New CDK CEO Brian Krzanich said that if the software provider didn't resolve customers' complaints about vendor integration, it would lose them.
"Customers have told me that they need more choice — they're getting squeezed for profits," Krzanich, who joined the company in November, said last month. "They need to optimize around solutions, they need more support and they need somebody to piece all this together."
Vendor collaboration is necessary for dealership operations, but it has historically come at an uncomfortable cost. From digital marketing and lead-generating tools to customer relationship management systems and even basic phone lines, dealerships on average use 14 service providers, according to CDK. Almost all of these tools share data at the beating heart of a store's operations, the DMS.
Whether to integrate those tools is a long-standing dilemma for dealers. Those who choose less expensive vendors often pay exorbitant fees to connect them to their DMS. Dealerships that buy fully integrated systems can connect other software from the same provider without added fees, though some dealers say such systems are slow to innovate and expensive in their own right.
In response, CDK last year rolled out Fortellis, an open-development platform that lets dealerships and software vendors build and sell tools that integrate with each other. Depending on which vendors sign onto the platform, dealerships could integrate the resulting software products into their DMS seamlessly, without the hefty integration fees many pay today.
As margins get ever thinner on the new-vehicle side and dealers work to cut costs, they are demanding more from their vendors. And integration capability will play a large role in how selections are made.
If vendor integration is too expensive or difficult, it could be a deal breaker for dealers.
At the moment, Adam Lee, chairman of Lee Auto Malls in Auburn, Maine, said the pricing of his DMS is not competitive — but he has made peace with that. Lee is a customer of CDK's chief competitor, Reynolds and Reynolds.
"It doesn't need to be" competitive, said Lee, who called his group's arrangement with Reynolds "the best deal we could make." The system works well, and his other option would be "someone else who's also not competitive," he told Automotive News.
But other dealers have jumped ship, wooed by big cost savings or promises of better customer service, and that hasn't gone unnoticed by the giants. At the National Automobile Dealers Association Show in January, CDK executives said the company is seeking to offer more of the customer-service benefits that smaller players provide, and Reynolds executives emphasized how much value dealers get from its connected system instead of working with multiple, smaller vendors.