ADP Dealer Services has gained an early upper hand over Reynolds and Reynolds Co. as the nation's largest dealership groups increasingly choose exclusive vendors to consolidate their stores' management software.
ADP has persuaded at least five of the nation's 10 largest dealership groups to move all of their stores to its system. Two recent converts include AutoNation Inc. and Sonic Automotive Inc.
UnitedAuto Group Inc. of Bloomfield Hills, Mich., the nation's second-largest dealership group, is the lone Reynolds triumph so far among the 10 largest groups. UnitedAuto owns 165 stores.
The trend toward choosing an exclusive system has intensified in recent years as dealership groups realize that future profitability will depend in large part on organizational efficiency and cost cutting rather than rapid expansion.
As a result, the competition between Reynolds and ADP -- who have long slugged it out in the marketplace -- has become even more intense.
Choosing a single system for all stores also tightens a group's management control. With a single system, a group can get a more accurate picture of stores' operations, costs and inventories. And the group saves money by eliminating the need to maintain two or more software systems.
Dealers typically lease management systems for five years. Systems usually include computer hardware and software programs required to run accounting, human resources, F&I, service and parts departments.
Reynolds and ADP are the dominant vendors of dealer management systems. ADP of Hoffman Estates, Ill., says its market share is 41 percent. Reynolds, based in Dayton, Ohio, says it has a 40 percent share of the market and 45 percent of all the stores that are part of dealership groups.
Reynolds generated revenue of $982 million during the fiscal year ended last Sept. 30, 3 percent below the previous year.
ADP Dealer Services had revenue of $890 million in fiscal year ended June 30, 2004, up 9.5 percent from a year earlier. ADP is a unit of ADP Inc. of Roseland, N.J., which had revenue of $7.8 billion in 2004.