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OEM - original equipment manufacturer

OEM (pronounced as separate letters) is short for original equipment manufacturer, which is a misleading term used to describe a company that has a special relationship with computer and IT producers. OEMs are manufacturers who resell another company's product under their own name and branding.

OEM is Similar to VAR

While an OEM is similar to a VAR (value-added reseller), it refers specifically to the act of a company branding a product to its own name and offering its own warranty, support and licensing of the product. The term is really a misnomer because OEMs are not the original manufacturers; they customize the original product.

An Example of OEM

When a computer technology producer manufacturers its product, for example, a computer graphics card, they will usually make two or more versions of the product. One version is distributed by the manufacturer direct to the consumer retail market, using its own branding and offering its own warranty and support.

Other versions of the manufactured product will be distributed through the manufacturer's OEM and authorized reseller distribution channels. Usually OEM products are the same quality as the retail versions, but warranties may be different, the manual and bundled software may be non-existent, and the cables and connectors required for installation might not be included. In some cases it may be large quantities of the product purchased in bulk by the OEM for mass-production of pre-built systems.

Recommended Reading: Learn more about different OEM Business Models in this Webopedia Quick Reference article.

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