Microsoft may offer short-term contracts for dealer systems

Microsoft Corp., developing its own brand of dealership management system, envisions a system with short-term dealer contracts - perhaps month-to-month.

Hearing dealers' complaints about being locked into long-term contracts of five years or more, a top Microsoft official says the company would consider month-to-month contracts for its system.

Microsoft also could ask dealers to pay for software upfront and charge a nominal annual maintenance fee, says John Reed, director of Microsoft's automotive retail solutions, in Southfield, Mich.

Also, Microsoft wants third-party software companies to be able to provide dealers software that can connect easily with its new system.

Microsoft shook up the dealership management world in July when it announced plans to enter the marketplace next year.

Microsoft is forming an advisory group of 10 to 20 auto dealers to assist it as the company develops its system for dealers in North America.

The software giant also has begun working with developers of third-party software that want to sell the programs to the dealers. The company says it will introduce software providers to dealers at the National Automobile Dealers Association convention in Las Vegas in February.

Microsoft has been deluged by auto dealers that want to be the first to test the new product and by third-party software makers that want to partner with Microsoft, Reed says.

Microsoft's product will compete with systems from the leading vendors, ADP Dealer Services and Reynolds and Reynolds Co.

Microsoft plans to begin testing the system in a handful of pilot dealerships during the first half of 2007.

The company will sell its new system to dealerships indirectly, using software resellers.

Reed declined to name the dealerships that have been chosen so far for the advisory panel and the pilot programs.

Microsoft isn't the only company that could enter the dealership software market. European rival SAP, a leading producer of business software based in Walldorf, Germany, plans to begin testing its own dealership management system this month with auto dealerships in Europe.

"SAP also is aggressively studying the market in the United States," says Thomas Wright, an automotive executive with SAP America Inc. "But it's a tough decision that we can't make lightly."

You may e-mail Ralph Kisiel at [email protected]