OEM Trouble

11:00 AM -- Relationships among original equipment makers, or OEMs, are commonplace in technology, and for the most part they are valuable.

Often a company will leverage another company's expertise and then add value to the products via software or additional hardware to create essentially a new solution. Some of these relationships are so tight that the companies don't even want you to know they are there. These OEM relationships are fine. Why should a storage software company design its own hardware if a suitable reference platform is available elsewhere?

However, the OEM relationship that does concern me -- and I think should concern users -- is the one where the relationship is really more of a reseller relationship. In this case, the company is merely taking the OEM product and adding virtually no value to it. The primary goal is to increase revenues by theoretically leveraging an installed base.

There is nothing wrong with increasing revenues. My concern is when that OEM product distracts the organization from its core product offering.

For example, I know of a tape manufacturer that tried and tried to get into the online disk storage market. It sold one set of OEM products, but that supplier was bought out from under it. It then came up with a strategy that said the disk didn't matter, it was the storage software that mattered. It then proceeded to get a software-only virtualization solution through an OEM deal, and a backup solution, a replication solution, and an email archiving solution. Those sales didn't go all that well, so the vendor got another OEM disk solution.The result was total confusion. The company provided extra incentives for its salespeople to sell disk (remember, tape was its core and also its most profitable offering). That didn't increase revenues all that much, so then the firm hired disk sales and engineering specialists to help its salespeople sell more disk. Again, it was pushing a less profitable product compared to its main product line.

As you can imagine, this was bad for the company. But it was also bad for users. Why? Users lost a company that was building great tape and tape library solutions. Instead of tending to its knitting and making great tape, the manufacturer stretched itself too thin and became average at everything. It could have been the company I have been clamoring for in my "tape canceled" rants (here and here), but instead it was marginalized, bought, and it faded into oblivion.

This OEM-for-resell mentality risks distracting a company from what it does best and puts core offerings at risk from more focused companies. If you are going to venture into a new market, at least be committed enough to buy the technology -- or better yet, develop it yourself.

George Crump is founder of Storage Switzerland , which provides strategic consulting and analysis to storage users, suppliers, and integrators. Prior to Storage Switzerland, he was CTO at one of the nation's largest integrators.