Supply chain value-add

Every day, software distribution companies are hunting for ways to improve their offerings. While some are adding new products to their portfolios, others are looking for increasing value to offer their resellers. But, while all of them are feeling the speed and technology pressures of the software industry, some have risen to the challenge.

“The life of any software product nowadays is only a year or two in its current form, and you must maximise the return on your investment in that product in a very short time,” says Etienne Wagener, General Manager at Phoenix Software. “The OEM channel is one more channel to add to our other distribution methods, to ensure that all of our customers are getting the best possible pricing and service.”

This is one of the reasons that Phoenix Software is growing its OEM partnerships. “A certain amount of conflict among channels is inevitable, although careful planning will minimise it. OEM licensing need not conflict with other channels, but can actually help build sales in them by giving a broader number of users a taste for the product, and then offering these users upgrades,” adds Wagener.

OEM deals provide a number of other benefits to both the channel and the software users, the main one being better pricing. The cost savings are passed down through the supply chain, resulting in the consumer being able to avail himself of premium software products without having to pay the premium retail prices.

“The retail channel typically uses colourful retail boxed products, with installation manuals, software CDs etc. OEM bulk-pack products do not have fancy packaging materials and are often produced in much higher volume, both of which result in much lower prices that are not generally available to the public, but it's a win-win because the OEM products are of the same quality as their retail counterparts,” explains Wagener. “OEMs choose to bundle or preload premium software with their devices, as the value-add is significant, while the cost to acquire the added value is minimal. This leads to margin protection for vendors on the one hand, and consumer satisfaction on the other.”

This is, in fact, one of the reasons that most hardware companies make use of OEM products: the fact that they are of guaranteed high quality. In addition, Wagener says, OEM firms only deal with suppliers that are capable of keeping up with their demands to enable timely production of high-quality products. “Phoenix Software is already dealing with several of the tier 1 hardware vendors and distributors in South Africa, and the range of available products are growing steadily,” says Wagener.

Too good to be true? It can be.

Wagener says OEM software has received a bad reputation as a result of unscrupulous dealers and distributors reselling old products - often illegally - through OEMs and online. “If you see software advertised at really low prices, you would be right to be sceptical. By definition, OEM software is not something that can be resold, and should only be distributed with specific hardware,” Wagener explains. “If it is sold in any other way, it is tantamount to piracy. However, when done right, OEM deals are a fantastic value-add within the supply chain.”