SaaS OEM Agreement, Reseller and Referral Models: A Vendor’s Guide

Short answer: there are essentially three SaaS channel models, referral, reseller, and OEM. The difference comes down to two questions: who sets the price to the end customer, and who collects the money. Get those two answers straight and the right agreement almost picks itself.

I have done hundreds of channel deals for SaaS vendors, and the mistakes are almost always the same: the paperwork describes a model the company is not actually running. So before you paper anything, get clear on the model. Here is how the three break down.

Referral Agreements.

A SaaS referral agreement is where the referring company introduces new leads to the vendor. If the vendor closes the lead, it pays the referrer a percentage of the deal for a set period. The vendor sets the price and the referrer does not, and the customer contracts directly with you. The referrer never touches the money or the contract.

Nail down what counts as a qualifying referral, how long the commission tail runs (one year? the life of the account?), and whether the referrer has any exclusivity. Keep the referrer out of the sales and support relationship. The moment they quote prices or make product promises, you have drifted toward a reseller relationship without the contract to match.

Reseller Agreements.

A SaaS reseller agreement is for when the reseller resells your service and collects the money from the customer. The reseller sets the customer price, and you set the price to the reseller, so the reseller earns the margin. Often you still contract directly with the customer for the service, but the order and money flow through the reseller.

The recurring issues are pricing control, who owns the customer relationship, and what happens to the customer if the reseller goes away. You can suggest a resale price but generally cannot fix it (see the Leegin point below). Make sure your end-customer terms still bind the customer directly, so a reseller dispute does not put your service relationship at risk, and spell out renewal and data ownership clearly, because that is where reseller deals get messy.

OEM Agreements.

A SaaS OEM agreement is for when your solution is re-branded for the OEM, which usually provides level-1 support, implementation, and training. The OEM sets pricing to the customer and pays a predetermined price for your service.

OEM is the deepest relationship, so the agreement carries the most weight. Watch the trademark and branding license closely (narrow and revocable), define support responsibilities precisely so customers do not fall between you and the OEM, and cap your liability with care because you are now a step removed from the end customer. Tie the OEM’s rights tightly to the term: as the SAP case shows, an OEM that keeps using your software past expiration is a real and expensive problem.

How to Choose the Right Model.

There are no hard and fast rules; many channel agreements are hybrids of two models. The agreement should reflect, not define, your channel model, so think it through first. Ask yourself: do I want to keep the customer relationship and just reward an introduction (referral)? Do I want a partner to own pricing and billing but keep my brand (reseller)? Or am I letting a partner put their brand on my product and run the front line (OEM)? You can suggest but generally not dictate a reseller’s price, a limit that comes from antitrust law the FTC still enforces, summarized in its guidance on manufacturer-imposed resale requirements. If you want help putting one in place, here is how we approach a SaaS reseller agreement for software vendors.

Frequently Asked Questions.

What is the difference between referral, reseller, and OEM? Who sets the price and who collects the money. Referral: you set price, you bill, the partner just introduces. Reseller: the partner sets price and bills, keeping margin. OEM: the partner re-brands your product, prices it, and runs front-line support.

Can I set the price my reseller charges? You can suggest it but generally cannot mandate it. Resale price maintenance is judged under antitrust law, so set the floor only with advice and within the rule of reason.

Which model needs the most careful contract? OEM. Because your product is re-branded and you are a step removed from the customer, the trademark license, support split, liability cap, and post-termination rights all need to be tight.

A few related reads. Software OEM Agreement: 3 Lessons from the SAP Case walks through how SAP lost a case for extending AMC software rights past expiration. Which Form of SaaS Distributor Agreement Do You Need? is a decision tree across the channel models. 3 Things to Consider in Your Software Referral Agreement covers scope, qualifying events, and tail payments. And How the Leegin Case Changed Software Reseller Law covers the resale-pricing rules that still govern.

I hope this helps. Get the model right first, and the agreement gets a lot easier.

Disclaimer:

This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after review of all relevant facts and applicable law.