Key Takeaways

  • OEM SaaS agreements allow for SaaS solutions to be rebranded and sold by OEM businesses, which may also provide additional services like training and support.
  • OEM software is pre-installed on devices and can also refer to software integrated into SaaS tools to avoid custom development.
  • OEM and VAR (Value-Added Reseller) terms can overlap, but the former often focuses on hardware, while the latter focuses on selling complete IT solutions.
  • The inclusion of embedded analytics and business intelligence (BI) tools is a growing trend in OEM SaaS agreements.

A SaaS OEM agreement is applicable in situations where the SaaS solution is rebranded for the OEM business and where an OEM company is responsible for providing additional services such as training, implementation, and level one support.

The OEM business determines the pricing, and the customer will then pay that predetermined amount for the SaaS solution. There are some instances where an OEM company will also commit to additional items, such as training a set percentage of its employees or agreeing to a minimum spend over a certain period.

What Is OEM?

OEM stands for original equipment manufacturer. It's a broad term used to describe a series of relationships between:

  • Information technology component makers
  • Software and hardware vendors
  • Distributors and resellers

The term has evolved from primarily meaning a company that originally built a product, which was then sold to others who could rebrand and sell it. Now, OEM can describe a variety of businesses and their relationships in a convoluted, information technology supply chain.

It's not uncommon for OEM relationships to overlap. One business may be acting as an OEM, and at the same time, sell to other OEMs.

OEM SaaS and Its Role in Software Integration

OEM SaaS agreements allow software companies to distribute their solutions to other businesses, often enabling rebranding and additional custom services. These agreements are particularly advantageous in SaaS because they reduce development costs and allow businesses to leverage ready-made, scalable solutions. By using OEM SaaS models, companies can integrate embedded analytics, business intelligence (BI) tools, and other necessary software features, accelerating time to market and reducing the need for lengthy custom development cycles.

Defining SaaS Terms

It's important to start by defining some standard SaaS terms you'll see used:

  • Customer: The person who has the rights to use the software or application.
  • End-user: The person who interacts with the solution or application, be it indirectly and directly. This person does not work directly for the customer.
  • Solution: Also called “application,” it is the software or a special website created, which the customer either rents or owns. This software or website interacts indirectly or directly with the vendor software.
  • Internal use: Solution is only accessed by people who work for the customer.
  • Public use: Available to an end user by paying a fee, or it may be free.
  • Processed document: Any document the software has manipulated or converted.
  • Source document: The initial document before the software does any processing.
  • Transmit: Transmission is how the processed or source document is delivered to the customer. It can be done through electronic means such as an e-mail or via hard copy.

OEM Hardware and Software

The term OEM hardware can take on several different meanings. These can be specific companies such as Dell or Lenovo who buy components from businesses and sell entire systems under their own brand label. Some component suppliers may offer OEM products in addition to retail versions. Brand-name OEMs may even develop relationships with OEM hardware companies who are in the same supply chain.

There are some software companies that offer OEM versions of their products to smaller systems builders, or bigger OEM hardware companies, who will then incorporate the product into their own line. There are third-party applications and operating system software that are preinstalled on items such as:

  • Laptops
  • Smartphones
  • Tablets

These can be considered OEM software.

The Growing Role of OEM Software in SaaS Solutions

In the SaaS space, OEM software is increasingly used to provide essential functionalities, such as embedded analytics, without the need for separate platforms. This integration helps companies deliver comprehensive solutions while reducing costs and the time required for development. One common example is integrating OEM business intelligence tools directly into customer relationship management (CRM) or enterprise resource planning (ERP) applications.

Difference Between OEM and VAR

There is some overlap between OEM and VAR, and the lines between the two can be blurred to some degree. The label “OEM” is often connected to large, name-brand hardware companies and marketers who customize the hardware for their own markets, whereas VAR, or Value-Added Reseller, is often defined as selling a larger information technology solution.

However, OEMs can serve as VARs if they bundle third-party software and hardware parts along with building their own intellectual property into the products they are selling. A VAR can white-label the hardware products they are sourcing from various vendors, which means they resemble downstream OEMs.

OEM SaaS vs. White-Label SaaS Solutions

OEM SaaS and white-label solutions are similar in that both allow businesses to offer third-party software under their own branding. However, in an OEM SaaS agreement, the solution is typically integrated into a larger system with added functionalities like analytics and BI tools, whereas white-label products are typically sold as-is, without customization. This difference can impact the pricing structure and the types of services offered, making OEM SaaS a more integrated and feature-rich option for businesses.

SaaS Reseller and Referral Agreements

SaaS reseller agreements are used in situations where the reseller plans to resell the SaaS vendor's solution and collects the money from the customer directly. The vendor determines the price the reseller will pay, and then the reseller comes up with the price that the customer will pay. The reseller is usually the one who is providing training, level one support, and implementation services, although it depends on the SaaS vendor's business operation model.

A SaaS referral agreement is one where the referring business introduces or “refers” brand-new leads to the vendor. If a deal is reached, the SaaS vendor pays the referral party a percentage of the contract for a stated period. The SaaS vendor is the one who sets the pricing, not the party who referred the lead. You may hear this referred to as an affiliate agreement, but referral agreement is really more accurate.

Customization and Integration in OEM SaaS Solutions

OEM SaaS agreements are particularly popular for their flexibility, allowing businesses to customize the software according to their needs. This flexibility can include features like branding, pricing models, and the integration of additional tools such as embedded analytics. By using OEM SaaS, companies can avoid the high costs and long timelines of custom development while benefiting from a scalable, ready-made solution.

Frequently Asked Questions

  1. What is an OEM SaaS agreement?
    An OEM SaaS agreement allows a company to rebrand and sell a SaaS solution, often with additional services like training and support.
  2. How does OEM software help SaaS companies?
    OEM software reduces development costs by providing built-in, scalable solutions like analytics and business intelligence tools that integrate seamlessly with existing platforms.
  3. What is the difference between OEM and VAR?
    OEM focuses on rebranding and adding value to software, while VAR sells complete IT solutions. OEM often includes integration of additional features such as analytics tools.
  4. What are some examples of OEM SaaS in action?
    OEM SaaS is commonly used for integrating embedded analytics and business intelligence tools into CRM and ERP systems to streamline business processes.
  5. How do OEM SaaS agreements benefit businesses?
    OEM SaaS agreements help businesses save time and money by using pre-built solutions, which can be customized to fit specific needs without the expense of custom development.

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