The Big Move: Changing Dealership Management Systems

If a dealership were a living organism, it’s safe to say the dealership management system (DMS) could be considered the creature’s central nervous system. There isn’t an area of the dealership the DMS does not touch; it holds huge amounts of the data necessary for the dealership to function—customer data, parts and vehicle inventory information, service history, financial data and much more. To be sure, having a DMS go down can paralyze a dealership or at the very least slow operations to a crawl. It’s no wonder the idea of moving to a completely new DMS is an extremely intimidating one for most any dealer.

“It weaves so much into the fabric of the operation that you get concerned [about] changing,” said George Steinmetz, owner of Matthews Paoli Ford in Paoli, Pennsylvania. “Your bias is not to leave [your current DMS provider] because of the work involved with leaving, the switching costs and the work involved with switching over,” he stated. However, despite the magnitude of this kind of change, it is one that has been undertaken by a number of dealers—albeit, not lightly.

The Itch to Switch
Not surprisingly, cost tends to be the primary motivation in most dealers’ decisions to switch; however, it is certainly not the only factor to be considered.
 
Jeff Wood, president of Don Wood Automotive, a multi-franchise group with stores in Athens and Logan, Ohio, was actually happy with the DMS product he had previously. Rather, it was the degree of control and inflexibility exhibited by his former provider that served as motivation to switch. “Reynolds and Reynolds has no flexibility in their dealer agreement,” he stated, a sentiment that has been echoed by more than a few dealers. “Instead of trying to be flexible for dealers and have a 30-day opt-out clause and get paid because they’re the best product, they chose to lock dealers into long-term agreements … I was absolutely, 100-percent satisfied with Reynolds and Reynolds as a product and 100-percent dissatisfied with their business practices.”

Was switching your DMS really as difficult as you anticipated?
"When it's all said and done and you do make a switch, it's a painful process, but because I let [the department managers] in on the decision-making process itself, they accepted that a little bit better because they felt ... like they had quite a bit of input." Matt Bell, Owner Greg Bell Chevrolet - Adrian, MI

The control issues extended to more than just the term of their dealer agreement, he added. “They don’t give you much control over your hardware, and so I would have battles from time to time … if I wanted to do anything with my network.” He was also unhappy with the expense related to maintaining the equipment required by Reynolds. “There’s a premium for their hardware, and I just didn’t want to pay that.”

Expenses related to required equipment was a complaint echoed by Phil Doukas, comptroller at Roto Lincoln Mercury Subaru Mazda in Arlington Heights, Ill., which switched from ADP about a year ago. “They were charging us a lot of maintenance fees,” he said. As the end of the store’s most recent contract with ADP approached, Doukas and others began doing a great deal of research on a few other companies they’d heard about; in the course of that research, he said, they came to the conclusion that they were being “grossly overcharged.”

He discovered that the dealership could get the features it needed in a DMS for “about a quarter or a third of what we were paying.” After all, extras like laser invoicing of F&I products – additional modules for which there were separate charges and specific equipment required – were not absolutely necessary to dealership operations. “A basic DMS package will work for us as long as it does the ‘normal’ things necessary—payroll, accounting, parts inventory, service invoicing, things of that nature,” he stated.

The difference in cost among DMS providers had little to do with one dealer’s decision to switch from his provider of 15 years. “As far as the actual cost issues, we were looking at similar costs. Dubuque [Data Services] is one of the lower-cost providers,” said Phil Rich, president of Rich Ford Lincoln Mercury in Archbold, Ohio. A couple of things factored into his decision to look at other systems. First, the dealership’s server was 10 years old, meaning he would soon have to either update it or replace it. The second factor was that he wanted to move to a particular provider for customer relationship management in his business development center, and the CRM program could not interface with his Dubuque DMS. “We wanted to be able to push data back and forth between the two systems.” Rather than go with a different CRM, he opted to examine his options for a new DMS.

Weighing the Alternatives
Once the decision to change systems has been made, the next big hurdle is choosing the new DMS provider. There are a number of issues for the dealer, general manager and/or controller to consider. Is there a less expensive system that offers the functionality we need? Will the systems we’re considering be compatible with multiple franchises? Do we want to maintain a server on site, or will a Web-based solution be a better fit for our store? Would it be helpful to get input from our department managers before choosing a new system?

When it came time to examine alternatives to replace the Reynolds and Reynolds system he had been on for about 20 years, Matt Bell, owner of Greg Bell Chevrolet in Adrian, Mich., said it was very helpful for him to get input from his management staff. “I had all my managers from each department sit in on demos from the different companies, and I really let them get involved as far as what we were going to switch to,” he said.

A similar approach was taken at Tyler Automotive, which has three stores covering multiple franchises in Niles and Benton Harbor, Mich. Although Controller Paula Wilkinson noted that it could be “a long and tedious process trying to coordinate schedules,” she said it was a good idea to “get as many managers involved as you can, so you can get their opinions on the demos … especially the more computer-savvy ones just because they know better questions to ask.”

Why did you opt to go with an Internet-based DMS?
"It freed up space in the dealership and it freed up the problem of troubleshooting. It freed up doing nightly data saves and all that good stuff, and at a fraction of the cost." Phil Doukas, Comptroller Roto Lincoln Mercury Subaru Mazda Arlington Heights, IL

Tyler Automotive made the switch from Reynolds and Reynolds to Auto/Mate at the beginning of March. “The largest concern was that we had heard the cheaper systems are more limited in their report-writing function, and we do a lot of expense analysis and things of that nature,” said Wilkinson. She added that she was not able to get the same kinds of reports out of the new system that she was able to get from their old Reynolds and Reynolds DMS; however, that was deemed an acceptable loss in the face of the cost benefit of switching. “That’s been our biggest drawback, but we knew that going into it,” she said. “We just decided the cost wasn’t worth what we were getting out of the [Reynolds] system.”

Reporting capability is something of a subjective matter; it all depends on dealer preference and what kind of information they find the most useful. Bell also went with an Auto/Mate DMS for his dealership. However, he had no issues with the system’s reporting capability; in fact, he believed it was better than what he had before. “I like Auto/Mate just as well or better,” he stated. “I can pull every report that I need, and I can pull out more information much easier than I could with the Reynolds system.”

When Rich started his investigation into DMS alternatives, he sought help from a logical source. “We talked to some of the other dealers I know and asked them questions.” He looked primarily at two providers, AutoSoft and DealerTrack, but ultimately decided on DealerTrack, citing the fact that its DMS is a Web-based system. “The idea of not having to maintain a server and update it and all that stuff was attractive to us,” he said.

Doukas expressed similar reasoning in his choice to go with DealerTrack. “It’s all Internet-based,” he said. “It freed up space in the dealership and it freed up the problem of troubleshooting. It freed up doing nightly data saves and all that good stuff, and at a fraction of the cost.”

Of course, with a Web-based system the first concern many dealers have is what will happen if they should lose their Internet connection, but Rich pointed out that it wasn’t much different than having an on-site server go down. “We have had that happen,” he said. “We’ve never had it lose the data or anything like that, but when the server was down you couldn’t do anything…then somebody had to come fix it.” He was actually more comfortable going with a Web-based system over an on-site server. “I think actually this will be more reliable.”

Steinmetz opted to take an extra precaution when he moved to a Web-based system. “We’ve got redundancy built into our Internet connection,” he said. “We’ve got Comcast cable with a DSL backup, so if one goes down the other one can kick in.” Like Doukas and Rich, he also went with DealerTrack for his new DMS.

Steinmetz said he was attracted to DealerTrack’s menu-based system, which was completely different than his old system. “[Reynolds and Reynolds] had what they called executables,” he elaborated. “If you wanted to get into a certain area to work on something, you had to know the code … and if you didn’t know that, you could look for 30 minutes and not find where you needed to go.” With DealerTrack, he said, “It’s a menu-driven process, so you can see what’s in front of you. I know it’s an overused term, but it’s more user-friendly.” He also believed the company to be more open to working with third-party vendors than his old provider. “I think Reynolds is going in the other direction; they’re making it more difficult for third-party vendors to extract data and to work with them,” he observed.

Why are so many dealers reluctant to switch DMS providers?
"It weaves so much into the fabric of the operation that you get concerned [about] changing. Your bias is not to leave [your current DMS provider] because of the work involved with leaving, the switching costs and the work involved with switching over." George Steinmetz, Owner Matthews Paoli Ford - Paoli, PA

Wood agreed, and said that was one of the reasons he decided to go with a LightYear DMS from DealerBuilt. “The thing I like about doing business with them is that there is no rule of thumb, there’s flexibility,” he stated. “Whatever the situation merited, they were willing to adapt to make it work, whereas Reynolds and Reynolds says, ‘This is how we’re doing it and if you want to do business with us, this is how you’ve got to do it.’” 

Another attractive feature of switching to a less expensive system is the availability of much shorter lease terms. Instead of locking dealers in for years, many of the lower-cost providers operate on a month-to-month contract. Fundamentally, that may not make much difference to the big picture. Steinmetz noted, “In reality, it’s the same thing. Once you’re on the system, it’s tough to make a switch.” However, it’s more about the principle; dealers may not like the idea of switching their DMS, but they have the freedom to leave without fear of penalties for early termination. “That is a nice feature,” said Steinmetz. “They don’t want to force us to stay if we’re not happy.”

Zero Hour—The Actual Switchover
A number of issues can pop up during the move from one DMS to another, ranging from data loss and/or incompatibility to employee difficulties, and they can vary in severity depending on the situation. The actual data transfer generally takes place over the course of one night, often on a weekend; most of the real work is preparing for the transfer and then learning the new system.

Data loss tends to be the most immediate concern dealers have when making the changeover. In most cases, if any data loss is incurred, it seems to be an inconvenience at most. “We did not have issues with losing data, but we had issues with getting data transferred,” said Rich. “We still have data in the Dubuque system that we can’t get over and so we have to go back in there and look things up once in a while … mainly service history.” He added,

Wilkinson said that the cleaner and more complete a store’s files are, the easier it makes the switchover. “Two of our three stores were very clean; the one that wasn’t very clean was the worst conversion,” she said.

Bell agreed that cleaning up files and organizing information such as account numbers and balances can minimize problems with the transition. “There’s a lot of legwork that you need to do to make the switch,” he said. To make sure he didn’t permanently lose any of his data, he opted to buy out his Reynolds server, which cost several thousand dollars. While there was a small amount of data that did not transfer, he said, “It wasn’t anything major … Most everything came over.”

Many of the problems making the transition have to do with the human factor. Getting dozens of employees to accept something completely new can be difficult—especially if they were not happy about making a change.

“Change is a four-letter word,” Steinmetz joked when talking about how his staff accepted his decision to switch the DMS. “They didn’t want to do it … Our main service and parts areas were frightened to death.” Several of the employees, including the parts manager, were longtime Reynolds users, and his general manager was as “nervous as a cat on a hot tin roof.”

Bell said his decision to get input from his managers made the changeover go a little more smoothly. “When it’s all said and done and you do make a switch, it’s a painful process, but because I let them in on the decision-making process itself, they accepted that a little bit better because they felt … like they had quite a bit of input.”

Did having multiple stores present a problem when you switched to a new DMS?
"If I had to do it over again ... I would have done a store every two weeks. That would be my suggestion to a dealer group with more than one store--try to space those conversions out over a certain time period." Paula Wilkinson, Controller Tyler Automotive - Niles, MI

Steinmetz did not take that approach. “I explained the benefits of the system itself, explained the cost savings, and said, ‘This is the direction that we need to go.’” He went on to explain, “I guess in my mind I knew my folks – not all of them, but a portion of them – were resistant and that I wasn’t going to get total buy-in, so I just had to go and do it. And it’s worked out better than I expected … If I thought I could’ve gotten more buy-in or [of] a way to make them less afraid, I would have done that, but in retrospect … I can’t see any way I could’ve done that.” His employees actually took to the new system much better than he anticipated. “We’re a little over a month into it and things are much calmer now. I thought it was going to be a good 90 days before the dust settled and we didn’t have any real day-to-day problems, [but] it was pretty quick.”

For the most part, the ease of the transition depends on how quickly the new system can be learned. “You can cut a check in your sleep when you’re used to the same system for so long, and then [with the new DMS] you just have to really think about the steps … The days were very long,” Wilkinson recalled.

As with any change, there is an adjustment period, but the in-store training provided by the DMS company can go a long way toward making the adjustment as pain-free as possible. Doukas was very pleased with the help he got from DealerTrack. “The team I had out here was fantastic. They had a lead technician, and then they had a person for each department … and they all stayed for one solid week,” he said. “When they left here after the week, we were running like we ever did … Everyone picked it up really well.”

“I think everybody’s situation is different,” said Wood. “We went through a really rough time for many months.” He said there are still a few issues with the system. “One big weakness with LightYear is [it] is using a third-party payroll system, and it’s not as good as Reynolds and Reynolds’ payroll module.” However, he said that it was his understanding that DealerBuilt is creating new software to address that problem.

One issue Bell mentioned had nothing to do with adjusting to his new provider, but rather with disentangling himself from his old provider, was in the different modules he had added to his former primary DMS. Each of those modules had its own lease. “They staggered the leases on those modules,” he said; all had different end dates. “It got so complicated as far as how to notify them – and they have really tight contracts – that I had to hire a consultant to tell me how to do that,” he stated. He added that avoiding that particular headache was definitely worth the expense of hiring outside help.

Hindsight is 20/20
Of course, after having gone through the entire process from the initial decision to the actual implementation, practically everyone cited at least one thing they would do differently if they had to change out their DMS again.

With respect to his investigation of different providers, Wood said, “I don’t know that I was as thorough as I should have been … I tried to talk to other people that were on the software to try to get an accurate impression.” However, he said if we were to do it all over again, he would visit another dealership to see the system in action and talk to people like the parts manager and office manager. “For anybody switching [dealership management systems], I would just say that it’s probably more important to talk to the people on the front lines of a dealership than it is to talk to the president of a company. My agenda is saving money and getting the information processed; the parts manager’s agenda is far different than that, and I know that for our parts managers the transition was the roughest.”

Whose input is especially helpful when weighing DMS options?

"For anybody switching [dealership management systems] I would just say that it's probably more important to talk to the peopl on the front lines of a dealership than it is to talk to the president of a company. My agenda is saving money and getting the information processed; the parts manager's agenda is far different than that, and I know that for our parts managers the transition was the roughest." Jeff Wood, President Don Wood Automotive - Athens, OH

Wilkinson said she would have timed things a little differently. As it was, they ended up with a little bit of a time crunch on their hands as the end of their lease drew near, and she said didn’t have as much time as she would’ve liked to pull data from their old system and to familiarize herself with the new system. While she had made hard copies of the data from the old DMS and didn’t actually lose any data, she said, “It is really hard to have to go to the files and just pull stuff when you’re so used to looking at it in the system, so I think it would have been well worth the cost to have both systems up and going for at least two months.”

She also recommended that dealers with multiple stores give themselves a little wiggle room during the switch. “We did our Honda store one week and then we did the two Niles stores the same week. As a controller, that was a total nightmare because … I was so busy checking setups and doing things that needed to be done that I really didn’t have any time to learn the system,” she said. “That would be my suggestion to a dealer group with more than one store—try to space those conversions out over a certain time period.” She added, “If I had it to do over again… I would have done a store every two weeks.”

Allowing enough time to investigate providers and coordinating the changeover to take place near the expiration of the prior lease can save dealers some unnecessary expense. Steinmetz ended up buying out his server because he ran out of time. He started looking at different systems at the beginning of 2009, but was also waiting on a quote from his then-provider on a new contract. “I was going to make a decision, but Reynolds kept saying they were going to come back to me with a price,” he said. “They didn’t.” He didn’t have time to make an informed decision before his contract with them ended around. “I didn’t have enough time to really make a switch,” he said. “I ended up buying out the server … [and] just operated month-to-month with Reynolds, then eventually made the switch.”

One other mistake he said he made was not going with the router recommended by his new provider, DealerTrack. He had just purchased a router and didn’t want the expense of buying a different one. He and his IT guy believed the one he had would meet DealerTrack’s requirements but they spent their first week on the new system repeatedly rebooting their router. “It wasn’t a major thing. It was just annoying, and during that fragile time it kind of increased everybody’s anxiety,” said Steinmetz. “Once we got the new router, we didn’t have any more issues.”

Wood said his store has experienced its share of issues since switching, but chalked it up to “growing pains” with the LightYear system. “I look at a [system] like LightYear as being one where you can have considerable savings, probably better software, but you’ve got to be a little bit technically savvy to really make it work in your business, I think,” he stated. “At the end of they day, would I change again? I’m not sure that I would, but I can say that in probably another year or so, I think that I’ll be really pleased that I have,” said Wood.

He added, “And I do know one thing—I’m not obligated to some long-term agreement,” said Wood. “To me that was really appealing. If I want to walk away, I can. There’s certainly a level of accountability that they have to provide if they want to maintain my business.”

Vol. 7, Issue 6