If you’ve shopped for computer parts of software online you’ve likely come across a three-letter acronym. OEM. This stands for Original Equipment Manufacturer, and it’s usually tagged on to hardware or software that’s less expensive than normal retail products.

Which may make you wonder – should you buy an OEM product, or is there a catch that’s setting you up for trouble?  The truth is that they do differ from retail products and the differences can be a big deal.

OEM – What Does It Mean, & Is It Legal?

As mentioned, OEM stands for Original Equipment Manufacturer. In this case, however, the acronym isn’t commenting on who sells the product as much as who the product is meant to be sold to.

OEM hardware and software is packaged for distribution to companies who build systems. These companies are the original equipment manufacturers. This is why OEM products are usually sold in a generic box or wrapper instead of retail packaging. They’re not meant to ever be on store shelves.

And they’re usually not. Most retail stores never sell OEM products. Online stores don’t care about retail packaging, however, so they’re more than happy to stock up on these products and sell them to customers. Online retailers know that there are plenty of bargain hunters looking for the lowest price possible.

Some users find themselves wondering if OEM software is legal for a consumer to buy. Yes, it is. But there are stipulations attached to the product which you accept by purchasing it.

Software

OEM software is probably not as common as hardware, but there are some important products that are wildly available in their OEM version. Windows is the best example, but there are also OEM versions of security suites, system utilities and productivity software.

When you buy this software you usually are provided only with a sleeve that contains the software and a license key. In some cases you may instead receive a small plastic container with a few logos and basic documentation, but that’s it.

The lack of documentation is part of the deal. In fact, most OEM licensed software comes with no tech support. Zip. Zero. That’s to be provided by the system builder. And if the system builder is you, well, you have to provide your own tech support.

OEM software is usually licensed on a per-system basis, which means that you can’t install it on another computer. In theory this means that an OEM version of Windows is tied to the specific computer build you install it on, but Microsoft is famously kind-hearted about this. Re-activating Windows just requires a call to customer service.

But Microsoft doesn’t have to do that, and other companies might be more restrictive. It’s a risk you take with OEM products.  It costs less, but you might have to re-purchase the software if you replace your PC.

Hardware

OEM isn’t hardware to find on the web. It’s often a few bucks cheaper than a retail product and the hardware itself is otherwise the same in capabilities and performance.

However, the hardware usually doesn’t ship with extra components – even those that are critical to the hardware’s operation. OEM computer processors, for example, usually do not ship with fans. An OEM video card or hard drive often doesn’t ship with the cables or adapters needed to use it.

There may also be restrictions on technical support, as with software. You may have difficulty with customer service if you have an issue and the warranty may be (but is not always) changed or reduced.

Hard drives, optical drives and some PCI expansion cards are the most common types of components that are offered for as OEM. But many other products may be offered this way in limited numbers.

Is Buying OEM Worth It?

OEM software is a risky but potentially worthwhile choice. Windows 7 Home Premium is $99, while the retail version is $179.99. That’s a big difference. It’s possible that you could be in trouble if you run into an issue, but you’re also paying nearly half the price. Personally, I’ve bought OEM operating systems for years to use on PCs I build for myself and I’ve yet to have an encounter. But I’m also the kind of person who would probably never call tech support in the first place.

The story is same with other software. OEM anti-virus software is usually 25% to 50% off when purchased OEM. Some utility software enjoys similar discounts. The main issue you’ll run into is public availability. Most developers only offer a retail version of their product.

Hardware is more hit-or-miss. Sometimes you’ll be able to save a few bucks by going with OEM hardware. Other times, you’ll find that buying the extras missing from the hardware makes up the money saved.

And then there is the hardware that’s actually more expensive than retail. This usually happens when hardware is going into the end of its life-span. Spare stock is sometimes put up for sale as an OEM part and then sold for as much or more than retail.

OEM software is perfectly legal and works the same as the retail version (installation restrictions and lack of extras aside), but it doesn’t guarantee a good deal.  Fortunately, most places that sell these OEM products also sell full retail versions. Do a quick price comparison before making your choice.