By Sally Lopez and Edmund J. Reinhard
As software vendors develop more powerful types of dealership management system (DMS) technology, a growing number of dealers are considering switching to a new system that promises more features, improved functionality, greater efficiency, and/or lower costs.
Migrating to a new DMS can cause major disruptions to dealer operations if not handled correctly. Fortunately, proper planning and active project management can help make the transition a positive experience.
Why Dealers Switch
The DMS could be called the central nervous system of any automobile dealership group. It contains the brain – a central repository of all critical business data, including customer information – as well as links to all the operational units, management, and administrative departments. Finally, it links the dealerships with various external entities that keep the business functioning.
Because the DMS is so intricately involved with every aspect of the business, converting to a new platform carries significant risk. That is why it is done so infrequently – and generally only after considerable hesitation.
The most common concern that leads management to overcome this reluctance is cost. Data processing is one of the largest line-items in a dealership’s profit and loss statement, and this expense often is the initial motivator behind a system change.
But cost rarely is the only factor leading to a switch. A dealer often finds its existing DMS provider is willing to negotiate or counter a competitor’s offer once the vendor knows the dealer is considering a change. That’s when other factors come into play.
Another common factor dealers encounter when making a switch is difficulty in integrating third-party marketing, inventory, customer relationship management (CRM) or other business systems with the existing DMS. While many DMS providers offer their own modules for these functions, many dealers prefer third-party software that offers specific features or functions they value.
Along with cost, features, and integration issues, some dealers find 1) they have outgrown their DMS or 2) their DMS provider has outgrown them as they no longer receive the same attention that bigger dealership groups receive.
Five things to consider when deciding to switch
Regardless of the specific factors that motivate a change in DMS providers, management teams should take into account a broad range of issues before deciding to switch. Here are five critical issues for a dealership to consider if it is contemplating such a change:
1. Cost. Even if it is not the primary driver behind the change, cost is always a consideration. Everyone concerned should understand exactly how much the new system will cost, how that cost will affect profits, and how much the company can expect to save over time through improved productivity and efficiency.
2. Features. Management should be prepared to answer some basic questions, such as the following: Is the proposed new DMS better than the current system? What specific features or improvements does it offer? Will the dealership group be able to maintain its existing customer database and grow it in the future? Will the new DMS integrate with all manufacturers, especially if the vendor is smaller or highly specialized?
3. Focus. What is the dealership group’s business focus? Does it rely on service and parts to drive profits? If so, all fixed operations must maintain functionality when switching. If front-end systems drive the business, the new system’s finance and insurance menus should let the dealer upsell more effectively.
4. Flexibility. The vendor must understand the dealership’s business processes and have the ability to adapt the new DMS to help automate and streamline them. The system should be molded to fit the group’s processes – rather than the dealership changing its processes to accommodate the DMS.
5. Support. The vendor’s service and training systems should meet dealership expectations. Reliability and uptime are critical, of course, but it’s also important to know how the provider might react when things go wrong. Dealerships are looking for a long-term partner that is willing to commit resources when needed.
Five factors that help make a successful transition
Selecting the right provider is essential to a successful DMS transition, but it is only the first step. Then the real work starts – and the dealership must get ready to do its part. Five more success factors to bear in mind once the vendor selection process has been completed include:
1. Open communication. From the beginning, executive management should make sure everyone is working together – that is, the vendor has a clear understanding of how the dealership works, and everyone at the dealership understands what’s expected. Typically, open communication involves a series of on-site meetings and walk-throughs as the vendor’s implementation team shadows workers in all departments to understand how they operate. Many times, this process can reveal opportunities to streamline or standardize operations across several stores.
2. Diligence in completing training. While the vendor team is configuring the system, the dealership team should train on the new software. Every vendor has its own method, but most commonly, this training is accomplished in stages. General tutorials are followed by remote training that allows workers to practice entering data in isolation, without affecting live operating data. Finally, on the ‘go-live’ date and for a period thereafter, the vendor should have trainers on-site to help with the actual transition.
3. Management team buy-in. It’s natural to expect some resistance to change, especially among employees who find their day-to-day work experiences altered drastically. Soliciting their input early in the process can help smooth the way, but the most critical factor in overcoming employee resistance is the attitude of their immediate supervisors and department managers. Even managers who have reservations about the switch should recognize their obligation to make sure personnel complete the required training. Senior executives should personally explain the reasons for the change, and make sure that mid-level managers and employees are alerted to the change as early as possible.
4. Project planning and management. A detailed project plan – complete with milestones, timelines, and lines of responsibility – is essential to a successful transition. Generally speaking, it usually is better if all departments and all stores make the transition simultaneously, but in certain situations, a phased-in approach might be unavoidable. For example, a large group might prefer to beta-test a new system in one or two areas before rolling it out to the whole organization. The dealer and vendor should agree on this plan early in the project. It also is important to form a core integration team, with representation from across the organization including sales and service units, administrative departments, and IT. Management should appoint a dedicated project champion in every department in every store. These project champions should be updated with regularly scheduled status calls so they can keep their coworkers informed on how the migration is progressing.
5. Third-party coordination. Another of the project champions’ duties is to compile an up-to-date list of all outside entities that access or coordinate with the existing DMS. This list often contains some surprises for senior executives and IT teams. All third parties – from marketing and CRM providers to parts vendors and manufacturer representatives – need to get notified of the pending change so that they update their sign-on credentials, automatic data transmissions, inventory feeds, and other critical information.
Coordinating the conversion
For most dealerships, a change in DMS is a rare occurrence. Perhaps it’s been 20 years or more since they made such a switch. Quite often, they do not remember the process involved or the pitfalls they encountered the last time.
This lack of organizational knowledge is a compelling reason to consider hiring an experienced transition consultant to help coordinate the effort. Although software vendors offer to help manage the transition, they often are handling multiple implementations at once and have limited resources available for project management.
Making dealership personnel responsible for project management also can be ineffective because their primary focus is on their day-to-day job responsibilities. Managing the DMS migration would be a secondary priority at best. Because expected cost savings often are a motivating factor, it makes sense to invest in an experienced specialist whose sole focus is on managing the transition and maximizing financial benefits.
Implementing a new DMS is a major step, and a failed transition can get extremely costly. But with proper planning, careful evaluation, system selection, and active project management, the effort can provide significant benefits.
About the Author
Sally Lopez is Partner of Owl Automotive Consulting LLC. EMAIL: sally@owlautocs.com. Ed Reinhard is Partner of Crowe LLP. EMAIL: ed.reinhard@crowe.com
