Outsourcing tech development in the digital economy driving OEM business growth

A new study commissioned by Dell EMC and Intel found that 93 per cent of enterprise customers surveyed believe that OEM partnerships accelerate product and services innovation, with the numbers being highest in banking and finance, and in media and technology.

Enterprise customers who already use OEM manufacturing to provide custom engineered solutions aligned to their specific business models believe that their OEM business will increase – significantly. The principal reason for this is that the accelerated speed and complexity of technological advances created by digital transformation improves their time to market and overall efficiency by effectively outsourcing core technology development specific to their particular business model. These were among the key findings of a new study commissioned by Dell EMC and Intel.

Dell EMC’s OEM business is very large, but not very well known.

“Name an industry, and we are probably there,” said Ethan Wood, Vice President, Global OEM & IoT Marketing at Dell EMC. “Customers buy our OEM solutions rather than the standard product when they want some degree of custom engineering, and there are basically two variants, with some being heavily engineered and some being more augmented. A lot of logistics and supply chain management also go into it. The OEM embedded business also scales into the operation technology [OT] world.”

Wood said that the OEM business has a very deep focus on individual customers’ business models because of the need for the high degree of customization.

“Our regular business also has to understand the needs of the customer, so that’s similar, but with the OEM business, we really have to be very intimate with their business model and how they go to market,” he indicated.

The OEM business is well suited for Dell’s direct business, and there is a strong direct presence, but Wood said that the channel element is significant as well.

“We do work with partners, often very large ones, who often have their OEM businesses,” he indicated. “We often use partners with very advanced engineering capabilities, who can take our own engineering to a different level for the needs of a specific customer. We don’t have thousands of partners like the regular Dell EMC business, but we do have more channel companies knocking on our doors here. The embedded systems play is significant for the right partners.”

Wood noted that the OEM business is booming and Dell and Intel jointly commissioned Futurum Research to find out more about the reasons for it. Their report, ‘The OEM Partnership Survey,’ is based on input from over 1,000 senior decision makers in enterprise  customers who have OEM-type business models globally. The key takeaway metrics are that they expect the OEM business to grow further, and that they see it as effectively outsourcing and accelerating research to keep up with the fast pace of digital transformation.

Over three quarters (77.4 per cent) of the customers said that they expect use of OEM partnerships to increase, while over a quarter of the whole group (26.7 per cent) anticipated that the increase would be dramatic. Only 4.2 per cent thought their OEM business would decrease.

The reasons for this won’t be surprising, although the numbers in agreement may be. 93 per cent said that OEM partnerships accelerated product and services innovation. A third of them said that this increase was more than 30 per cent, while 53 per cent said that the increase was between 11 and 30 per cent.  6.7 per cent see the increase as more than 50 per cent, and these came overwhelmingly from the banking and finance, and media and technology sectors. In addition, 87 per cent said that OEM business has empowered their company to be more effective at embracing emerging technologies.

The study concluded that these results indicate that digital transformation has driven the OEM business even more strongly than before, as customers use OEM specialists to effectively outsource key aspects of technology development during a time of massive technological change. That latter aspect is the key here – that digital transformation has picked up what was already a very fast pace.

“Technological change has always been at play,” Wood said. “It seems to us that it is accelerating, however, because of the speed at which companies have to bring things to market. Things specific to digital transformation, such as the increased importance of artificial intelligence, have played a key part here, because the code base has become much more sophisticated. It has led customers to think more about where they want to place their own bets. Other factors here are the rise of smaller form factors, and the growing focus on the need to microsegment. These things are only going to be speeding up.”

Wood said that the general thrust of the findings was pretty much what he expected – but that the order of magnitude was greater than he anticipated.

“I was shocked at how high the percentages were,” he said. “It’s a good validation of our strategy. Michael Dell has emphasized that companies have become more dependent than ever on technology to deliver their services and goods to the market. More and more companies who have not been deep into technology in the past, like shipping companies, are getting more into it.”

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