In one sentence:
A distributor is a company that buys products in volume from manufacturers or software vendors and resells them to downstream resellers, retailers, or VARs — usually without selling directly to end customers.
Distributors are the middle tier of a three-tier channel: vendor → distributor → reseller → end customer. They earn thin margins on high volume, provide logistics and credit terms to downstream resellers, and act as a force multiplier for vendors who can't economically manage thousands of small reseller relationships directly.
What a Distributor Actually Does
A distributor's job is breadth, logistics, and credit:
- Breadth — Aggregates products from hundreds of vendors into a single catalog resellers can shop.
- Logistics — Handles inventory (in hardware), license fulfillment (in software), and order processing.
- Credit — Extends net-30 or net-60 terms to resellers who couldn't get them directly from the vendor.
- Enablement — Runs training, certification, and demand-generation programs across many vendor lines.
In return, distributors take a margin (typically 3–7% in hardware, higher in software) and may earn additional rebates and MDF from the vendor for hitting volume tiers.
Distributors in Hardware vs Software
Distribution is a legacy of physical hardware — Ingram Micro, TD Synnex, and Arrow Electronics each ship billions of dollars of product per quarter. In SaaS, the role looks different:
- Cloud distributors (Pax8, TD Synnex's Stellr, Ingram Micro Cloud) aggregate SaaS subscriptions for MSP resellers. They handle provisioning, monthly billing reconciliation, and consolidated invoicing across dozens of SaaS products.
- Marketplace distributors (AppDirect, Sherweb) operate cloud marketplaces where MSPs and VARs can spin up customer subscriptions on demand.
- For most direct-sale SaaS, true distributors are absent — the vendor sells directly to resellers without a middle tier.
Distributor vs VAR vs Reseller
- Distributor — Sells to other resellers in volume. Thin margin, high turnover. Almost never customer-facing.
- Reseller — Sells to end customers. Earns commission or markup. Limited services attached.
- VAR (Value-Added Reseller) — Sells to end customers and bundles meaningful services. Highest margin per deal.
Real Example: Pax8 in the MSP Channel
Pax8 is the dominant cloud distributor for the MSP channel in North America. Microsoft 365, Acronis, Bitdefender, Datto, and 200+ other SaaS vendors flow through Pax8 to ~40,000 MSPs. An MSP that wants to resell Microsoft 365 doesn't sign a contract with Microsoft directly — they sign with Pax8, who handles provisioning, monthly billing in their currency, support escalations, and consolidated invoicing across every SaaS line they resell. Pax8 takes a small distribution margin; the MSP keeps the rest of the markup they charge their customer.
Does Your SaaS Need a Distributor?
A cloud distributor is worth considering when:
- You're targeting MSPs at scale (hundreds to thousands) and can't manage that many direct relationships.
- You need international reach — distributors handle local invoicing, tax, and currency.
- Your product fits into an MSP's monthly billing stack alongside other recurring SaaS subscriptions.
For most SMB SaaS, going direct to VARs or running an affiliate program is simpler and preserves more margin.
Manage hundreds of resellers without a distributor
Elinkages handles partner onboarding, deal registration, and commission payouts across your entire channel — direct or distributor-led.
See reseller management →Related Terms
Value-Added Reseller (VAR)
A value-added reseller (VAR) is a company that buys products from a manufacturer or software vendor and resells them to end customers after adding value — typically through integration, customization, implementation services, training, or ongoing support.
Channel Partner
A channel partner is any third-party organization that sells, services, refers, or markets a vendor's products to end customers — operating as part of the vendor's indirect (non-direct) sales motion.
Managed Service Provider (MSP)
A managed service provider (MSP) is a company that delivers IT, security, or software services to clients on an ongoing subscription — running infrastructure, support, and operations on the client's behalf for a recurring monthly fee.
Market Development Fund (MDF)
A Market Development Fund (MDF) is money a vendor gives a partner to spend on marketing activities — events, ads, content, lead generation — designed to drive demand for the vendor's product within the partner's customer base.
Deal Registration
Deal registration is the process by which a channel partner formally reserves a specific sales opportunity with a vendor — protecting them from channel conflict and securing margin protection if the deal closes within the agreed window.