OEM (original equipment manufacturer)

OEM is a term that refers to a web of relationships that typically involve a channel partner purchasing hardware or software from a vendor for inclusion in its own products.

OEM (original equipment manufacturer) is a broad term whose meaning has evolved over time. In the past, OEM referred to the company that originally built a given product, which was then sold to other companies to rebrand and resell. Over time, however, the term is more frequently used to describe those companies in the business of rebranding a manufacturer's products and selling them to end customers.

A hardware OEM, for example, might acquire a vendor's products -- servers or storage systems, for example -- and rebrand and resell the vendor's equipment without modification. Alternatively, it may incorporate and bundle the vendor's products with its own technology for resale. Vendors such as IBM and HP offer channel programs that address the needs of this type of hardware OEM. At times, major hardware vendors will themselves enter OEM arrangements to supplement their product lines. IBM in the 1980s and 1990s, for instance, resold Stratus Technologies' fault-tolerant servers under IBM's System/88 label.

A software OEM, on the other hand, typically embeds another software vendor's technology into its own applications. As with hardware OEM relationships, software OEM arrangements can fluctuate. Autodesk, for instance, offers an embeddable version of its AutoCAD software for its OEM partners, but also embeds visual data analysis software from Tableau under an OEM agreement. Another software OEM variation lets system builders license software for inclusion in the systems they sell to customers. Microsoft's OEM system builder initiative, for example, offers system builder licensing for the Windows and Windows server operating systems and Microsoft Office.

See also: value-added reseller (VAR)

This was first published in April 2015

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