OEM: the highest ceiling and the longest runway

OEM is the partnership where you disappear. Your part goes inside their product. Their name is on the box. The customer may never know you exist, and if the deal is structured right you are fine with that, because every unit they ship is your revenue and you did not have to sell a single one.

It has the highest ceiling of any partnership type I have worked. It also has the longest runway, and companies that do not understand the second part quit before they see the first.

Here is why it takes so long. An OEM partner is not agreeing to sell your product. They are agreeing to build their product around yours. That means their engineering has to design you in, their test group has to qualify you, their supply chain has to carry you, and their roadmap has to assume you will still be there in three years. None of that happens because a partner manager had a good meeting. Co-build comes before co-sell, and co-build takes quarters.

The one I am proudest of was an encoding accelerator that a major streaming platform adopted at the moment that platform was deciding what it would become. We were inside a partner's product first. Their appliance, our silicon. When the streaming platform got big enough to want the hardware without the appliance around it, the partner did something unusual and, in hindsight, generous. They asked us to take that customer direct. They knew the volume was going somewhere their software was not, and they would rather keep the relationship with us than lose both.

On the other side of that story, we were the one building on someone else's platform. A much larger company's media platform was the thing we designed into, and they named us their partner of the year four years running for exactly that kind of work. Ten multi-million-dollar deals came through that one platform in that stretch.

The failure mode is the flip side of the ceiling. You become a line item in their bill of materials. The day they find a cheaper part, you are gone, and you find out from a purchase order that did not arrive.

So the test. Does the customer know you are in there? Not the OEM. The customer. If the answer is no, you have a supplier relationship with a long runway and no floor. If the answer is yes, you have a partnership, because the customer will ask for you by name when the OEM shops for a cheaper part.

Next Tuesday: strategic alliances, and the logo slide.

Who at your biggest OEM's customers knows your name?

Part 10 of 15 in the Which Partnership series.