As dealerships have moved into the digital age, store employees have come to rely on as many as 10 software vendors -- beyond the base DMS -- to help them run operations.
In most cases, CDK and Reynolds have broadened their own software offerings so they compete against third-party vendors that now face higher fees from both DMS providers.
The DMS is the main operating software of a store. It helps dealerships run accounting, payroll, parts ordering, vehicle ordering and finance and insurance. Critically, it is the place where customer and dealer data are stored.
CDK and Reynolds are the dominant DMS providers. Most experts estimate that combined, they provide DMS to about 70 percent of the nation's 18,000 franchised dealerships.
But hundreds of third-party software vendors need data at least daily from any single store's DMS to complete their tasks.
Those tasks include marketing to customers, posting vehicle listings on online shopping sites, managing new and used inventory, scheduling service, finding customers with vehicle equity and a host of other sometimes small but essential tasks.
CDK, Reynolds and other, smaller DMS providers act as gatekeepers of dealer data in a couple of fundamental ways. One is to provide portals to outside vendors, protected by passcodes, to exchange data in real time with the DMS.
The other way is for approved contractors to extract the data in a batch, usually overnight, before organizing the information and parceling out the specific data fields that each vendor or carmaker needs in a timely way.
Vendors briefed on CDK's new data-security program said nothing will change in the way they get data from CDK-served DMS dealerships under SecurityFirst except for a higher price. Prices generally will go up for 120 vendors currently in CDK's vendor-access program.
Automotive News spoke with senior executivesof three large third-party vendors who all requested anonymity because they are in the process of determining whether they will participate at the new higher rates and fear reprisals.
They said CDK started serving them with termination notices in the spring, effectively saying vendors will lose access to the dealer data needed to perform their services until they get certified under SecurityFirst.
One vendor executive said the new program would raise monthly data fees from about $50 per store per month today to as much as $600 for customer relationship management software. CRM software requires lots of data to be exchanged between the vendor and the DMS. That extra cost will be passed along to dealerships, the executive said.
Karp said CDK is pushing third-party certification because it has a responsibility to protect customer data housed in its software systems.
In addition to putting in place new vendor-access protocols under SecurityFirst, CDK is planning to have more dealer training, improve security technology and roll out tools that allow dealers to see what data fields are being exchanged with vendors, Karp said.
CDK determined its charges after an exhaustive analysis found the company was not adequately covering costs associated with managing data-related programs, said Linda Bartman, CDK's global chief marketing officer. She said, in some cases, vendors' access fees won't rise if they already were paying higher fees than peers.
CDK's SecurityFirst is similar to a vendor-certification program that rival Reynolds has operated for years, known as Reynolds Certified Interface, or RCI.
Participation costs one CRM vendor more than $700 a month per Reynolds store. The vendor requested anonymity because Reynolds has strict nondisclosure provisions in its vendor contracts.
One dealer principal of a West Coast dealership group who requested anonymity said last week that he switched his DMS from Reynolds to a less expensive provider more than two years ago. That move saved him $450 a month per store on his CRM software bills alone because he was no longer paying for the vendor's RCI. He knows because his bill from his CRM vendor went down after he left Reynolds.