Product OEM Strategies: Approaches and Best Practices
Using third-party technologies to enhance the capability of existing applications is not a new concept in the software industry. The return on investment (ROI) analysis recommends that development from scratch is a lost cause, and organizations should integrate instead. A support strategy for third-party ‘systems, software and components’ integration is better known with the acronym OEM (Original Equipment Manufacturer).
The recent power hour hosted by Harbinger Systems was focused on Product OEM Strategies, in which industry experts Eric Shepherd (Executive Director, Talent Transformation), Joshua Medina (Sr. Account Executive-Embedded Platform, Workato), Llyod Fassett (HR Technology Consultant & Labor Marketplace Entrepreneur, HRTech Advisor), and Shrikant Pattathil (President, Harbinger Systems), shared their thoughts and experiences on market trends driving the need for OEMs, go-to-market product OEM strategies,various approaches to OEMs, and checklist that can make OEM partnership a win-win for the stakeholders involved in an OEM initiative.
Key OEM Market Players
OEM Partners find customers by providing a customized software solution that can be integrated into their products/solutions or platforms. The level of customization that sets them apart is the ability to personalize the solutions sold to match the demands of the business and what they can accomplish for clients.
At a broad level, there are two important key players in an OEM software partnership, explained Shrikant Pattathil while setting up the context for the discussion.
- OEM Platform Company: It provides an end-to-end solution or multiple workflows or a complete package to an end-user. Platform companies are the ones who are selling the service that an end-user consumes. For example, a platform provider for a Customer Relationship Management (CRM) or a Human Resources Management (HRM) platform.
- OEM Technology Company: It enables a specific feature or a specific workflow, which is embedded in the platform. For instance, a payment processing module within a large platform or an analytics platform integrated into a large system.
While this post covers some of the salient points discussed during the Power Hour, it includes a link to the Power Hour recording containing the entire panel discussion, at the end.
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To further contextualize the former, Shrikant gave a brief on Skimthru or ‘OEM Skimthru’, an artificial intelligence (AI) powered video navigator tool developed by Harbinger. Skimthru generates easy-to-understand word clouds for videos. These word clouds highlight the most important parts of a video, facilitating the fast absorption of information important and relevant to an end-user. With Skimthru, a user can intelligently navigate through videos and can save valuable viewing time.
Platform companies can get a competitive advantage by having the unique capability to navigate through videos quickly, that would otherwise take a long time.
The realization of why and where the need for an OEM solution arises is the essence of a successful OEM strategy. Watch the Power Hour to discover what piqued our panelist's interest in this topic.
OEM Strategies & Best Practices – Expert Recommendations
To be on the winning side of an OEM business, it is critical to have a clear picture of the key drivers that concoct an OEM deal. Drivers such as the go-to-market capability with which a feature can be easily integrated into a large platform,improved user experience for better engagement as also adoption, workflows, and the additional /attractive features in a complete platform catering to the requirement of each stakeholder, opined Shrikant.
While working with several potential OEM partners, Joshua Medina discovered that while considering an OEM approach into commission, some vendors were just interested in research, while others had a strategy in place and some had a very bad experience working with many OEM providers.
Joshua shared his perspective on the recommended OEM approach for mid-size platform companies. “The first step in the process is to have a strategy in place”, he said. “Then, by taking a holistic approach, instead of trying to align with what the vendor offers, bringing the bigger strategy to a possible OEM vendor to see if both align,” is the approach he strongly recommended. It is important for expectations to converge on one core vision, he emphasized.
To pursue a significant OEM approach for either the development of a core feature or integration of a backend module into the system, organizations must have a clear understanding of the key decision-makers and have their priorities in place from the start.
Strategically, who owns the customer relationship is the key decision-making driver for an OEM approach, according to Llyod Fassett. The reason being,“if you're going to be the platform company, one of your responsibilities as a partner is to assist in navigating the various possibilities available in terms of the vendors that can be integrated into the platform”, said Llyod.
Eric Shephard, on the other hand, believes that using a tool to chalk out various critical data points, such as market costs, maintenance, and various product management criteria, is a logical and less back-breaking process to select the right OEM approach. When these crucial data points are combined with the executive team's concerns and suggestions, it gives a clearer perspective on the selection of the best OEM approach.
Are you considering entering an OEM agreement by merely having a strategy in place?
Before taking the plunge take a step back and consider the following framework to make an OEM partnership successful.
ISVs (Independent Software Vendors) cannot afford to lose time or resources when planning their next product development strategy. They need to focus their efforts on key differentiators, leaving the rest to off-the-shelf technology.
Are you thinking of taking the OEM route in future? Don't sweat it. Contact us at hsinfo@harbingergroup.com to discuss your specific OEM needs.
Watch the Power Hour recording to see what our panelists suggested are the most important things to consider when starting an OEM partnership.
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