As more dealer groups grow into regional and national chains, computer vendors are scrambling to grab these larger slices of the $900 million a year systems business.
The two largest vendors - Automatic Data Processing of Hoffman Estates, Ill., and Reynolds and Reynolds Co. of Dayton, Ohio - have formed separate divisions to handle national accounts. Reynolds is supplying systems to Car Corp. of America, a recently established used-car superstore chain in Rockville, Md. ADP's Dealer Services Group is providing systems to Driver's Mart Worldwide Inc., a Grand Rapids Mich.-based multidealer superstore chain.
'Our customers are growing in response to consolidation in the industry. As they grow, we have to be able to respond to their needs,' said Bob Schachte, vice president of the Enterprise Solutions Group for Reynolds and Reynolds.
National accounts are more complex, explained Schachte, who defines a 'national' group as a company with intentions to span more than one of Reynolds' three geographic regions. The company will assign an account executive to handle all the computer needs for each large account. Smaller accounts are serviced through multiple representatives, depending on the product, he said.
The National Automobile Dealers Association estimates there are 16,000 to 17,000 dealer computer systems in the United States, and U.S. dealers spend $900 million annually on their systems.
About 50 percent of the dealer computer contracts will expire by 2000, estimated Mike Castleman, CEO of Dealer Solutions L.L.C., a Houston-based management information systems company. 'The average contract is five to seven years. The bulk of these contracts are going to roll over beginning in 1998,' said Castleman.
A 10-store chain with 30 work stations per dealership could spend up to $5 million over five years to upgrade computer systems, including hardware, software, cabling and support, Dealer Solutions estimated.
Large, rapidly growing chains have a greater need to upgrade computers than the average dealership, said John Oates, executive vice president of Dealer Solutions. That company recently signed an agreement to supply software to AutoNation USA, the used-car superstore operated by Republic Industries Inc.
'They have an immediate need to get everybody on the same platform to provide quick reporting to the corporate office,' Oates explained.
Some of these chains are using touch-screen kiosks to deliver information to retail customers. That point-of-sale technology has created a new market for computer vendors, said Ken Mehall, vice president of manufacturer relations for ADP.
The demand for timely transmission of information to corporate offices is critical for public dealerships, which are legally required to file quarterly financial reports to the Securities and Exchange Commission, said Oates.
The problem with assimilating newly acquired dealerships is that dealerships served by a different computer supplier will have hardware and software that is incompatible with the corporate office. The chains likely will need to make a major investment in both hardware and software, said Oates, who said he believes vendors are moving toward open systems that eliminate compatibility problems.
WHAT DEALERS NEED
The demand will be for client-server systems where personal computers on a network can share data with all other terminals on the system. Currently, most dealers have a mainframe computer that sends information to 'dumb' terminals, said Jon Lancaster, a multifranchise dealer in Madison, Wis.
Lancaster is working on a new computer system called Car America Systems. The project is a joint venture between Lancaster and Kerridge Computer Co. of Newbury, England.
'Each type of transaction (sales, service, finance and insurance, parts) creates a database. So there is a service file and a sales file for one customer. Dealers have to keep inputting the same data time and again,' explained Lancaster.
What dealers need is a relational database so each customer's history with the dealership is stored on one file.
Many current systems are not only redundant, but time-consuming. 'If a customer takes delivery on Saturday, the dealer does not know how much he made on the car until the deal is sent to the accounting office to be posted in the general ledger,' said Oates. 'This can take three to four days.'