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The Dynamics of ODMs and OEMs

I've seen a lot of different thoughts about "original equipment manufacturers" and "original design manufacturers" recently, so I figured I'd offer my observations from my time working in Shenzhen for my IoT company.

Backstory: we’re partnered with Qualcomm to cloud enable bluetooth mesh technology across myriad US, Asian, and European based companies, primarily for lighting and smart home products in consumer/commercial markets. I spent about 6 months in Shenzhen and Hong Kong during 2017 putting together the supply chain partnerships.

From what I’ve experienced, “brand,” i.e. the companies we’re familiar with as consumers, and Original Equipment Manufacturer “OEM” are used interchangeably, while Original Design Manufacturer “ODM” refers to the “factory.”

In most of my interactions, there is a tight albeit painful relationship between the OEM and ODM in consumer electronics because cooperation between multiple vendors is often required to get a product to market, especially in IoT. Typically, the most differentiated intellectual property (IP) is in the hands of the OEM (brand)— industrial design, software, firmware, and it’s in their best interests to obfuscate as much as possible throughout the supply chain to make it harder to replicate the technology, which everyone assumes will happen. And it does. This is especially true during the rise of the IoT, where connectivity challenges plague both sides of the pond, and clever solutions are the 11th hour superpower everyone is fighting to find first to use as leverage in the supply chain. 

There is another class of manufacturers— not sure the technical name, but we call them “module makers” — companies that specialize in the design and production of drop-in PCB modules for various connectivity chipsets to make them easier to productize. An example would be ITON, who provides chips for several of GE’s products to the prime ODM (such as Leedarson or Eastfield) who is responsible for final assembly (note: many ODMs are also module makers— they keep chips in house to maximize control and profits).

Both ODMs and module makers participate in a process of product innovation that presupposes the market. Chipmakers (and other tech vendors) like Qualcomm send their reps out to the factories to demo new silicon technology in the form of a “reference design” in a bid to get the ODM to create a module or product based on that chipset that answers to a trend they’ve noticed from their OEM/brand customers. In this way, the ODM bears the R&D cost as a bet for business, but doing so gives them a chance to retain the right to get a royalty on every module sold. Ask an ODM to hand over any firmware they've made and they’ll tell you with their sweet puppy dog eyes “eat my shorts” because it’s how they keep you from just taking everything to another vendor.

For brands like Home Depot (or more generally companies less interested in designing hardware) these ODMs are essential because they are flexible enough to develop a catalog of partially developed products on speculation— whatever successfully sells up the food chain at Home Depot, they make real (note: the “make real” part is where a lot hits the fan because this stuff is hard to scale).

The OEM-ODM-module maker ecosystem creates a sort of “it takes a village to make a product” atmosphere, but with grumpy uncles, annoying neighbors, and meddling kids abounding. There's a constant sense of quiet espionage on both sides, although that tends to get better if you develop a direct relationship with your mfg partners. Western business has evolved to sustain trust with purely transactional relationships-- this is way less true in places like China. Go to lunch with them and take them to dinner a few times, invite them to Macau, get them drunk and having fun with you. These relationships are insurance policies on getting screwed. Further, having boots on the ground near your manufacturing is practically a requirement nowadays if you want to have any hope of your supply chain operating smoothly. 

In the case of a brand like Apple, who meticulously defines and controls every little detail of their product and supply chain works with an Electronic Manufacturing Services company “EMS” like Foxconn who primarily invest only in building other designs precisely to specification.

So OEM v. EMS: OEM: “build this for me, exactly like this, and don’t ask too many questions, or I’ll eat your children.” 

EMS: ;)

The ODM/OEM relationship is a bit shakier: 

OEM: “build this for me, and pretty please do your best not to use lead paint or explode my users.” 

ODM: ¯\_(ツ)_/¯

All that said, many companies I’ve encountered are chimeric— companies that usually do business as an EMS could also be caught as an ODM if the opportunity is right. I’ve wracked my brain over how to approach meetings with ODMs that also have an OEM/brand side to the company. The ODM side is a potential partner while the OEM side is a potential customer— in the already confusing world of IoT this can be quite the rollercoaster.

I could be off, but the cash value of the above has navigated me through hella lots of conversations from ivory tower to where the dog food gets made. It is a truly global and complex web of associations, across cultural, language, political, and social boundaries. Read “Poorly Made in China” and “Barbarians at the Gate” to see the differences in East vs. West strategies for business success, which I see as orthogonal values of Replication and Dominance.

If you’re interested, here’s a great article by a Shenzhen based supply chain expert: https://www.linkedin.com/pulse/3-types-partners-product-managers-can-use-development-changtsong-lin/

 

Thanks for reading! Our company is expert at IoT integrations, and we thrive on building ecosystems of partners with positive feedback loops on new services and revenue streams. Kindred spririts, please reach out to me at [email protected] 

 

Best, 

 Preston

COO @ Droplit

https://droplit.io

[email protected]

 

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"One day I'm in my cubicle, Steve shows up with someone I've never met before. He asks me, 'Guy, what do you think of this company Knoware?'. I said, 'Well Steve, it is a mediocre company, mediocre product, lot of drilling practises, doesn't make full use of graphics, just basic mediocrity, nothing that strategic for us.' He says to me, 'I want you to meet the CEO of Knoware.' So that's what was like working for Steve Jobs. ‘You always have to be on the ball.

A lot of water has flowed under the bridge since then. The flow of information has also changed the way we live in today’s world.

Your mark on the world begins…

Every morning when we read a newspaper having out so much information we came to know the latest happening in the world (of course in details), yeah you are right even the internet edition also. This is just a very basic example of IoT. All our Railways, Air and even sea networks are connected with the help of IoT. We can take the example of banking. It is very easy to transact any amount of money from part of the world to other with help of e-commerce. We can purchase anything online with help of debit and credit cards. This has made our lives more and more simple. People are working on the internet without really having to go outside to their workplace. IoT has changed the whole scenario. Companies can share technologies online. Even the doctors can guide the other doctors while operating on a patient with the help of Information Technology. A whole new world is coming our way. Technology is allowing us to reimagine our future transportation system. Advances in connected automation, navigation, communication, robotics, and smart cities—coupled with a surge in transportation-related data—will dramatically change how we travel and deliver goods and services. Automation in the field of transportation is everywhere. Have we as humans become an afterthought? We order service on our smartphones, we manoeuvre around in increasingly automated vehicles, we ride in driverless transport, and we will increasingly find ourselves sharing our highways and byways with drones and other unmanned craft.

1) SaaS & Bring Your Own Device

Global movements such as BYOD and SaaS, where consumerisation of IT and mobility are drastically changing the capabilities of employees and their expectations of a workspace. Building your own apps is the ideal way to mitigate the risk of BYOD and SaaS. An organisation can provide those that only allow the user to access what they need. The enter-prise’s concern is the data; the employee’s concern is the device. In the IT security world, we care about both. Now that most of the organizations started adopting BYOD in some form, it is not just their personal iPads and laptops that users are bringing into the office, they are also using the consumer apps available in their personal device for work purpose which leads to the next wave in mobility. In the very near future BYOD won’t be a ‘trend’ but a norm no one would think twice about.

2) The Emergence of Big Data

 "Big data" alluringly holds out the promise of competitive advantages to companies that can use it to unlock secrets about customers, website usage and other key elements of their business operations. Big Data now stream from daily life: from phones and credit cards and televisions and computers; from the infrastructure of cities; from sensor-equipped buildings, trains, buses, planes, bridges, and factories. It's estimated that 43 trillion gigabytes of new data will be created by the year 2020. 

3) Cloud computing: How it's transforming the role of IT

Market conditions require significant change and many organizations are using this driver as an opportunity to simplify their applications and data through rationalization and technology innovations such as Cloud Computing. Cloud is defined as any cloud service where consumers are able to access software applications over the internet. The applications are hosted in “the cloud” and can be used for a wide range of tasks for both individuals and organisations. Google, Twitter, Facebook and Flickr are all examples of SaaS, with users able to access the services via any internet enabled device. Cloud is also the fastest growing because it keeps pace with emerging and future business models than on-premise systems, the majority of which were designed for business models of the past.

The next step, moving towards virtual workspaces, can make organisations far more agile but only if those responsible for the IT (and in effect, the productivity) of the employees understand the relationship employees have with their devices and how these change throughout the day based on their personal preference – be it a smartphone for the train, a tablet device for a client meeting or a laptop for remote working at home.

4) Millions of sensitive IT services exposed to the Internet

All the more the Internet is becoming more and more important for nearly everybody as it is one of the newest and most forward-looking media and surely "the" medium of the future. These advances—in fields such as robotics, A.I., computing, synthetic biology, 3D printing, medicine, and nanomaterials—are making it possible for small teams to do what was once possible only for governments and large corporations: solve the grand challenges in education, water, food, shelter, health, and security. Technology is, today, moving faster than ever. Advances that took decades, sometime centuries, such as the development of telephones, airplanes, and the first computers, now happen in years.

The macro trends that have changed the playing field in the past 10 years have been cloud, mobility, Big Data, and social networking. An even bigger trend ahead will be the Internet of Things that will extend information technology into every aspect of our lives. IT has become more agile and responsive to the needs of the business. While cloud was considered hype just a few years ago, the cloud in its many forms, private, public, hybrid, is transforming IT into a service model. IT leaders who embraced these changes have been able to do more with less and have proven their strategic value.

According to Steve, the iPhone was originally a tablet project. Partway through the R&D process, he said, “Hmm, we can make a phone out of this.” After the launch, many people rewrote history and said that the purpose of the iPhone was to reinvent the future of telephony.

Today, technology is, moving faster than ever. The ubiquity of network connectivity and the proliferation of smart devices (such as sensors, signs, phones, tablets, lights, and drones) have created platforms upon which every enterprise can innovate. Since the past few years we have also seen countless innovations that improve our daily lives. From Internet technology to finance to genetics and beyond - we have seen technologies such as mobile, social media, smartphones, big data, predictive analytics, and cloud, among others are fundamentally different than the preceding IT-based technologies. And advances in science and technology have changed the way we communicate, our thought processes, exchange views, understand the way we relate to one another and think about what it means to be a real Innovative change maker. Perhaps one day you too can be a part of reinventing something which is new, timely, relevant and useful.

 

Best Regards,

Raj Kosaraju

 

Raj Kosaraju specializes on Cloud Computing, Data Warehousing, Business Intelligence, Supply Chain Management, Big Data & IoT.

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Technologists and analysts are on a path to discovery, obtaining answers on how technology and the data collected can make our cities more efficient and cost effective. 

While IoT may be seen as another buzzword at the moment, companies like SAP, Cloud Sigma, Net Atlantic and Amazon Web Services are working to make sure that for businesses, IoT is a reality. It’s companies with this willingness to change, adopt and invent that will win the new economy. Mobile phones, online shopping, social networks, electronic communication, GPS and instrumented machinery all produce torrents of data as a by-product of their ordinary operations. Most companies want their platform to be the foundation of everything it does, whether it is with big data, data analytics, IoT or app development. The same  rub off phenomenon was emulated in Latin American countries  like Brazil, Argentina, Mexico and European countries like Brussels, Italy,  Germany, Denmark , Poland and Prague in recent times.

It is important to realize that technology is exploding before our very eyes, generating unprecedented opportunities. With easy access to cheap cloud services, smarter people came up with these platforms, and it has fundamentally changed businesses and created new ways of working. Mobile cannot be an afterthought. It needs to be integrated in everything you do and positioned at the forefront of your strategy. You have no valid reason to avoid migrating to the cloud. Cloud provides a ubiquitous, on-demand, broad network with elastic resource pooling. It’s a self-configurable, cost-effective computing and measured service. On the application side, cloud computing helps in adopting new capabilities, meeting the costs to deploy, employing viable software, and maintaining and training people on enterprise software. If enterprises want to keep pace, they need to emulate the architectures, processes and practices of these exemplary cloud providers.

One of the main factors of contributing value additions is the concept of a Smart City which is described as one that uses digital technologies or information and communication technologies to enhance the quality and performance of urban services, to reduce costs and resource consumption and to engage more effectively and actively with its citizens. We will interact and get information from these smart systems using our smartphones, watches and other wearables, and crucially, the machines will also speak to each other.The idea is to embed the advances in technology and data collection which are making the Internet of Things (IoT) a reality into the infrastructures of the environments where we live. We will interact and get information from these smart systems using our smartphones, watches and other wearables, and crucially, the machines will also speak to each other. Technologists and analysts are on a path to discovery, obtaining answers on how technology and the data collected can make our cities more efficient and cost effective. The current model adopted for IoT is to attract businesses to develop software and hardware applications in this domain. The model also encourages businesses to put their creativity to use for the greater good, making cities safer, smarter and more sustainable.

A few years ago like many others  I predicted  that Business models will be shaped by analytics, data and the cloud. Moreover, the IoT is deeply tied in with data, analytics and cloud to enable them and to improve solutions. The key goal is to ensure there is value to both customers and businesses. You can effectively put this strategy into action and build a modern data ecosystem that will transform your data into actionable insights.  

Till we meet next time...

Best,

Raj Kosaraju

CIO 

 

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The current political events in Barcelona provide us with a barely-needed reminder that we live in changing times.  I was in the city as part of the Trustonic team exhibiting at IoT Solutions World Congress last week and took some time to speak with fellow vendors. I soon saw some fantastic product demonstrations that drew my attention - I wanted to learn more. Frequently though, the response to: “This looks great - how is it secured? How do we know the data is trustworthy?” was a puzzled look and a “It uses our cloud and we secure that” or “It runs on a secure OS”.  Sometimes the response was worse: “It’s a closed network. You couldn’t attack it”.

It didn’t fill me with confidence. Everyone has a secure solution, it seems. But how do we know that it’s secure? Who has validated it? The questions and the perplexed looks continued. I slept uneasily.

I don’t want to criticise the IoT solutions that I saw – they were interesting and point to an exciting future for us all. Unfortunately, securing these solutions isn’t exciting and probably won’t draw a crowd to your stand. It’s rare to see ground-breaking security solutions making the news – consumers just expect it these days. Of course, you can expect a media frenzy if you’re breached. There have been some horrifying examples already and we are still in the early days of this industry. IoT solutions need to be secure by design – or, to put it another way, the components of the solution must already be secure when they are deployed. With the headache (and tedium) of security taken care of, the industry would be free to innovate and dream up even more exciting products.

I was showing an IoT security demo built on a Samsung ARTIK board, which already has Trustonic TEE technology embedded. It showed an IoT device connecting to Amazon Web Services (AWS), cryptographically proving itself to be secure and having a trusted identity, thus enabling it to become automatically registered on the system. Perhaps not as exciting as an IoT boat or sports bike sharing data in real time, but it demonstrated that, by embedding a truly secure OS (one that’s Common Criteria certified and FIPS-140-2 approved) combined with a Root of Trust installed in the factory (think of this like a digital birthmark), an IoT device can be trusted pretty much automatically. Once you have an inherently trusted device, you can be confident that data from its sensors is also trustworthy.

Shakespeare wrote “Love all, trust a few”. So, love all the cool and exciting IoT products – but only trust the few which are truly secure.

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Why have hardware do the task alone, when it can team up with software and services to do the job easier and better? Think of how cars have developed over the years — from diesel to unleaded gasoline to electricity, we’ve refined the fuel that goes in the car, not the car itself. A car still has four wheels, an engine and a steering wheel. A smartphone’s hardware is the car itself — you can’t reinvent the wheel, and you can’t realistically expand what a smartphone is either. Software is the destination, where you want to take the car. What we need to change is the fuel — in this case, the processing. Processing on the phone itself is diesel — cloud processing is nitro-boosted gasoline.
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The Internet of Things is slated to be one of the most disruptive technologies we’ve ever seen. It’s going to change a great deal - including how we look at and use the cloud.

Software-defined cars. Internet-connected ‘smart’ fridges, coffee machines, and televisions. Wearable technology like smartwatches and smartglasses. The Internet of Things is going to change everything from how we work to how we drive to how we live our lives. And as it does so, it’s also going to change the cloud.

It already is, actually.

Enter fog computing. It’s an extension of the cloud, born out of the fact that there are more Internet-connected devices in the world than ever before (by 2020, Gartner predicts that there will be 6.4 billion.)  Given this influx, the traditional, centralized model of the cloud is no longer viable.

“Today, there might be hundreds of connected devices in an office or data center,” writes Ahmed Banafa of Thoughts On Cloud. “In just a few years, that number could explode to thousands or tens of thousands, all connected and communicating. Most of the buzz around fog has a direct correlation with IoT. The fact that everything from cars to thermostats are gaining web intelligence means that direct user-end computing and communication may soon be more important than ever.”

It makes a lot more sense to move the real computing and processing closer to client devices. To carry out analysis at the network’s edge. See, the thing about the Internet of Things is that it depends on managing data over very short timeframes. Even a slight delay introduced as a result of bandwidth is unacceptable.

Consider the following examples:

  • A self-driving car is communicating with the vehicles and traffic infrastructure around it, and analyzing traffic and weather conditions. While it may communicate with a central server, it needs to be able to analyze and aggregate data immediately, lest it cause an accident.

  • Autonomous tunneling and boring machines at a mining site ensure workers don’t have to subject themselves to hazardous underground conditions. These machines must be capable of analyzing and storing terabytes of data, as network connectivity hundreds of feet underground is near-impossible. They also must be able to communicate with other mining infrastructure, as well as a central server, uploading processed data to the cloud when mining is finished.

  • Sensors at an oil well must connect to a cloud server to provide headquarters with a real-time vision of the facility. These sensors, however, must be capable of analyzing data on-site before it is uploaded.

In each of the examples above, distributed computing works together with a more traditional cloud model to better-enable connected equipment and sensors. And that’s where the cloud slots in with IoT. It’s still the cloud - but it’s changed in order to adapt to new workflows, business processes, and an entirely new world.

“With the increase in data and cloud services utilization, fog computing will play a key role in helping reduce latency and improve the user experience” writes Data Center Knowledge’s Bill Kleyman. “We are now truly distributing the data plane and pushing advanced services to the edge. By doing so, administrators are able to bring rich content to the user faster, more efficiently, and - very importantly - more economically.”

Photo credit: Mr. & Mrs. Gray

About the Author:

Tim Mullahy is the General Manager at Liberty Center One. Liberty Center One is a new breed of data center located in Royal Oak, MI. Liberty can host any customer solution regardless of space, power, or networking/bandwidth requirements.

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A Different Kind of IoT Competition

Two months ago, we made the claim that IoT needs a new programming language. That was not a light statement. It was backed by 3 years of heads-down innovation on a fundamental technology: TQL (Thing Query Language). Next month, we will see TQLers’ submitting IoT projects from all over the globe for the TQLOne Competition. Imagine learning a foreign language. Before you become proficient, you are invited to join a poetry contest, against the native speakers. What would happen? In fact, your poem would win for its creativity, albeit with a few spelling errors!!
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