OEM is an abbreviation for Original Equipment Manufacturer:
An original equipment manufacturer, or OEM, manufactures products or
components that are purchased by another company and retailed under
that purchasing company’s brand name. OEM refers to the company that
originally manufactured the product. When referring to automotive
parts, OEM designates a replacement part made by the manufacturer of
the original part.
In Salesforce, going the OEM route allows you to sell Salesforce licenses directly to your customers. It does not require them to already be a Salesforce customer. For instance, say you are building some new advertising tool for tracking customers and their ads. This type of system is going to be beneficial to a large group of people, not only Salesforce’s customers. By going OEM, you can sell just your app to your customers (in the bundle you would include the required Salesforce licenses). This allows app builders to sell to anyone.
In contrast, ISV customers can only sell to existing Salesforce customers. This is ideal for an app that may not be relevant to a larger market but specifically targets Salesforce customers, like a Chatter app for instance.
Deciding to go ISV or OEM is a big decision that has implications. If you are thinking of building an app, work with your partner rep to determine which is better for you. Do your research first so you understand what you are getting into.