OEM VS Reseller how do I build the business case for it?


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So here's the dilemna. I have a software product that is a value add to ERP system for mid to large organizations. I found a reseller and we sold to a large customer our product customer as an add on to theirs on a commission basis. Our company was looking for a small amount of cash to help us with cash flow. I turned to my closest contact in that company and asked what the possibility was of getting a loan from them. They told me they don't loan money but if I would build a version of a small business package they could license and resell with their product and then they could make the investment and would share the revenues with us on everything they sold. So I agreed. The challenge now is the partner needs to sell this story to his partners that they should do an OEM agreement with us and he knows they will say why should we OEM when we could just resell as we already have and if we pay for it what's in it for us? The other part of this is the version we both want to build will be generic ( not their product specific) where we can both sell it independently of one another that's why its not a straight oem deal. How can we make the business case for this to the other partners?

Mentor Partnerships

asked Nov 20 '10 at 06:16
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Stacey
484 points

1 Answer


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If the partner resells the product under your brand name (as a standard reseller), customers will learn your name, and the brand value will accrue to you.

If the partner becomes an OEM for your product, presumably they will put their brand name on it, and you will not be earning any brand value.

From your perspective:

  • You would prefer a reseller agreement if you wish to build up reputation and brand, and you want the end-users to come to you with their future software needs
  • You would prefer an OEM agreement if you think that the software will sell so much better with the other company's brand name attached to it that you are willing to forego any brand equity that you might have earned.

From their perspective:

  • They will prefer a reseller agreement if they don't want to provide support and they don't want to risk their brand being tarnished if you fail to deliver
  • They will prefer an OEM agreement if they don't want customers finding out about you and, possibly, going around them in the future with their software needs.
answered Nov 21 '10 at 14:00
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Joel Spolsky
13,472 points
  • Ok so if the reseller is going to invest money for us to build an SMB package whether branded theirs or not what type of compensation plan or money arrangement should their be so they can demonstrate a one year return on investment? – Stacey 8 years ago

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