It was a Cinderella story. Three years ago, DealerTrack Holdings Inc. vaulted into the big leagues of dealership management system suppliers by landing its biggest customer ever. But now the clock has struck midnight.
Asbury Automotive Group, the nation's sixth-largest dealership group, is switching its 80 stores from the core software of DealerTrack to industry giant ADP Dealer Services.
ADP will be the third DMS vendor for Asbury dealers in three years. Before DealerTrack won the account in 2007, the Asbury stores predominantly used accounting software provided by the other market superpower, Reynolds and Reynolds Co.
Publicly traded Asbury, of suburban Atlanta, said the conversion should be completed next summer. Asbury officials said it will have no comment beyond its press release until the company's earnings call this month. ADP also declined to comment.
For DealerTrack, the switch is a comedown, even though the company will retain and expand finance and insurance software business at Asbury that it expects to be more profitable than the DMS business it is losing.
"We're disappointed, but we understand the reasons," said Raj Sundaram, DealerTrack's senior vice president of solutions/services.
The affected stores could face upheaval. Each conversion from one supplier to another is akin to a heart transplant, said Mike Esposito, CEO of Auto/Mate Inc., a competitor. He said staff will have to learn new processes and get accustomed to the way data are inputted and distributed.
The ADP software is likely to be more expensive as well, Esposito said. DealerTrack typically charges about $1,500 a month per store for its DMS, while ADP's fees easily can exceed $5,000 a month.
In 2007, Asbury was a marquee victory for DealerTrack. The supplier, at the time viewed mainly as a credit application software company, was broadening its reach through the acquisition of a dealership management systems supplier, Arkona Inc.
Asbury was DealerTrack's largest DMS customer and the only publicly traded retail group it had landed. "It was a huge credibility statement," Sundaram said.
But Sundaram conceded that the account has taxed DealerTrack's resources during a growth spurt at his company. As a publicly traded company, Asbury needed software designed to meet regulatory accounting and other compliance mandates. Those products couldn't necessarily be used by the rest of DealerTrack's customer base, Sundaram said.
Without Asbury, DealerTrack can devote its product development to a broader set of customers, he said.
By year end, even with the loss of Asbury, DealerTrack expects for the first time to have 10 percent of dealers nationally as customers of its management system, Sundaram said. Reynolds and ADP dominate the market with a combined share of more than 80 percent.
DealerTrack will continue to provide software for Asbury dealerships' finance and credit departments as well as inventory management tools.
Sundaram said additional business from Asbury dealers' finance and insurance departments is expected to offset any revenue loss from the dealership management software switch.
DealerTrack refuses to say whether the Asbury account was profitable. But Sundaram said profit margins in the Asbury F&I business are higher than in the business that will be lost.
Publicly traded DealerTrack posted a net loss of $4.3 million in 2009 on revenue of $225.6 million.