Now that Reynolds and Reynolds Co. is scrapping its next-generation software system for auto dealerships, the company wants to retain the 38 dealership groups that bought the technology.
So far, Reynolds has lost only one dealership group, which has five stores. The group decided to return to ADP Dealer Services for a dealership management system. Neither Reynolds nor ADP would identify the dealership group.
Reynolds and ADP Dealer Services, a division of ADP Inc., are the two leading dealership software system vendors. They are embroiled in a fierce battle to retain customers and capture new ones. Losing 38 dealership groups, representing 73 stores, would be a severe blow to Reynolds.
But there also are broader implications for auto dealership technology development. Reynolds partnered with Microsoft Corp. and tried to move dealers into the latest Windows-based technology. But Reynolds discovered that dealers are in no hurry to dump their traditional dealer management systems.
In July, Reynolds said that it would discontinue its new dealership management system, called the Reynolds Generations Series Suite, and that it would write off $67 million in software development costs.
But the company has incurred additional expenses as it shuts down the software system.
Reynolds is spending another $27 million to try to keep those dealership groups as customers, to make their transition to another Reynolds dealer management system as painless as possible and to cover other costs related to terminating the software.
The $27 million includes costs associated with layoffs of 80 employees who played some role in the Generations software.
Transferring dealers from one system to another is expected to last at least through 2006, Reynolds CEO Finbarr O'Neill told Automotive News.
Reynolds is encouraging dealers to lease its ERA XT, the latest version of its long-time dealer management system.
Reynolds placed Terri Mulcahey, senior vice president of sales and service, in charge of the dealership transition in July, when the company officially decided to scrap the new software.
The conversion is fairly automated, Mulcahey says. Reynolds will provide two weeks of on-site training on a simulated system for dealership employees.
Once all of the data are transferred from the Generations system into ERA XT, employees can begin using the system. Then Reynolds remains on-site for two weeks to provide support.
Dealers typically will want to have all of their stores go live simultaneously on the new system, Mulcahey says.
'Pain in neck'
No dealer enjoys switching dealer management systems.
"It's a pain in the neck; nobody wants to switch computer systems," says David Menton, dealer principal at Sawgrass Ford in Sunrise, Fla. Menton is still using the Generations software.
"Just about the time we figured out how to use it, they're canceling it," Menton says.
He probably will switch to Reynolds' ERA XT system. But he looked at dealer management systems from other vendors, too.
Menton, who considers himself an early adopter of new technology, says he will miss the Generations system.
"It saddened me," he says. "I like this system. It works well. But if you can't get enough dealers to sign on, it doesn't make it a very viable product."
With the Generations software, everyone in the dealership - regardless of what department they worked in - uses the same customer database, Menton says.
"So you don't have all the different databases and all the bolt-ons that you have with all the current providers," he says.
Not early adopters
But the system just never took off with dealers. Dealers are not generally known as early adopters of technology, Menton says.
"They like to see technology take hold, and then they like to jump in," he says.
Scott Harris, dealer principal at Bill Harris Auto Center, a Buick-Cadillac-Chevrolet-Pontiac dealer in Ashland, Ohio, is one of Generations' staunchest supporters.
Harris even hosted dealers who wanted to see firsthand how the software worked in his dealership. Now he gets calls from those same dealers, but this time some are agitated rather than curious.
"They had a good product; it just wasn't catching on to the dealer population," Harris says. "That's really not Reynolds' fault. A lot of dealers aren't ready for that, I guess."
Harris was one of the first dealerships to install the software. It will stick with Reynolds. Next month, the dealership will convert to the Reynolds ERA XT system.
"It is important that we get as much of that information out of (Generations) and into ERA because we retain a lot of customer information," he says.
Harris does not regret having taken the risk with Generations.
He declined to discuss what incentives Reynolds offered to retain him as a customer.
"They are handling them one at a time and taking care of everybody to the best of their ability," Harris says. "They are going to do the right thing and make it right by everybody."
Not all dealers have been that supportive. Nine dealers bailed on the Generations software even before the vendor pulled the plug.
"We had some dealers early on who decided it was too much transition for them," O'Neill says. "They said, 'Get me back to ERA,' and we did it."
Reynolds launched Generations in 2003 when Buzz Waterhouse, a former IBM Corp. executive, was at the helm. In July 2004, Waterhouse resigned suddenly in the wake of declining orders and lower quarterly earnings.
O'Neill, the former CEO of Mitsubishi Motors North America Inc., took over at Reynolds on Jan. 17. Six months later, O'Neill said that Reynolds no longer would sell Generations because of poor sales, high implementation and training costs, and substantial changes that were required in dealership processes to make it work.
Now the mop-up work begins with the 38 dealership groups.
"The balance, we believe, are already locked in or favorably disposed, and it's just a question of resolving how we move forward," O'Neill says.
Reynolds, of Dayton, Ohio, would like the whole Generations experience to go away as quickly as possible, says a dealership consultant who asked to remain anonymous. Generations was developed by software specialists who had no retail automotive experience, the consultant adds.
Another consultant, Sandi Jerome, of Sandi Jerome Computer Consulting in Eugene, Ore., says that she was shocked to hear that Reynolds had pulled the plug on the software.
"I first saw (Generations) a few years ago and was impressed," Jerome says. "It was a system built around the customer and is a fully Windows-based system. I knew this was the system of the future."
Dealers tell O'Neill that they have two concerns: Will the transition to another system cost them anything, and will it disrupt their business?
"I want to be sure that they can make the transition smoothly and without incremental cost penalties," O'Neill says. "They understand the business decision."