The cost for the former should be predetermined. For example, what happens if the manufacturer gets bought out by another vendor who competes with the OEM? Some OEM agreements include using an escrow service. An escrow service is used to deposit the source code and is perceived as an insurance policy in case the manufacturer fails to fulfill their commitments.
There are several issues with escrow services:. If for whatever reason the OEM ends up with the source code, will they be able to devote the resources to take the code, understand it and start maintaining it? Escrow services will only benefit the OEM if the code that was deposited is really the code that is needed to compile the product and is up to date. To verify this, the escrow service should provide a verification service where they take the code and the associated build instructions and build the product and do basic testing in their labs.
This can incur a significant cost that must be taken into consideration. This article and its contents copyright c by Daniel Shefer. View all posts. I am going to teach you our approach to creating meaningful buyer personas that I use in my business at Bestbuyerpersona.
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Skip to content. Home Resources Articles. Daniel Shefer. Aug 9 - ' What is an OEM Agreement? Why OEM? Competitive advantage: Companies who are able to enhance the functionality of their product beyond that of their competitors, they stand to gain market share faster than their competitors.
Time to market: OEM relationships are often set up to decrease the time it would normally take to develop, test and release a new product, or feature. Companies may not have the development skill-set in house. If they do, it may make more sense to have those resources applied to a potentially more profitable project that is closer to their core business.
Licensing the technology that will enhance your own offering. By adding Real Streaming Media technology to their products, the demand for our own servers has actually increased. The OEM relationship is not a win-win situation for both sides.
The agreements are too complex and hard to implement. One of the sides needs to refer constantly to the contract to get things done. One of the sides is not interested in investing the resources to pursue the agreement. On the OEM side, unless the agreement is core to their business, soon after the honeymoon i. Channels are driven by effort vs. The OEM underestimates the resources needed to sell the resulting product.
Will they build something bigger and better than the original product i. If not, they may turn out to be limited to an additional sales channel offering marginal value. Who will manage the relationship? Does this person have the skills and resources to make the agreement work? The agreement should set up a joint Product Forum that includes Product Managers form both companies that meets regularly to discuss customer feedback, product requests, bugs etc.
Agree on release schedules and what a point release includes. On what terms will the license be renewed? Will it be automatic? With 90 days notice? If the OEM has their own distribution channels, the agreement has to support this. If there are other vendors reselling the product you want to resell: Check if any of them have exclusivity rights and if so, what they include. Make sure that your respective positionings do not clash. Exclusivity OEMs always prefer exclusivity but of course would never want to give this to their channels.
Payments A common pricing model that vendors use includes an up front OEM licensing fee, an annual volume-based fee and an annual support fee. Regular audits are recommended if the OEM is not known to have strong internal controls. Branding The OEM agreement should cover whose brand will be in front of the customer. There are two approaches as to who owns the results of the NRE work. This is done to prevent ambiguities re. One such limitation can be a time limit where other OEM?
This option is the exception rather than the rule. The support costs the OEM is obligated to. Are they per incident, hourly, or per annum? What problems are covered by the support agreement? For example, if the OEM creates a bug when tinkering with the installation script, is this covered in the fixed price support costs?
What are the escalation procedures and turnaround time to get a problem resolved if the OEM cannot resolve an issue? A well structured support system is something that the manufacturer can charge for.
Training The OEM agreement should detail the extent and frequency of product training. Disputing Issues The OEM agreement should specify that when dealing with technical issues that are not covered by the OEM agreement that people from each side will come to an agreement on the relevant issue.
Escrow Some OEM agreements include using an escrow service. There are several issues with escrow services: If for whatever reason the OEM ends up with the source code, will they be able to devote the resources to take the code, understand it and start maintaining it?
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