Original Equipment Manufacturer (OEM) software is software sold wholesale to third-party hardware and software vendors for integration into the vendor’s end product.
While often used as IT jargon, OEMs have been a part of our economy since the innovation of interchangeable parts during the Industrial Revolution. When manufacturers can offer their products to other vendors for repurposing, both parties can prioritize their core competencies. By purchasing in bulk, the third-party vendor can reap the benefits of discounted products while the manufacturer gains what we know as a channel partner.
In the digital age, software vendors can offer licensed versions of their applications to channel partners that deploy it into hardware or bundle it with other software before selling directly to consumers or businesses (or B2B2B). OEMs are often confused with and mentioned alongside value-added resellers (VAR), which is a line that continues to grow thin. Many know OEM software as the applications pre-installed on most devices, and there’s an argument to be made that SaaS and OEM software fill a similar purpose.
Because OEM software can be built into any number of different applications, general features are relatively universal, including:
- Fully-functioning licensed version of the software
- Tied to the machine first installed on
- Discounted price vs. retail software license
- End-user license agreement (EULA) for standards and accompanying benefits
For industry buyers, the most mentioned pros and cons of OEM software include:
Types of OEM software
Software manufacturers for OEMs can offer their software in a way that makes the most business sense. For example, vendors can provide older, or custom versions often referred to as limited edition (LE) or special edition (SE). Or vendors can also offer new editions no different from what’s available for retail.
Typically, older OEM software versions can be purchased by individuals at a discount, but vendors buying in bulk reap the most significant cost savings.
Examples of OEM Software
Consumers know OEM software best by the suite of applications pre-installed on their devices. While some of these programs are vendor-produced, a handful of others are often great examples of how OEM software is bundled into a single product.
For example, operating systems, tablet software, and scanner/printer software can all come pre-installed on devices but could have different original manufacturers. Similarly, video software with a camera attachment and recording software with a microphone are also examples of software typically offered by a specialized manufacturer and repurposed for the device. Specific applications like printers, cameras, and audio software are increasingly available online at no additional cost, also known as freeware.
Is SaaS OEM Software?
The cloud has provided a universe of services now available with a few clicks. Individuals know the subscription-based applications on their smartphones and tablets. In the enterprise, the cloud is already taking center stage for organizations taking the next step towards digital transformation. With the way Software-as-a-Service (SaaS) is being used and integrated into companies globally, there’s an argument to be made that specific cloud software solutions are also types of OEM software.
If OEM software and SaaS are this closely related, this OEM market’s importance is only just being understood. Cloud-based software has arguably been one of the most critical developments for enterprises in the 21st century because it offers a diverse range of business-critical applications in a scalable, intuitive framework.
Also Read: Best Cloud Based Services for 2021
Buyers Beware and Use Caution
While this is most pertinent to consumers and small businesses, we’d like to note OEM software has gotten a bad reputation thanks to the proliferation of online schemes.
Pirated OEM Software
Innocent consumers shopping eBay for a new OEM part have been the victim of pirated versions that put the consumer at risk and stranded without an original manufacturer’s license. As software vendors migrate to the cloud and begin offering their OEM software as SaaS, schemes like this could be a thing of the past. For cloud services, all you need is access to a web server. There’s no software to download and, therefore, no chance of mistakenly using a pirated version.
Compliance and software management
Another aspect of OEM software to be cautious about is laissez-faire attitudes on compliance and copyright infringement issues. For organizations dealing with OEM software, misuse of OEM software can mean serious consequences. Modern business requires proactive management of supply chain contracts and software inventory and legal use of OEM software internally.
As software applications become more integral to everyday business, software asset management (SAM) is developing, procuring, deploying, maintaining, and retiring an organization’s software assets. Having SAM in place provides an accurate picture of an organization’s deployed software and ensures software buying and ownership are calculated decisions.
Also Read: What is Server NAS Software?
OEM Software Market
The two leading OEM software vendors for servers and storage are Dell Technologies and Hewlett Packard Enterprise. Early OEM vendors also included Foxconn, WiWynn, Inventec, and Supermicro, joined by a group of contemporary OEM vendors like Lenovo, Cisco Systems, Inspur, and Sugon. We dive into how Dell, HPE, and Microsoft all function as OEM partners today.
The fast facts show Dell’s extensive footprint in the OEM game. It boasts 11 Gartner Magic Quadrant positions, 40+ industry verticals served, and is a world-leading OEM software vendor. The Dell Technologies OEM Solutions division offers a range of products including the popular line of PowerEdge server appliances.
DIGISTOR, a computer hardware vendor serving military and defense industries, was looking to address more client challenges and grow their enterprise portfolio. Using Dell as an OEM partner, the organization deployed a Dell EMC PowerEdge XR2 server and PowerEdge R640 to meet their evolving needs.
Speaking highly of the partnership, DIGISTOR VP of Engineering Murray Ellis noted, “In their challenging use cases, the XR2 enables productive operation under almost any condition at the edge, and the R640 delivers vastly scalable computing in the data center.”
Hewlett Packard Enterprise (HPE)
Hewlett Packard (HPE) is one of the world’s oldest OEM technology vendors. In their own words, “Instead of developing and manufacturing a component, a business can simply acquire someone else’s design and leverage their expertise.”
As for HPE’s OEM software in action, Synamedia is a multinational digital media company that provides the infrastructure for televisions, tablets, and phones, reaching 100+ million each day. Synamedia uses custom-built HPE ProLiant servers and HPE Apollo systems for its video network solutions. HPE notes that with their applications, Synamedia can broadcast to millions daily and automatically shift between unicast and multicast content delivery.
Though Microsoft isn’t as far up on the server provider list as Dell or HPE, the Windows OS is possibly the most used OEM software in the world. Microsoft sends fully licensed OEM software to hardware manufacturers like Dell, HP, Toshiba, and countless others for their product development.
Milan-based Inside Technologies deployed Microsoft software to enhance application development, enterprise solutions, and infrastructure services to a global audience. In evaluating how they could offer new tools and updates to customers, they ultimately decided on deploying Windows Server technologies, including Hyper-V. Using the Windows Admin Center, Insight Technologies can manage assets from a single server, integrate Azure Active Directory, and work every detail with PowerShell.
OEM Software: Economic and Specialized
Though OEM software may seem like a niche B2B market, our research says differently. As data and technology continue to improve our lives, the need for specialized or adapted software isn’t going away. From an economic perspective, the OEM software market offers original manufacturers and third-party vendors an equilibrium opportunity that benefits both parties.