This arrangement defines the terms and conditions under which one party is authorized to market and distribute a software application hosted and maintained by another. For example, a company developing accounting software might permit a separate entity to sell subscriptions to that software to its own customer base. This allows the software developer to expand its reach without directly managing sales in all markets.
Such agreements are vital for software companies seeking rapid growth and market penetration. They enable developers to leverage the established customer relationships and sales expertise of their partners. Historically, this type of agreement has allowed smaller software firms to compete effectively with larger, more established players, leading to increased innovation and market diversity. The benefits extend beyond just market access; resellers often provide valuable feedback on customer needs, influencing future product development.