Original equipment manufacturer, or OEM, is a term that refers to containment-based re-branding, namely where one company uses a component of another company within its product, or sells the product of another company under its own brand. OEM refers to the company that originally manufactured the product.
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Term origin
OEM is a term that may have been coined in the 1950s by IBM to refer to a vendor that purchased and resold IBM computers, also soon after in the early 1960s by Digital Equipment Corporation and its venders. OEM refers to the manufacturer of a component of, or subassembly used in, the production of a larger item.
Aeronautical industry
OEM refers to the aircraft manufacturers. Examples of globally present OEMs in this industry are Airbus of Europe, ATR of France/Italy, Boeing of the United States,Bombardier of Canada and Embraer of Brazil.
Automobile industry
OEMs are the industries brand name auto manufacturers such as General Motors, Ford, Toyota, etc. The OEM definition in the automobile industry constitutes a federally-licensed entity required to warrant and/or guarantee their products unlike "aftermarket" which is not legally bound to a government-dictated level of liability. OEMs also apply to component manufacturers, such as Bosch, BBS, NGK, Pagid, Ferodo, etc. Identical products, such as spark plugs may be supplied though official franchised dealers, in appropriately branded packaging (Volkswagen, General Motors, etc). The same product may be supplied though general auto retail outlets (in the UK - Halfords, A1 Motor Stores, etc), or 'trade' motor factors (UK - Euro Car Parts, APD) in the manufacturers original branded packaging.
Electrical switchgear
Many OEMs exist across the United States to manufacture electrical equipment. These OEMs exist because typically the "national" manufacturers do not have a tremendous ability to adapt to certain needs (ie. special data-center requirements, dimensional challenges as well as speed of delivery). An example of one of these OEMs is California-based Industrial Electric Manufacturing (IEM).
Computers
Beside referring to manufacturers, OEM can be used as an adjective to describe software licensed only for a particular system. OEM software is purchased along side a system or hardware parts. Certain OEM programs have limited functionality, but most do not. OEM software is often cheaper than the full versions but not as cheap as academic or student editions.
Contradictory uses in manufacturing
When a company purchases products or components from another company and resells the products or components with the purchasing company's name or logo on them (usually, but not always as part of a product), the company that resells the product is called the OEM.[1][2][3] For example, when IBM purchased Tandon floppy drives for IBM's original PC, IBM sold the floppy drive to the end user via sales of IBM's PC, and IBM was called the OEM in relation to the Tandon floppy drive. However, in another common usage, Tandon would be called the OEM.[4][5] According to Search Data Center, the former meaning (the reseller is the OEM) is the modern meaning, and the latter meaning (the manufacturer is the OEM) is a holdover from an older usage.[6]. The full extent of the confusion can be seen by browsing the contradictory definitions pulled up by Audit My PC from the results of various search engines.[7] In the above example also, the Tandon Floppy drive would be called an OEM product.[8]. In the verb form, it would be said that IBM OEM'ed the Tandon floppy drives. There is a growing market for the sales of OEM products directly to end users via online auction sites and such. An OEM product will differ from its retail version in price, the extent of the warranty, parts, instructions, and sometimes even functionality. OEM hardware can be purchased by end users at considerable savings of 30% or more. For example, OEM hard drives are purchased in a simple plastic bag or brown cardboard box without the additional cables or bulky box found in the more expensive retail package.
Software
OEM, when used to describe software, is used to differentiate that version of the software which is bundled with other hardware or software from that same software package sold on its own as a retail package. The packaging and legal rights that come with the OEM versions of a software package generally differ from what is provided with the retail versions. The functionality of the software is sometimes the same, but it is quite common for the OEM version to be a version with reduced functionality. (For instance the OEM version of Cyberlink PowerDVD supports two-channel audio but not multi-channel sound systems. A customer who wishes to play DVDs with multi-channel sound is required to pay to upgrade to the full version). The OEM version of a software package may also be limited to be usable only with the hardware it came with. For instance the Nero burning ROM OEM software only functions with the same brand burner it is bundled with. Typically OEM software licenses require the installer to agree to additional terms to have a valid license. Microsoft requires certain conditions of distribution and support for its System Builders, which is how it describes the installers with privileges to use OEM licenses. The requirements include: automated methods of installation of the product; customization of the installation to identify the OEM; first level technical support of the product; application of a Certificate of Authenticity (COA) to the hardware; and distribution of original media and booklets. OEM software may be licensed under conditions requiring that it be sold with computer hardware. Such conditions have been ruled null and void by the courts of some countries, such as Germany. In those countries where they are deemed binding, to avoid contravening the conditions while passing OEM software savings on to end users, some retailers will sell OEM software with a token hardware device of small cost, such as an obsolete motherboard, single SIMM, or a cable splitter to satisfy the letter of the licensing agreement. This practice is questionable, and may open the end user to audits by publishers. The practice of utilizing OEMs in today's cost competitive environment falls under the broader category of outsourcing - a popular business strategy which taps into the original manufacturer's ability to drive cost out of production of the product through manufacturing economies of scale; thereby being able to pass on a more competitive purchase price to the reseller which, in turn, makes each partner in the transaction more competitive.
False OEM software in spam e-mails
Companies and websites passing off pirated and illegal software as "OEM software" have become a major source of e-mail spam. According to SurfControl OEM scams accounted, as of December 2003, for 5% of all e-mail spam.[1]
Related Terms
Bulk components
Bulk components are often mistakenly referred to as OEM products. However, these do not actually differ from retail versions, except in their packaging and/or the way they are procured.
Original Design Manufacturer (ODM)
The term Original Design Manufacturer is used to describe companies that design and manufacture a product that is then sold under other brand names and does not necessarily acknowledge the Original Design Manufacturer brand. Some OEMs (original manufacturers, not resellers) have taken on a larger role in the design of the product they are manufacturing and become ODMs.
Value Added Reseller (VAR)
When the term OEM is used to refer only to the original manufacturer of the product (such as with computer hardware), the term Value Added Reseller is used to describe the reseller. The use of OEM as a verb results in the common misunderstanding/reversal of meaning. For example, a VAR might say that they are going to OEM a new product, meaning they are going to offer a new product based on components from an OEM. However, this could also be taken to mean that the VAR considers themselves to be the OEM. An OEM will typically build to order based on designs of the VAR. For example, a hard drive in a computer system may be manufactured by a corporation separate from the company that markets and sells the computer, or a loudspeaker in a stereo system made by a company that specializes in audio manufacturing.
See also
References
- ^ http://www.webopedia.com/TERM/O/OEM.html
- ^ http://www.helpwithpcs.com/jargon/oem.htm
- ^ http://www.sandisk.com/Oem/Products/
- ^ http://www.wisegeek.com/what-is-oem.htm
- ^ http://smallbusiness.sagesoftware.com/OEM/
- ^ http://searchdatacenter.techtarget.com/sDefinition/0,,sid80_gci214136,00.html
- ^ http://www.auditmypc.com/acronym/OEM.asp
- ^ http://compreviews.about.com/od/general/a/OEM.htm
