Independent Software Vendor (ISV) | B2B Finance Glossary

What is an Independent Software Vendor?

An independent software vendor (ISV) is an individual or organization that develops, markets and sells software solutions for consumers and businesses. Typically, business-related ISVs are referred to as Software-as-a-Service (SaaS) companies.

An ISV can develop and sell software by offering licensing agreements to customers, whether those customers are enterprises or individuals. However, even if the ISV sells its products and services to other companies, the ISV remains the owner of the software (since these deals are usually done through licensing agreements which allow the ISV to remain the owner of the IP that it has created).

Any company that offers software developed on a marketplace such as Hubspot Connect or Salesforce AppExchange is considered an ISV.

What are Some Examples of ISV Products?

Many ISV offerings are designed specifically to help enterprises operate more efficiently. Here are some examples of the most popular SaaS-based ISV categories:

• ERP software. ERP stands for enterprise resource planning, and ERP systems are designed to increase a business’s efficiency by managing HR, finance, supply chain, and other essential functions within a single system. Many ISV offerings are new ERP systems or plug-ins that help improve existing ERP systems.
• CRM offerings. CRM stands for customer relationship management. CRMS is a software product designed to help businesses better collect and manage data related to customer behavior. Today, many different ISV offerings are available on the market, designed to improve the CRM process from the ground up.
• ERM products. ERM stands for enterprise risk management and includes products and services built to track compliance and mitigate enterprise risk. Certain ISV products are created to carry out these functions and help companies better protect their customers and employees across the board.
  
  

How do ISVs Work?

ISVs develop software to eventually license that software to businesses and other types of partners through subscription plans and one-time licenses. Since ISVs typically work with specific hardware, they need to go through the process of becoming ISV-certified or an ISV partner to be approved to work alongside existing tools and marketplaces.

What Does it mean to be ISV certified?

ISV certification is an approval process that helps customers build trust with up-and-coming ISVs. To do this, hardware providers, cloud platforms, and operating systems will vet potential ISVs who wish to sell their products on their marketplaces.

These companies will then provide ISV certification to the solutions that are the most relevant solutions on the market – something that guarantees that the hardware company, cloud platform, or operating system is offering top-notch solutions for their customers who are looking for software programs that can help take their businesses to the next level.

What is an ISV Partner?

An ISV partner is almost identical to a company that has become ISV-certified. ISV partners can resell their software solutions on existing marketplaces, but ISV-certified programs tend to be more exclusive than ISV partner programs. This means it’s slightly easier for ISV software companies to become ISV partners than to become ISV certified.

If an ISV wants to be accepted into a specific ISV partner program, that ISV will need to apply, agree to any conditions that are necessary to obtain membership to the partner program in question, and then eventually get accepted into the program.

Other types of ISV partnerships also help drive growth for the specific software program being offered by the ISV itself. Outside of a specific partnership program, there are four different forms of partnerships that ISVs can make:

• OEM partnerships. Original Equipment Manufacturers (OEMs) are companies that make products or parts of products that are then sold by another company. These products are packaged and sold under the company's branding that sells them to the end user. Regarding SaaS companies, OEMs create software that can be easily integrated into an ISV’s offering.
• Software / SaaS investor partners. An investment partnership is when a partner invests money into the ISV to help it grow and develop more products and services to keep it competitive in the market. This is an opportunity for specific ISVs to grow their business and reach more customers effectively.
• Payment partnerships. A payment partnership allows a payment solution to be integrated into an ISV’s product. This allows the specific ISV to provide more value to its customers and significantly makes it easier to use, making it more attractive to potential merchants.
• Reseller partnerships. A reseller company is a company that sells another company’s product. Software reseller companies, in particular, can assist ISVs in growth by helping any given ISV’s product reach more customers that it wouldn’t necessarily be able to reach on its own.