Are you maximizing your software sales via the OEM channel?  

As ISVs are aware, there are several keychannels for selling your software.  Depending on the type of products you manufacture and the markets they sell into,  the OEM channel can be a key channel for distributing your software.  However, several questions may arise when discussing your overall distribution strategy. 

Should I OEM, and if so, what are the advantages?  Disadvantages? What is the potential for channel conflict?  How do I go about finding partners?  Can I leverage other sales  through the OEM channel?  I can help you answer these and other important questions and ensure your success in the OEM channel. 

 Let’s take the above questions, in order.

 Should I OEM, and if so, what are the advantages?

 Obviously much of this will be dictated by your corporate or business unit strategy.  Adobe OEM’d software with pricing starting at “free” and going up to over $100/unit.  The goal for freeware might be to expand marketshare, while there can clearly be a profit center around higher priced OEM software.For example, if one of your goals is proliferation, you might be able to gain market share against a competitor by strategically bundling your application with another pieceof hardware, or software.  A key advantage in this type of scenario is that the partneryou choose to bundle with may be able to get you into a  market that would normallybe either difficult or impossible to get into.  In Adobe’s case, if you look at PostScriptlicensing as an example, it would be difficult for Adobe to sell PostScript directly to customers, because this software is typically customized and highly dependent on the hardware it’s tied to.  PostScript printer manufacturers, therefore, are a likely bundle candidate.

 What are the disadvantages?

 Again, this is highly dependent on your company’s goals and situation.  Let’s look atbundling digital imaging software as one example. Adobe bundles their mid-level digitalimaging software, Photoshop Elements, with many different devices including scannersand digital cameras.  If they feel they are losing money by bundling with varioushardware devices (bundling prices are typically lower than channel prices) then theywould not do so.  One caveat is that they might continue to bundle if they felt thatsome other strategic objectives were being met that outweighed any potential lossin profits that occurred through bundling.

 What is the potential for channel conflict?

 This of course is highly dependent, again, on your company’s channel stratey andspecific situation.  In some instances, channel conflict could be very high.  Forexample, you will find few, if any, imaging scanners bundled with the full version ofPhotoshop.  Photoshop sells for several hundred dollars at retail.  Discounted versionsof this product could negatively impact channel sales.  Coversely, if you look at asituation such as a new mobile phone application in start-up mode, if you don’t alreadyhave an existing channel, putting together a bundle deal with a handset manufacturercould be the perfect way to get your product/company launched.

 How do I go about finding partners?

 First, I would recommend hiring an experienced OEM software salesperson or consultant to help guide you.  Part of the process of finding partners will relate back to your industry.  If you developmobile applications, then the handset manufacturers (Samsung, RIM, Sony, etc.) areobvious choices.  But what about the possibility of bundling your app with anothersoftware manufacturer?  Sources for finding partners to bundle with include yoursales staff, existing distributors (in some cases), executive staff, tradeshow andindustry contacts, to mention a few.  It is likely you will find some obvious partners, as in the case above, and some less obvious partners that may only be uncovered through dedicated prospecting.

Can I leverage other sales through the OEM channel?

 The answer is: Yes.  How is this achieved?  There are several ways.  One is based around an “upsell” model.  For example, let’s say you develop handwriting recognitionsoftware and have 3 different versions available, an entry level, mid-level and professional version.  You might consider bundling your entry level version with acomputer manufacturer, and offering an “upsell” to a higher end version, either throughyour partner or direct (more on that in a later article).

I hope you found the above info useful in helping you decide whether or not to utilize the OEM channel as part of your overall software distribution strategy.

Stay tuned for more informative articles, and feel free to visit me at mbrucechandler.com for more articles and information on how to succeed in the OEM Channel.

 Bruce Chandler

bruce@mbchandler.com

www.mbrucechandler.com

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