Software partnerships and business models: OEM

The European Workshop on Software Ecosystems is an annual event which connects top notch researchers and business professionals in the field of software and platform ecosystems as well as business networks. Here is an example of a topic we will discuss at the event.

OEM

In an OEM scenario the software vendor provides OEM software to the software partner. The software partner sells the OEM software as part of his solution. Usually, the software partner charges no price for the OEM software, but for his own solution. This is the key difference between OEM and resell.

The software vendor delivers the OEM software to the partner, which pays a license fee and maintenance fee to the software vendor. The license fee for the OEM might be a share of the revenue of the partner product containing the OEM software. Or it might be a constant fee that applies per copy of the OEM software shipped to the customer.

Business Model Canvas for OEM software

In a generic view, the value proposition of outbound OEM for a customer (software vendor) is that the customer saves development cost and time and gets a quality product.

For customer segments, this business model is generally limited to software vendors but might also apply to hardware vendors shipping hardware with embedded software. Based on the specific functionality of the OEM software, it might be further limited to specific software vendors. Customer relationships to software vendors using the software are important. As a consequence, the network of partner companies is the main channel.

More details and background information can be found in these books: