The Changing Face of OEMs

To some, ‘OEM’ might just be another mysterious business acronym. OEM is short for Original Equipment Manufacturer. However, even if you are familiar with the acronym, the definition of it has evolved over time.The traditional definition of it identifies a business-to-business relationship in which a business or OEM, such as ABB sells parts to another company (known as the value-added reseller (VAR)). The VAR then uses the parts from the OEM to customize and create its own product (hardware, software or intellectual property). The second definition is newer and most common in the computer industry. This refers to the VAR as the OEM. In other words, the company that customizes, rebrands and sells a product as its own is considered to be the OEM.

As many consumers see only the final products, how a product came to be is left up the imagination. Many of the products that consumers know and love would not actually exist if it were not for the relationships between OEMs and other companies. For example: the iPhone. Using the second definition of OEM, Apple is considered the OEM as it partnered with Foxconn, its supplier. The partnership enabled Apple to focus solely on the success of the iPhone instead of the extra background work that goes into the supplying it.Successful OEM partnerships enable businesses to team up, leading to a high quality product produced on a large scale. Like any partnership, some are successful and some are not. The connection of Apple and Foxconn certainly resulted in a successful partnership that further launched the success of the iPhone.

Though the final products of these partnerships commonly end up with high quality products at a competitive price, there are other companies that offer competition. For example, a parts company may join the market to offer a similar product at a lower price point, yet of lower quality. This is often seen as an aftermarket part. Quality and price can range across different offerings that will drive companies on the market to compete even further benefiting the customers as the cost of some higher priced products may drop to avoid losing customers. Some people, for example those who want to build their own computers or who want to repair their own cars, now go directly to OEMs to ensure that they use products that are of high quality.Customers are also commonly encouraged to go to OEMs directly because compatibility will not be a risk as it sometimes can be with aftermarket products, the warranty is clearly stated and upheld, support is offered and quality parts make for a better investment.As technology continues to improve, so does the quality of OEM products.