1.
NAVIGATING THE MAZE
OF OEM TERMS
with
Dmitry Shesterin
© 2015 Dmitry Shesterin. All Rights Reserved.

2.
Agenda
© 2015 Dmitry Shesterin. All Rights Reserved.
 Before you partner
 Common terms
 Uncommon terms
 Implementation best practices
#PCToronto

3.
Before you partner
© 2015 Dmitry Shesterin. All Rights Reserved.
 Assess Build / Buy / Partner options
 Evaluate all potential arrangements
 Get consensus on:
 Parameters
 Assessment spectrum
 Weighting
Scoring:
Consideration rating = 80%
5 - Excellent / Highest
4 - Good
3 - Average
2 - Below Average
1 - Poor / Low
Criteria
Weight
Option1
Option2
Option3
Option4
Option5
Criteria 1 25% 5 4 2 3 2
Criteria 2 25% 4 5 5 2 2
Criteria 3 20% 5 4 3 3 2
Criteria 4 20% 4 3 3 3 3
Criteria 5 10% 4 4 4 4 2
Percentage 100% 89% 81% 67% 57% 44%
1 2 3 4 5
Consider Consider Reject Reject Reject
Rank
Recommendation
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4.
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
© 2015 Dmitry Shesterin. All Rights Reserved.
#PCToronto

5.
Agenda
© 2015 Dmitry Shesterin. All Rights Reserved.
 Before you partner
 Common terms
 Uncommon terms
 Implementation best practices
#PCToronto

6.
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
© 2015 Dmitry Shesterin. All Rights Reserved.
#PCToronto

7.
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
© 2015 Dmitry Shesterin. All Rights Reserved.
#PCToronto

8.
Common Terms - Embargos
• Refrain from competition
• Geographically
• Vertically
• Based on customer segmentation
• Employment
• Goes both ways
• Sharing of customer data
© 2015 Dmitry Shesterin. All Rights Reserved.
#PCToronto

9.
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
© 2015 Dmitry Shesterin. All Rights Reserved.
#PCToronto

10.
Agenda
© 2015 Dmitry Shesterin. All Rights Reserved.
 Before you partner
 Common terms
 Uncommon terms
 Implementation best practices
#PCToronto

11.
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
© 2015 Dmitry Shesterin. All Rights Reserved.
#PCToronto

12.
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
© 2015 Dmitry Shesterin. All Rights Reserved.
#PCToronto

13.
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!
© 2015 Dmitry Shesterin. All Rights Reserved.
#PCToronto

14.
Agenda
© 2015 Dmitry Shesterin. All Rights Reserved.
 Before you partner
 Common terms
 Uncommon terms
 Implementation best practices
#PCToronto

15.
All Systems GO!
1. Learn EVERYTHING about your partner
2. Confirm stakeholders with authority
3. Draft a term sheet (integrative stage)
4. Codify terms in a contract (distributive stage)
5. Launch
6. Maintain
7. Evaluate your options
© 2015 Dmitry Shesterin. All Rights Reserved.
#PCToronto

16.
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
© 2015 Dmitry Shesterin. All Rights Reserved.
#PCToronto

17.
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
© 2015 Dmitry Shesterin. All Rights Reserved.
#PCToronto

18.
Happy Partnering!
© 2015 Dmitry Shesterin. All Rights Reserved.
 Email d.shesterin@gmail.com for deck copy,
template files and frameworks
 Connect on LinkedIn at linkd.in/shesterin
 Follow me @dscheste
#PCToronto