What is OEM?

The term, OEM (original equipment manufacturer) refers to companies that make products for others to repackage and sell. Resellers buy OEM products in bulk, minus the costly retail packaging that comes with individually sold units. The product itself is essentially the same as its more expensive, retail-packaged sibling. OEM products are used in many industries, but are perhaps most prevalent in electronics.

Generally, dealers of OEM products add something of value before reselling the merchandise. An OEM vendor that does this is known as a "value added reseller" (VAR). A VAR might build components, sub-systems, or systems from quality OEM parts. OEM goods allow VARs a wide range of creative marketing choices, which permits smaller dealers to be competitive in the marketplace.

OEM products can be utilized at several different levels of industry. For example, assume a fictitious company, "Head Music," makes popular sound cards, and wants to introduce a DVD player to the marketplace. Not making DVD players themselves, they enter into a contract with Sony to supply OEM DVD players to them. Head Music receives the Sony-manufactured DVD players in bulk, affixes their own logo to the players, bundles them with their sound cards, and they are repackaged as "Head Music DVD and Sound Card."

Taking this basic concept a step further, assume that a local Mom and Pop VAR wants to use Head Music's DVD package in PC clone systems they are building. They contact Head Music and enter into a contract to buy the DVD/sound card combo in bulk, or OEM. They will be shipped to the VAR minus the expensive retail packaging, at a substantial savings. The VAR will install the packages in their PC clones, along with other OEM products, from motherboards to CPUs and hard drives. Even the operating system will be OEM, for example, from Microsoft. When the VAR is finished they can offer a PC clone with brand name components and software at a competitive price.

OEM software will have different product numbers than retail packages, and support may be provided by the VAR, rather than the maker of the software. Functionally, OEM and retail versions of software should be essentially the same.

OEM hardware can be purchased directly by the public at a savings of up to 30%. Hard drives are typical OEM items, purchased in an anti-static wrapper without box, cables and often without drivers or a manual. The warranty is generally the same, and drivers, manual and support are available online, when not provided with the product itself.

Some OEM products, however, do have shorter warranties. This is true of many CPUs where the retail version carries a three-year warranty, and the OEM version, one year or less. Check any OEM product you are considering for support and warranty details.

OEM goods are a great value for the consumer and are environmentally friendlier than waste-producing retail packaging. However, for those new to technology, retail packaging will supply everything you need for the product, often including a toll-free number for support. Meanwhile, over-the-counter OEM products might be better suited to those who are at least minimally computer savvy.