partner as a generic “reseller” end up with programmes that fit no one well: campaigns an MSP can't use, incentives an SI doesn't care about, and MDF rules that punish the very partners who could drive the most pipeline.

The single most useful thing you can do before building a channel marketing plan is to know which partner types you actually rely on and how each of them earns. This guide walks through the five archetypes, how each makes money, who they sell to, and what they need from a vendor — the foundation for everything from partner recruitment to tier design. It builds on our category pillar, what is channel marketing?

VARs — value-added resellers

A value-added reseller buys products from vendors (often via a distributor) and resells them to end customers, adding value through advice, configuration, integration and implementation services. The VAR owns the customer relationship and, crucially, the transaction. Classic VARs sell infrastructure, networking, endpoints, security and business software into mid-market and enterprise accounts.

How they make money:product margin on the resale, plus attached services (design, deployment, support) and vendor incentives — back-end rebates, deal-registration discounts, SPIFFs and MDF. Because a meaningful share of a VAR's profit comes from vendor programmes rather than list margin, they are highly sensitive to how easy your incentives are to earn and claim.

What they need from you:demand they can convert into transactions, ready-to-run through-partner campaigns, competitive deal protection, and margin. A VAR's marketing function is often small or non-existent, so give them campaigns they can launch in an afternoon rather than a brief to build one. This is the classic through-partner audience, and where most MDF is spent.

Distributors

Distributors sit a tier above resellers in the traditional two-tier model. They buy from vendors at scale, hold credit and stock, and sell on to a large base of resellers — handling logistics, financing and, increasingly, marketing services and cloud provisioning on vendors' and partners' behalf. A distributor is a partner to you and a supplier to hundreds or thousands of resellers.

How they make money: thin margins on high volume, plus value-added services — credit, configuration, marketing-as-a-service, cloud marketplaces and professional services — where the real margin increasingly lives.

What they need from you: breadth of reseller reach, funded programmes they can run on your behalf to activate their base, and clean data. Modern distributors run substantial marketing operations and can be your force multiplier for reaching the long tail of resellers you could never manage directly — often deploying MDF and running through-partner campaigns as a service.

MSPs — managed service providers

An MSP delivers and manages technology as an ongoing service — security, cloud, networking, backup, helpdesk — billed monthly or per user. Rather than reselling a licence and moving on, the MSP builds a recurring-revenue relationship and owns the customer's technology outcome over years. MSPs are the fastest-growing part of many channels and behave very differently from transactional VARs.

How they make money: recurring service revenue and margin on the products they wrap into their stack. Their entire model rewards retention, predictability and lifetime value, so they favour products that renew cleanly, integrate into their tooling and reduce their cost to serve.

What they need from you: products that fit a recurring model, technical enablement for their engineers, co-branded material aimed at their existing base (upsell and cross-sell), and incentives that reward consumption and renewal rather than one-off resale. A SPIFF on a single transaction means little to an MSP; recurring margin and low operational friction mean everything.

SIs — system integrators

System integrators design and build complex, multi-vendor solutions, earning primarily on billable professional services rather than product margin. They range from global consultancies to regional specialists, and they are trusted advisers who often shape which products an enterprise buys in the first place — making them influential well beyond the deals they transact.

How they make money: professional-services fees for architecture, implementation and integration. Product is often a means to a services engagement, so SIs favour platforms that create meaningful implementation and consulting work and come with strong technical credibility.

What they need from you: deep technical enablement and certifications, joint solution development, executive alignment, and account-based, with-partner marketing into named target accounts rather than volume campaigns. This is relationship-led, strategic work that usually sits with your most senior partners.

ISVs — independent software vendors

An ISV builds its own software, often on top of a platform or cloud you provide. In a modern ecosystem, ISVs are both partners and a route to market: their applications extend your platform, and their customer base becomes a channel you can co-sell into. ISVs are central to the shift from linear reselling to ecosystem-led growth.

How they make money: licence or subscription revenue on their own product, and increasingly co-sell and cloud marketplace revenue where a hyperscaler helps them reach customers and transact.

What they need from you: a stable platform and APIs, technical and go-to-market co-investment, marketplace and co-sell support, and joint demand generation. Working with ISVs looks less like classic reselling and more like building a strategic alliance.

Blended and hybrid models

The neat archetypes above are increasingly blurred. A traditional VAR bolts on a managed-services practice to capture recurring revenue. An MSP develops its own IP and starts to look like an ISV. A distributor builds a cloud marketplace and co-sell motion. A single partner may span two or three models at once, and the model that matters is the one driving the specific deal in front of you.

The practical implication: classify partners by how they earn on your product, not by the label on their website. A partner that resells your on-premise product but manages your SaaS should be marketed to differently for each. This is also why a single flat programme rarely works, and why deliberate partner tiering matters.

What each type needs from vendor marketing and MDF

Once you map partners by economic model, your marketing and funding choices become clearer:

VARs and distributors want turnkey through-partner demand, margin and easy incentives. This is where most MDF-eligible activity — campaigns, events, telemarketing — lands, and where volume matters.
MSPs want recurring-friendly products, base-marketing to their own customers, and enablement. Fund upsell and cross-sell into their installed base, not one-off acquisition.
SIs want technical depth and joint, account-based marketing into named accounts — high-touch, with-partner activity rather than syndicated content.
ISVs want platform stability, co-sell and marketplace support, and joint go-to-market investment.

Whatever the mix, the funding you put behind partners only earns its place if you can attribute it to pipeline. Because different partner types run very different activities, tracking spend and outcomes across the base is a real measurement problem — exactly the gap our MDF Intelligence Platform and our MDF programme optimisation work are built to close.

Where to start

Before you write another partner campaign, audit your base by economic model rather than by name or revenue alone. You will almost always find that a handful of partner types drive most of your pipeline, that your current programme is designed for one of them, and that the others are quietly underserved. From there you can decide who to recruit more of, how to tier them, and where to point your funding.

The natural next steps are to sharpen who you are trying to attract in partner recruitment, to design a programme that rewards the right behaviour in designing partner tiers, and to build the operating model in partner-led growth. If you want a specialist to help you segment the base and build the plan, that is exactly what our channel marketing consultancy is for.