How can software resellers improve their margins?

In this article, we'll talk about how software resellers operate, common payment problems they face and how virtual credit cards can help them overcome these setbacks and improve their margins.

Read on!

Why are software resellers gaining ground?

Demand for software reseller services is on the rise worldwide as companies of all sizes continue to rely on software to drive growth, improve efficiency, and enhance customer satisfaction.

They typically specialize in certain types of software products or industries, such as enterprise resource planning (ERP) software, customer relationship management (CRM) software, or accounting software.

The global software resellers market size was valued at USD 274.4 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 8.3% from 2021 to 2028, according to Grand View Research. 

Factors contributing to this growth include:

• Cloud software solutions are increasingly being adopted.

• E-commerce and online marketplaces continue to grow.

• There is a constant demand for custom software solutions for specific business needs.

Why use a software reseller?

As mentioned above, these vendors provide custom software services to other companies.

Here’s how it works:

Let's say a manager is looking for specific software for their business. They’ve done some online research, but are not sure which software is going to work best for them. They’re also concerned about the software's security and reliability, and want to make sure they are getting a good price.

This is where a software reseller can help by:

• Providing expert guidance: Based on the person's industry, company size, and other relevant factors, the reseller could provide expert advice on the best software products for the person's specific needs.

• Ensuring the security and reliability of the products: Resellers can offer software products that are tested for security and reliability, giving customers confidence that their business data is safe and secure.

• Negotiating pricing: They could negotiate pricing for them and possibly get them a better deal than they could get by themselves.

• Offering support and education: These vendors can provide support and training to help individuals quickly become productive and effective users.

In this scenario, it seems like everyone is a winner. But there's more to this than meets the eye...

Common payment problems software resellers face 

In addition to selling software licenses, some resellers offer subscription-based licensing where customers pay a monthly or annual fee for access to the software.

However, as with any service provider, there are the typical headaches that come with day-to-day operations, such as:

• Late payments: They have a direct impact on cash flow and make it difficult to manage finances effectively.

• Chargebacks and disputes: If resellers don’t have adequate documentation to support their customers’ claims, these disputes can lead to lost revenue, additional charges, and bad publicity.

• Billing fees: These fees can eat into profit margins for high-volume software resellers. Plus, they may need to negotiate with payment processors to reduce fees or find lower-fee alternatives.

• Currency exchange rates: Software resellers selling internationally may face currency exchange challenges that affect their revenue and profitability. To find the best rates and minimize their exposure to foreign exchange risk, they may need to work with currency exchange providers.

• Fraud and security issues: Resellers may need to implement additional security measures, such as two-factor authentication, to prevent unauthorized access to their payment systems.

How can software resellers benefit from virtual credit cards to improve their margins?

Virtual credit cards can provide several benefits to software resellers. 

These include:

• High single-transaction limit: When making large purchases or paying for expensive services, a high single transaction limit provides greater flexibility. This is especially useful for businesses or individuals making large payments for equipment, inventory, or other high-value items. 

• Lower transaction fees: VCCs often have lower transaction fees than traditional credit cards, allowing merchants to reduce their overall transaction fees and improve their margins.

• Reduced currency fluctuation risks: Credit card usage effectively mitigates currency fluctuation risks for software resellers buying in one currency and selling in another.

Additional benefits that are available to software resellers with the use of virtual credit cards:

• Increased security: VCCs help protect against fraud and unauthorized transactions by generating a unique, one-time number associated with a specific transaction or payment.

• Simplified payment process: They automates payment and reconciliation, reduces management costs, and eliminates manual payment processing.

• Improved cash flow: By providing faster and more efficient payment processing, virtual credit cards reduce the amount of time it takes to receive payment and allow resellers to reinvest their cash in their business more quickly.

• Enhanced tracking and reporting: They provide detailed transaction information to help resellers track and report on payment activity, monitor expenses, and identify opportunities for cost savings and optimization.

• Boost customer satisfaction: A more convenient and streamlined payment process reduces the risk of payment errors or delays, and enables resellers to provide faster, more responsive service to their customers.

💡Pro Tip! Some corporate credit card companies offer rewards programs that provide benefits such as cashback, travel rewards, or other incentives for spending over a certain threshold amount. It can be easier to reach these thresholds and take advantage of these rewards with a high single transaction limit.

How many types of software resellers exist?

There are a number of different types of software resellers, each with their own unique business model, focus, and area of expertise. 

Here are some of the most common ones::

1. Value-added resellers (VARs): They focus on adding value to software products through customizing, integrating and consulting services.

2. Direct Market Resellers (DMRs): Typically sell software directly to end users through online marketplaces, catalogs, or other channels.

3. Retail resellers: These resellers typically target consumers or small businesses and sell software products through physical retail stores or online marketplaces.

4. Independent Software Vendors (ISVs): ISVs develop and sell software products, often through reseller channels or directly.

5. Managed Service Providers (MSPs): They offer a range of IT services, including selling, installing, configuring, maintaining and supporting software.

6. Cloud service providers (CSPs): Typically targeting businesses of all sizes, CSPs offer cloud-based software-as-a-service (SaaS) solutions.

7. System Integrators: They integrate and customize software products.

Germany’s popular software resellers and their services

Here are some of the most popular software resellers in Germany:

• COMPAREX: software licensing, digital transformation, and cloud services

• ALSO Deutschland GmbH: B2B marketplace and IT solutions provider, offering a wide range of software, hardware and services

• Bechtle AG: IT system integrator and reseller, IT products (software, hardware, and consulting)

• Softline AG: software licensing, digital transformation, and cloud services

• Sycor Group: software, hardware, and consulting services

• Compuwave GmbH: software licensing and digital transformation

• COS Computer GmbH: software and hardware

• ProSoft Software Vertriebs GmbH: software licensing and IT security

Conclusion

In short, Pliant virtual credit cards can provide significant benefits to software resellers, helping them to simplify payment processes, improve cash flow, enhance security, track and report on payment activity, and increase visibility and control over employee spending.

Using a virtual credit card allows software resellers to:

• reduce transaction fees,

• improve expense management,

• lower fraud and currency fluctuation risks, and

• earn cashback to improve margins.

💳 To learn more about our corporate credit card offering and how companies are leveraging our best-in-class integrations, click here.