The document discusses best practices for companies partnering with original equipment manufacturers (OEMs). It covers assessing partnership options, securing alignment within the organization, common terms like royalties and intellectual property, uncommon terms such as commitments and localization, and implementation best practices like maintaining communication and relationships. The goal is to help navigate the complex considerations involved in OEM partnerships.

1. NAVIGATING THE MAZE OF OEM
TERMS
with
Dmitry Shesterin
© 2013 Dmitry Shesterin. All Rights Reserved.

2. Agenda
 Introduction
 Before you partner
 Common terms
 Uncommon terms
 Implementation best practices
© 2013 Dmitry Shesterin. All Rights Reserved.

3. Intro
Pragmatic:
 Management Consultant
 Startup Advisor for Seed & Round A
 VP, Product Management
 VP, Marketing
 Large Capital Project Sales Manager
Academic
 Executive MBA
 BA, Intercultural Communications
Likes
 Theory of pricing
 Being a geek
© 2013 Dmitry Shesterin. All Rights Reserved.

4. Agenda
 Introduction
 Before you partner
 Common terms
 Uncommon terms
 Implementation best practices
© 2013 Dmitry Shesterin. All Rights Reserved.

5. Before you partner
 Assess Build / Buy / Partner options
 Evaluate all potential arrangements
Scoring:
 Get consensus on: Consideration rating = 80%
5 - Excellent / Highest
 Parameters 4 - Good
3 - Average
2 - Below Average
 Assessment spectrum 1 - Poor / Low
 Weighting
Option 1
Option 2
Option 3
Option 4
Option 5
Weight
Criteria
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%
Rank 1 2 3 4 5
Recommendation Consider Consider Reject Reject Reject
© 2013 Dmitry Shesterin. All Rights Reserved.

6. 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
© 2013 Dmitry Shesterin. All Rights Reserved.

7. Agenda
 Introduction
 Before you partner
 Common terms
 Uncommon terms
 Implementation best practices
© 2013 Dmitry Shesterin. All Rights Reserved.

8. 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
• Revenue recognition
© 2013 Dmitry Shesterin. All Rights Reserved.

9. 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
© 2013 Dmitry Shesterin. All Rights Reserved.

10. Common Terms - Embargos
• Refrain from competition
• Geographically
• Vertically
• Based on customer segmentation
• Employment
• Goes both ways
• Sharing of customer data
© 2013 Dmitry Shesterin. All Rights Reserved.

11. Common Terms - Termination
• Duration of initial agreement
(from one to five years)
• Renews automatically annually 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
© 2013 Dmitry Shesterin. All Rights Reserved.

12. Agenda
 Introduction
 Before you partner
 Common terms
 Uncommon terms
 Implementation best practices
© 2013 Dmitry Shesterin. All Rights Reserved.

13. 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 KPI
• Development and QA
© 2013 Dmitry Shesterin. All Rights Reserved.

14. Uncommon Terms – Nuts and Bolts
• Localization
• Who pays for which languages
• Who pays for localization of what
• Technical documentation
• Tends to be expensive and often underestimated
• User guides, release notes, known bugs, features
• Upgrade / update lag
• Avoid being used as beta customer
© 2013 Dmitry Shesterin. All Rights Reserved.

15. Uncommon Terms – Brand & Price
• Brand attribution
• In product UI
• In marketing and sales collateral
• Price floors
• Establish MSRP
• Agree on escalation trigger (volume, deal type)
• Beware of becoming a loss leader
• Everything is negotiable!
© 2013 Dmitry Shesterin. All Rights Reserved.

16. Agenda
 Introduction
 Before you partner
 Common terms
 Uncommon terms
 Implementation best practices
© 2013 Dmitry Shesterin. All Rights Reserved.

17. 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
© 2013 Dmitry Shesterin. All Rights Reserved.

18. 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
© 2013 Dmitry Shesterin. All Rights Reserved.

19. Best Practices to stay there
• Maintain good relationships
• Meet 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
• Events to avoid pitting
• Customer couponing
• Channel partner promos and acquisitions
© 2013 Dmitry Shesterin. All Rights Reserved.

20. Happy Partnering!
 Email d.shesterin@gmail.com for deck copy,
templates files and frameworks
 Connect on LinkedIn at linkd.in/shesterin
 Follow me @dscheste
© 2013 Dmitry Shesterin. All Rights Reserved.