navigating the maze of oem terms with dmitry shesterin

NAVIGATING THE MAZE OF OEM TERMS

withDmitry Shesterin

© 2015 Dmitry Shesterin. All Rights Reserved.

Agenda


Before you partner Common terms Uncommon terms Implementation best practices

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Before you partner


Assess Build / Buy / Partner options Evaluate all potential arrangements Get consensus on:

Parameters Assessment spectrum Weighting

Scoring:Consideration rating = 80%5 - Excellent / Highest4 - Good3 - Average2 - Below Average1 - Poor / Low

Criteria Wei

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Opt

ion

1

Opt

ion

2

Opt

ion

3

Opt

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4

Opt

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5

Criteria 1 25% 5 4 2 3 2Criteria 2 25% 4 5 5 2 2Criteria 3 20% 5 4 3 3 2Criteria 4 20% 4 3 3 3 3Criteria 5 10% 4 4 4 4 2

Percentage 100% 89% 81% 67% 57% 44%1 2 3 4 5

Consider Consider Reject Reject RejectRank

Recommendation

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Secure alignment• With management preferences

• Board / CEO / COO / Departments

• Organizational capabilities• Abilities, experience, skills

• Availability of resources• CapEx / OpEx requirements• Extra office space• Additional regulations or certification


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Agenda



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Common Terms - Royalties• Royalties• Values can be deceptive• Net or Gross?• Currency hedging• Payment terms

• Net 30 / 60 / 90• Regular sales volume reports• Invoicing frequency vs reporting frequency

• Revenue recognition


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Common Terms - IP• Who owns what:• OEMee:

• IP for all technical designs• Even if designs are based on feedback from OEMer• Original trademarks and branding elements• Own customer data

• OEMer:• New trademarks• Copyright• Resulting offering• Own customer data


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Common Terms - Embargos

• Refrain from competition• Geographically• Vertically• Based on customer segmentation

• Employment• Goes both ways

• Sharing of customer data


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Common Terms - Termination

• Duration of initial agreement(from one to five years)

• Automatic renewal every year thereafter• Cancellations:

• At least 6 months notice• Consider scaled penalties• Support to extend for one to two years

• Can be used to renegotiate other terms


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Agenda



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Uncommon Terms - Commitments

• Promotional spend• Fixed or variable amount over time• Plans typically signed off on by OEMee

• Source code in escrow• Dedicated resources

• In Product Management / Marketing• In Support based on SLA or other KPIs• Development and QA


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Uncommon Terms – Nuts and Bolts

• Localization• Who pays for different languages• Who pays for localization of different components

• Technical documentation• Tends to be expensive and often underestimated as an expense• User guides, release notes, known bugs, features

• Upgrade / update lag• Avoid being used as beta customer


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Uncommon Terms – Brand & Price

• Brand attribution• In product UI• In marketing and sales collateral

• Price floors• Establish MSRP• Agree on escalation triggers and protocol (volume, deal type)• Don’t become a loss leader with your OEM product in a bundle

• Everything is negotiable!


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Agenda



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All Systems GO!

1. Learn EVERYTHING about your partner2. Confirm stakeholders with authority3. Draft a term sheet (integrative stage)4. Codify terms in a contract (distributive stage)5. Launch6. Maintain7. Evaluate your options


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Best Practices to get there• Keep regular communication consistent

• Secure authority (budgets and resources if needed)• Internal status updates for governance• Regular check-ins with key outside stakeholders

• Put faces to emails• Development / QA to co-locate pre-launch• Sales and marketing to cross – train @launch

• Provide a runway for sales quotas• Allow champions to emerge• Focus will grow organically


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Best Practices to stay there• Maintain good relationships

• Meet in person at least once a year• Insure quarterly visits by cross functional members• Get to know your partners personally• Share successes, not only escalations• Avoid changing contact persons

• Coordinate in advance• Events to avoid pitting• Customer couponing• Channel partner promos and acquisitions


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Happy Partnering!


Email [email protected] for deck copy, template files and frameworks

Connect on LinkedIn at linkd.in/shesterin Follow me @dscheste

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mailto:[email protected]

http://linkd.in/shesterin

navigating the maze of oem terms with dmitry shesterin

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