Generally the SEM side of SEO/SEM means the paid aspect of search marketing.

SEO and SEM - Both are Marketing

Both SEO and SEM deal of course with marketing, which is "the creation of a customer" in the words of the guru Peter Drucker. If your SEO guy or gal doesn't understand marketing (or thinks it is just promotion or advertising) you might have a problem.

As I liked to say in my marketing lectures at the University of Hawaii, advertising is about ads, branding is about brands and marketing is about markets. Markets are collections of customers, either our own, our competitors or the industry's potential customers. Too often marketing is defined as the front of the funnel, the initial pitch or contact (or repeated, unwelcome contact) by a brand to it's non-customers. However SEO has to do also with getting good visitors to the site, not just visitors, and converting them when they get to the site. This requires insight into what the customer wants and expects, not just targeting high-traffic keywords or pitching the anonymous, undifferentiated masses.

The M in SEM, Marketing Strategy

Conversion is the real metric of interest, conversion rates and conversion costs. The cost of inventory and the scalability of it is the other side. But we have to see a converted customer as more than a single person and a single purchase. It might be true that each visitor might make one and only one purchase, however the appropriate word-of-mouth leverage from that customer can mean many more customers in the future. This is a "duh" statement, but easily gets forgotten in the calculation of customer profitability and advertising costs.

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