Channel & Distribution
~92% of cybersecurity spend flows through the channel rather than direct from the vendor. "The channel" is not one thing — it is a chain of distinct actors that buy from, sell to, and add value for each other in specific ways. Each does different work and makes money differently, and those differences determine which channel businesses are attractive M&A targets.
Sub-page deep dives: Distribution & Cloud Marketplaces (distributors, the financing/certification moat, the hyperscaler-marketplace rail) · VAR/SI & MSP→MSSP (the services-attach ladder and the MSP→MSSP roll-up).
Who does what — the channel actors compared
The single most important distinction: who they sell to and what value they add. A distributor never touches the end customer; a reseller touches the customer but adds little; a VAR adds services; an MSP delivers the product as an ongoing service.
| Actor | Buys from | Sells to | What they actually do | How they make money | Margin / stickiness |
|---|---|---|---|---|---|
| Distributor | Vendors (direct) | Resellers, VARs, MSPs (not end customers) | Aggregate hundreds of vendors; warehouse/logistics; finance (float inventory, extend credit to partners); onboard & enable partners; technical pre-sales; run cloud-marketplace plumbing | Thin margin on volume + financing fees + vendor MDF | Low margin, high volume; low multiple |
| Reseller (pure) | Distributors (or vendors) | End customers | Take an order and fulfill it; little technical work | Resale margin + vendor rebates/back-end | Lowest margin; transactional; low multiple |
| VAR (value-added reseller) | Distributors / vendors | End customers | Resell plus design, implement, integrate, configure, and wrap professional & managed services and advisory | Product margin + services attach (the real profit) | Higher margin, stickier; roll-up target |
| Solution provider / SI | Distributors / vendors | Enterprise & federal customers | A VAR at the top end: embed products into a broader multi-vendor architecture; heavy professional services; program delivery | Services-led + product margin | High-value; enterprise/federal moats |
| MSP | Distributors / vendors | SMB / mid-market | Deliver IT as an ongoing managed service (recurring), security increasingly attached | Recurring per-seat/device fees | Recurring; consolidating fast (36) |
| MSSP | Vendors / build own platform | All segments | Deliver security as a managed service (24/7 SOC, MDR) | Recurring contracts | Recurring; the richest roll-up ground (04) |
| Cloud marketplace | Vendors list; co-sell | End customers (committed cloud budget) | A procurement rail: buyers spend pre-committed AWS/Azure/GCP budget; private offers, co-sell | Platform takes a cut; lowers vendor CAC | The fastest-growing rail |
In short: distributors move product in bulk to other businesses and finance the chain; resellers fulfill orders; VARs/SIs add the services that make a product usable and sticky; MSPs/MSSPs do not sell a product at all — they run it for the customer for a recurring fee; marketplaces are increasingly where the money is transacted.
The flow
Distributors — the financiers and aggregators of the channel
Full treatment: Distribution & Cloud Marketplaces.
- Broadline: Ingram Micro, TD SYNNEX, Westcon-Comstor — scale, logistics, credit, cloud-marketplace orchestration across thousands of vendors.
- Security-specialist: Exclusive Networks (global, security-focused), Infinigate (EMEA, PE-backed roll-up), Carahsoft (the dominant US public-sector aggregator — critical for gov cyber, see 14), Climb.
- Economics: thin points on volume, but the real value-add is financing (the distributor floats inventory and extends credit so a small reseller can transact a large deal) and enablement (training, demand-gen, technical pre-sales the reseller can't staff). Specialist distributors add deep security certification programs.
- → Security distribution has itself been a PE roll-up (Infinigate, Exclusive) — recurring vendor relationships + financing float = a financeable, consolidating asset.
Resellers vs. VARs/SIs — the value-add difference
Full treatment: VAR/SI & MSP→MSSP.
The difference between a reseller and a VAR is decisive for M&A. A pure reseller takes an order and earns a thin resale margin plus vendor rebates — transactional, undifferentiated, low-multiple. A VAR/solution provider wraps the product in services (architecture, deployment, integration, managed offerings, advisory), which is where the margin, the stickiness, and the customer relationship live.
- Security-led VAR/SI: Optiv (KKR), GuidePoint Security, Trace3, WWT, Set Solutions, Novacoast.
- Broadline IT with security practices: CDW, SHI, Insight, Presidio (BC Partners), Computacenter, Softcat.
- Enterprise/federal SI: Accenture Security, Deloitte, GDIT, Booz Allen (14).
- → The roll-up logic: PE consolidates security VARs/SIs precisely because services attach + vendor certifications + recurring managed revenue convert a low-margin reseller into a high-margin, defensible platform. Optiv (KKR) is the archetype. Operator economics: 36.
Cloud marketplaces — the new channel
AWS, Azure, and GCP marketplaces have become major procurement rails: enterprises spend committed cloud budget on third-party security software, and private offers / co-sell let vendors and partners transact faster with lower CAC. Marketplace traction is now a positive diligence signal (efficient distribution). It is reshaping — not replacing — the partner channel: deals are increasingly sourced by partners and transacted through the marketplace.
Why the channel matters in diligence & M&A
- For a vendor target: what % of revenue is channel-sourced vs. direct? Partner concentration? Channel conflict? Marketplace traction? (See GTM, CDD.)
- For a channel target: services attach rate, recurring/managed mix vs. one-time resale, vendor-certification depth, customer concentration. A services-heavy VAR/MSSP is worth a multiple of a transactional reseller of identical revenue.
Updated 2026-08-16 18:13 UTC · © El Dorado Capital · el-doradocapital.com · Market intelligence for informational purposes only; not investment advice.