A store's DMS can drive vendor decisions

The dealership management system is the beating heart of every dealership's operation. But a heart that only allows data to flow through certain arteries can be costly and time-consuming for dealers hoping to streamline operations.

Challenges such as these mean a dealership's DMS can have a strong influence on which vendors, F&I and otherwise, the store works with.

It can take several years for a large DMS provider to develop certain capacities smaller companies can offer today, dealers say, prompting the rise in third-party companies offering solutions such as digital retailing and shopping tools, customer relationship management systems and fraud protection products.

According to Cox Automotive, dealerships use, on average, about seven systems to complete a sales transaction and 18 vendors to run the stores.

Some DMS companies require vendors to go through third-party certifications, which can result in vendors being blocked from integrating with a dealership's DMS. If DMS providers lock dealers into long-term agreements, restrict DMS data or fail to integrate with other companies at all, that can back dealers into a corner.

If vendors cannot integrate with the DMS, dealers often have no choice but to give up on business with them, according to F&I specialist Becky Chernek, president of Chernek Consulting in Atlanta.

"I don't think it's fair," Chernek said. It's the dealerships' data, "their customers, their information."

Many dealers would rather save money by investing in a DMS with added capacities. Brondes Ford Toledo, in Ohio, which sells 2,200 new and used vehicles per year, is switching to Dominion Vue from Dominion Access, largely because Vue incorporates tablets into the F&I process. Because the new system has increased functionality, the dealership will be able to trim four vendors, which will save it as much as $65,000 a year in vendor expense, said Drew Conkle, the store's general manager.

"If your DMS can provide those services, and they are robust enough, you don't need those vendors to provide it," he said. When the DMS company does not provide necessary services, dealers must be sure that it will integrate with other vendors that offer them.

Dealerships that attempt to work with an F&I vendor that does not plug into the DMS may suffer integration challenges that could cost them more than a sale. Having to enter customer information multiple times in different vendors' platforms increases the odds of dirty data, according to Mo Zahabi, senior director of product consulting at VinSolutions and Dealertrack F&I.

Dirty data is the result of introducing more opportunities for human error. More typing increases the probability of mistakes that lead to compliance issues and angry customers.

"You can't have an F&I manager clicking through multiple applications, especially with double entry. It's a killer," Zahabi said.

Distracted F&I managers could input data twice or miss something in the process because they thought they already did it.

"When a dealership has multiple vendors and disparate systems, it becomes more difficult to keep up with the protocols and training that reduce dirty data," Zahabi said. "The workflows that power dealership operations become flawed and inefficient."

Dealers should look for vendors that allow for bidirectional data flows between the solution and the DMS, Zahabi said, though that path is often difficult.

Even dealers selecting vendors and a DMS on the grounds of having an open, integration-friendly interface can find deterrents, such as hefty integration fees, according to Jeff Proctor, managing partner at Metro Honda in Montclair, Calif., which sells about 300 new and about 100 used vehicles per month.

In some cases, Proctor said, the fee could add as much as $600 a month to overall vendor costs.

"These open integration fees ... they're killing this business," he said.

DMS giants Reynolds and Reynolds of Dayton, Ohio, and CDK Global Inc., of Hoffman Estates, Ill., have gotten in hot water over allegations that they charged exorbitant fees for vendor certification.

Four rival vendors — including the massive Cox Automotive conglomerate — sued CDK, Reynolds or both last year on the grounds of anti-competitive business practices. The suits allege that both Reynolds and CDK colluded to eliminate competition in dealership data integration.

At least five dealers or dealership groups jumped into the fray, filing class-action lawsuits against the company, alleging antitrust violations.

At the time, CDK said it would not comment on litigation. But in its third-quarter 2017 10-Q filing, CDK disclosed that the Federal Trade Commission issued a Civil Investigative Demand requesting documents that relate to any agreement between CDK and Reynolds. CDK "believes there has not been any conduct by the Company or its current or former employees that would be actionable under the antitrust laws in connection with the agreements between ourselves and Reynolds and Reynolds," the filing said. "At this time, the Company does not have sufficient information to predict the outcome of, or the cost of responding to or resolving this investigation."

Michael Eggerling, product marketing manager at CDK, said the company is improving its integration process in a variety of ways, such as establishing a partnership with predictive F&I tool provider Darwin Automotive.

While it is easier for a DMS company to build integration with its own products, he said enabling as much automotive commerce as possible is best for the industry. Vendors have to be cognizant of the dealer's experience to help bridge some of the cracks in the process, according to Eggerling.

"Are you thinking about the upstream, website, CRM, desking, menu, DMS — do all those points connect, or is there a break in between them, where you have to log out of one thing, log into something else, and re-key in the data? That's what we need to be thinking about as vendors," Eggerling said.

CDK aims to aid integration issues through its new open-development program Fortellis. The online platform is open to any software developer, from giant automakers to startups. CDK says those developers will integrate with one another. When the marketplace launches this year, dealerships will be able to choose from any of the offerings on the exchange to build their own solutions.

Reynolds and Reynolds declined to comment for this story, though the company previously told Automotive News that its preferred approach was to provide everything a dealership needs, down to the phone system.

Dominion DMS and Dealertrack DMS executives said the companies will integrate with dealerships' preferred vendors.

"The dealer decides what he or she wants to do with their data," said Van Koppersmith, president of Dominion DMS.

Cox Automotive CEO Sandy Schwartz said he believes the Dealertrack DMS should be open, comparing the situation to when friends come to your home and ask for the Wi-Fi password. Whether the friends have iPhones or Android phones, they can log into the Wi-Fi. "I'd love to say, 'You can't use anything but Cox Automotive products.' But that would be foolish," Schwartz said.

Hannah Lutz contributed to this report.