This article aims to discuss the definition of what an Original Equipment Manufacturer and how it works.
There are products that are composed of several components and not all parts are made solely by the company and this is where original equipment manufacturer comes into the picture because they are the ones that produce the other components of the final product. The term value-added reseller or VAR can be applied to this practice since the price of the final product can be increased due to some parts being made by other companies. Original equipment manufacturers create custom made parts for their clients and the effect of this kind of service would be an increase in selling price of the final product because nothing custom made ever comes cheap.
A good example would be car companies since cars have various parts in them and these parts are not all made by one company. If you would take your car and break it down into pieces, you would most likely see parts that are stamped with a different company name. The sole role of OEM is to produce components because other tasks such as assembly or incorporation of these components to the final product would be the job of the company they are working with.. If the final product did not have parts made by other companies then you would expect it to be cheaper.
As the world rapidly advances, OEM also advances with it and now these companies have a new term used specifically by companies under the computer industry. Rebranding is the most important terminology here because this is exactly what companies do tot he products or components that they buy off other companies. There are some computer companies that have created a certain software that people would want to get a hold of and to make money out of this, other companies would buy this software and add it to their own product to attract buyers. In this scenario, it would be the company selling the computers that would be considered to be the original equipment manufacturer.
How does an OEM operate?
As you might have already realized, VAR and OEM companies are those companies that cannot stand alone on their own but rather, they work together to make a profit. The production of certain parts is an important aspect in the finish product and in making a sale, which makes EOMs very valuable to VARs. The two companies may be working hand in hand to create the final product they can sell but in reality, the OEM just handles the making of the components and it would be solely up to the VAR to handle the finish product.