What is the OEM Technology?
Original equipment manufacturer or OEM technology is a general term that is commonly encountered when you purchase products; It involves partnerships between different companies to deliver a best-of-breed solution to the end user that is significantly cost-effective. The term original equipment manufacturer is used differently by different people. Initially, the term was used to refer companies which manufactured products and sold them to other companies that build a whole system. This meaning has evolved over time. Today, owing to integrated solutions such as virtualization, devops and hyper convergence, each organization partners with multiple companies to deliver an integrated solution to the end user.
With shrinking budgets and growing business needs, organizations are looking to optimize costs while delivering high quality solutions to customers. To do so, companies first evaluate various options such as buying products, manufacturing them or partnering with different companies etc. Most commonly, organizations license technology from another company and add it to its product to improve its quality, performance and feature set. The company that sells the product to the end user re brands it with its own logo. At times, you see products with logos of two or three companies. In that case, it is called a Co-branded OEM relationship. Today, many companies offer OEM ready programs so that you can quickly customize your solutions and bring them to the market. An example is the Dell OEM Ready Program.
What Challenges does the OEM technology overcome?
When organizations do not have the in-house skill set to develop certain solutions, it is a good option to acquire them other companies. Faster time to market is one of the key factors that favor OEM technology. By partnering with OEM companies, organizations can quickly build solutions and market them for a better ROI. Another important factor is the reduced product life cycle. By the time a company manufactures a product, the technology might become outdated. By purchasing products from other companies, organizations can quickly build a solution, market it and reap benefits.
Who is OEM technology relevant for?
OEM technology is relevant to organizations that do not have the expertise to develop certain technologies. So, it is feasible to obtain pre-defined technologies so that they can concentrate on their core competencies. It would also reduce the sales and marketing costs as well as the competitive pressure. It allows them to aggressively price the technology. By licensing another technology, you would be enhancing your own product offering as well.
There are downsides as well. In an OEM technology partnership, the manufacturer might not have control over how the technology that is sold. At the same time, the company would have to work in sync with the manufacturer. Secondly, changing business technologies have to be closely monitored. As technology gets outdated, companies should be able realign their solutions. So, the OEM agreement should be flexible enough to get adjusted to changing business conditions. When properly executed, OEM technology is a win-win situation for both companies.