CDK's massive outsourcing plan could affect customer service in uncertain ways

Retail technology giant CDK Global is pitching its massive outsourcing plan as a way to free up resources to boost efficiency and innovation, but how the pending changes will affect its interaction with customers remains an open question.

"It's very concerning. CDK as it stands right now doesn't have a great reputation around customer support," said Matthew Gillrie, CEO of the Gillrie Institute in Lehi, Utah, an automotive software consulting group that works exclusively with dealers. "I can't predict the future, but if I was a CDK customer, it's something I would be nervous about."

Gillrie acknowledged the move could end up being beneficial to dealers if it works as CDK is promising. But he said dealer customers he's talked with about it so far are worried they will struggle to get enough CDK support under an outsourcing scenario, particularly during the transition.

CDK spokesman Tony Macrito told Automotive News via email that "the transition will happen gradually," and customers "can continue to expect to receive the same industry-leading service they always have."

The plan calls for outsourcing most of the dealership management system company's enterprise information technology unit, as well as parts of its technology, product, customer, finance and procurement divisions, in the coming months to global outsourcer Genpact, according to CDK CEO Brian MacDonald in a Feb. 22 email to employees that was obtained by Automotive News and confirmed by CDK.

Under the plan, workers in those units will be offered the chance to become Genpact employees. It's unclear how many would be moved. CDK, of Hoffman Estates, Ill., was acquired last year by Brookfield Business Partners and employed about 6,000 people as of late January.

Outsourcing enterprise IT will allow for around-the-clock outage management and quicker help desk response, MacDonald said in the email. Genpact will also take on key but primarily older CDK products and help maintain and run them. MacDonald noted that Genpact "can do this type of work at scale," allowing for CDK to free up employees "to focus on innovation and modernization."

In terms of customer service, CDK plans to continue to invest in India, but Genpact will help the tech giant simplify and automate customer support more quickly, MacDonald said in the email. He didn't elaborate. Genpact also will take on efforts to make forms fulfillment more efficient. CDK has made a concerted effort in recent years to improve its customer service, simplify its billing and launch initiatives such as a customer rewards program. It is unclear whether the outsourcing plan will affect those and other initiatives.

On the purchasing side, Genpact will help improve supply chain efficiency by standardizing ordering processes with the use automated tools and predictive analytics, according to MacDonald.

The changes are part of MacDonald's "fit and focus" strategy to reorganize and boost efficiency, and he said that moving many of CDK's employees to Genpact will help preserve jobs.

"Shifting workloads to a managed services provider makes strategic sense for our business and the alternative would have been deep cuts to our workforce," MacDonald said in the email.

Affected employees in North America and India will receive offers to work for Genpact in the coming weeks and will continue to support CDK as Genpact employees, MacDonald said in the email.

While there "will be some eliminations on some teams," MacDonald acknowledged, the company will help "people find other roles at CDK and will work closely with each affected person to support them financially and professionally as best we can."

The outsourcing announcement came about a month after MacDonald told Automotive News in January that CDK had no plans for another companywide layoff following job cuts made in late 2022 as part of streamlining efforts. CDK did not reveal the number of positions eliminated then.

MacDonald also said in January that CDK's head count was "where we want it to be."

CDK did not disclose to Automotive News how many employees will be affected by the Genpact decision, nor did it provide the specific time frame involved for the outsourcing transition. Macrito said MacDonald was unavailable last week for an interview.

CDK counted 9,181 automotive DMS customer sites as of Dec. 31, 2021, and reported that roughly 15,000 automotive customers used its products in North America as of March 31, 2022. It was still a public company at the time, but Brookfield Business Partners took CDK private in July in a deal worth about $8.7 billion.

MacDonald had led CDK from January 2016 through November 2018 and returned as CEO after the Brookfield deal.

"When we took over the company, we told the employee base one of the key priorities would be getting fit and focused, and focused on what we want to do and be really good at that and deprioritize [other] things," MacDonald said in January.

Macrito said staff members who agree to transfer to Genpact will gain from "new opportunities for career advancement and skill development with a large, fast-growing, globally admired company."

Genpact describes itself as a global professional services company that employs 115,000 people around the world and supports 800 global clients. It also generated $4 billion in annual revenue as of 2021, according to its website.

Macrito said Genpact was selected after a "very thoughtful and thorough review and bid process" with a number of outsourcers. Genpact "has deep experience in the automotive industry" and will help CDK achieve "best practices, innovation and thought leadership used by leading technology companies," he added.

Genpact, MacDonald said in his email, can also tap into "a pool of talent" with "skills in digital platforms, tooling and software automation" that can boost CDK's efficiency and effectiveness.

"Given the tight labor markets in India and North America, it would take us much longer to recruit, hire and train the number of people we need" to support CDK's growth initiatives, MacDonald said.

Gillrie said he hopes for the best as CDK's transition gets underway.

"There's a route where the layoffs and this outsourcing is all happening because they're turning all their attention toward modernizing and improving the current product," Gillrie said. "If all of these moves are facilitating that ... and if we start seeing a very updated and slick new version of CDK coming out in the next year or two, then that will be fantastic for dealers."