Small computer vendors still out of the loop

The tradeoff: Lower fees, but more time at the keyboard

The computer system at Mark Miller Toyota can't talk with Toyota's factory computer. So employees of the Salt Lake City dealership must retype data about such things as parts orders and financial statements from their dealership management system to Toyota's factory-to-dealer system.

For most U.S. dealerships, such data transfers occur quickly and automatically. In 2001, automakers, dealers and companies that sell dealer management systems created Standards for Technology in Automotive Retail, or STAR. The goal was to enable car companies to exchange information with dealers using standardized files for financial statements, vehicle orders, invoices and scores of other business documents.

Six years later, that goal has been realized in part. But some dealerships remain left behind, often because of their choice of a dealer management system provider.

Industry analysts say automakers continue to deal mostly, and sometimes exclusively, with the two largest vendors of dealership management systems, Reynolds and Reynolds Co. and ADP Dealer Services. That restriction helps prevent smaller and often cheaper competitors from gaining a foothold, the analysts say.

"This marketplace is dominated by a few large vendors because of the manufacturers," says Jane Copeland, president of API International, a dealership consultant in Austin, Texas. "The focus should be on making the manufacturers open up integration so that there's more competition."

Big 2 and others

Mark Miller Toyota uses a dealership management system from Arkona Inc. Arkona is one of several small vendors that compete with Reynolds and ADP, which control 80 percent of the market.

"The biggest advantage is cost," says dealer Mark Miller. "Our cost of IT systems is just a fraction of what it would be with either ADP or Reynolds. And we don't have to sign long-term agreements."

If Miller had an ADP or Reynolds system, it would automatically exchange data with Toyota Motor Sales U.S.A. Inc.'s factory-to-dealership communications system, called Dealer Daily. But it is costly for smaller vendors of dealer management systems to integrate with the communications systems of multiple automakers.

Before automakers allow dealerships to exchange data with them electronically, they first certify dealer management systems vendors. That process is designed to ensure that the online connection between automaker and dealership is secure and works properly.

Toyota limits its certification to ADP and Reynolds, says Toyota spokesman Xavier Dominicis. When Toyota introduced Dealer Daily in 2002, he says, the company canvassed its dealers to determine which vendors they were using.

"The overwhelming majority were using Reynolds, ADP" or Universal Computer Systems, Dominicis says. "So it just made sense to target those suppliers to create the integration."

Universal Computer Systems acquired Reynolds last year and merged operations.

"Probably less than 5 percent" of Toyota dealers use a second-tier vendor of dealer management systems, Dominicis says. "Those dealers may have to do some redundant data entry," he concedes.

Similarly, Nissan North America Inc. only certifies ADP, Reynolds and Procede Software as dealer management systems vendors. Nissan says it has no plans to certify other vendors.

STAR bright
Standards for Technology in Automotive Retail, or STAR, aims to improve online communications between automakers and dealers.
Founded: 2001
Member institutions: 40
Membership: Automakers, dealers, dealership management system vendors
Areas of focus:
  • Standardized documents
  • Standardized method to transmit data over Internet
  • Recommendations on hardware and software for dealerships
Source: STAR

VW branches out

By contrast, Volkswagen of America Inc. is a STAR success story.

In 2003, VW moved from a proprietary satellite-based dealer communications system to an Internet-based system that uses STAR standards. That made it easier for all technology vendors to sell their dealership management systems to VW and Audi dealers, says Tramale Turner, VW's manager of services integration strategy.

VW has certified 13 vendors, including Reynolds and ADP.

"From a dealer's perspective, that's a lot of choice," Turner says. "We wanted to reduce our dealers' IT cost structure by giving more choice."

VW cut its internal costs, Turner says. And the company whacked about $2,000 a month from each dealer's IT costs.

An information technology company called T-Systems, then named gedas Inc., helped VW move to the Internet-based system. Russ Shephard manages the integration team within T-Systems' Custom Solutions Group.

"STAR has helped level the playing field," Shephard says. "Some of these vendors are going to be able to take market share away from Reynolds and ADP."

Thinking small saves money

Despite obstacles, some dealerships still choose to lease dealership management systems from small vendors.

Chuck Spadafora, a Toyota dealer in Indiana, Pa., uses a dealership management system from AutoSoft International Inc. A dealership employee must rekey data into Toyota's information system, he says. "I'm not really squawking," Spadafora says. "But I did call (Toyota) in January to say: Hey, guys, have you ever looked at this? It would sure make it easier."

Spadafora says his dealership pays about $800 a month for its AutoSoft system. A larger vendor would charge about $3,000 a month, he says.

"It's a 30-day contract," Spadafora says. "It's just a millimeter away from being an excellent program."

AutoSoft, of West Middlesex, Pa., has 35 Toyota dealership customers, says Jeff Harmer, the company's vice president of sales and marketing.

AutoSoft is certified by Honda, Acura, Volkswagen, Audi, Hyundai and Mazda. But Harmer says discussions about integrating with Toyota and Nissan have not borne fruit.

You may e-mail Ralph Kisiel at rkisiel@crain.com

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