As a dealer, I’m sure the idea of going through a dealer management system conversion is intimidating. After all, implementing a new DMS is difficult any way you look at it. You have to brace yourself for business disruptions, unsettled employees and long days and nights throughout the conversion process. However, the potential to cut monthly costs, boost efficiency and streamline workflows is overwhelmingly attractive, and dealers make the switch every day.

If you’re motivated by these benefits, read on for the three crucial components you need to look for in your next DMS — and tips to help you make the right decision for your dealership.

1. The Right Technology
There are numerous DMS providers in the market, and many offer both hosted (cloud-based) and in-house systems. To determine which is right for your dealership, you must examine how your dealership works today and where you want to be in three, five, or even 10 years.

With an in-house system, you purchase a server that resides in your dealership. Your IT team is responsible for installing and maintaining applications and data on every machine, and must perform regular data backups. A hosted system does not require you to purchase or maintain any hardware or software. The provider keeps the software upgraded and employees can access your information via any secure Internet connection.

Both delivery methods work well, but a new DMS is a significant investment, and one you want to be able to use for at least the next decade. For that reason, I encourage you to look to the future and how you want your dealership to function in 10 years. Then choose a system that will grow with you rather than lock you down with outdated technology. Consider the following:

• Mobility: Many dealers have begun making their F&I presentations more interactive by loading them onto customer-facing tablets. Sales associates are pulling up vehicle comparisons on their smartphones to share with customers on the lot. Our world is increasingly mobile, so it only makes sense to invest in a DMS that can go mobile with you. The DMS you choose should have a mobile solution already in place today, and a roadmap for how the system will evolve with future technological innovations.

• Cost Control: Adding storage, upgrading processing power, maintaining a data-center environment and providing administration and maintenance for an in-house system can greatly increase your cost. In comparison, a cloud-based system doesn’t require any such overhead, so you can easily save up to $10,000 per month over an in-house system.

• System Security: You have to make sure your provider takes great care to protect your data. Ask whether they adhere to SSAE 16 (Statement on Standards for Attestation Engagements, No. 16), which were put in place by the American Institute of Certified Public Accountants for financial reporting for service organizations, and include both logical and physical security controls audited by a third party.

If you choose an in-house system, make sure you have a rock-solid process for securing your data. There are recent reports of backup tapes being stolen, disgruntled employees hacking systems and dealership accounting systems being accessed through the store’s firewall. All these actions can expose personally identifiable information. Additionally, if backup tapes are not properly removed and stored off-site, you run the risk of not being able to recover the system in the event of a natural disaster.

Dealers who own multiple rooftops often manage a shared inventory and accounting office. Your DMS should be optimized to reflect the needs of your operation.

Dealers who own multiple rooftops often manage a shared inventory and accounting office. Your DMS should be optimized to reflect the needs of your operation. 

2. A Long-Term Partnership
Finding a DMS provider who will be an enduring business partner is crucial to your success. A true partner should have a long-term vision that is compatible with yours. They should recognize challenges and opportunities in the market, and allow you the proper level of flexibility and creativity to address them the way you want to.

You can also glean knowledge from a provider’s current customers. Are dealers you trust on the system? Does the provider have big-name customers and a decent presence in the market? Make some calls and talk with a few dealers. Ask what it is really like to work with the provider and the level of service they offer. Ask how the implementation process went — more on this in a moment. The answers to these questions will lend insight into how a vendor works, its longevity and its experts’ qualifications.

Next, take a look at who really controls your data. Many vendors decide which third-party groups can access it. In my opinion, that is not being a true partner. It’s your data and you should say where it goes. Look for a provider who gives you the freedom to choose the third-party applications your business needs to perform at peak.

You will also want to examine the provider’s billing practices. I hear from a lot of dealers who are frustrated and fed up with six-page bills that hide fees and obfuscate charges. It’s not just the frustration of feeling like you’re being taken for a ride, it’s also the inability to accurately forecast expenses. Look for a provider who delivers a simple bill that you can immediately understand, and that doesn’t fluctuate from month to month.

In addition to what you will pay immediately, look at what you will pay down the road. Does the system grow with you and evolve with changes in the market, or are you expected to pay for upgrades? There are providers who build their business model on charging for major upgrades every few years. They update the system, call it “new” and sell it to you. Other vendors continually improve their product and pass advances on to you at no extra cost.

Replacing your DMS is a serious and meaningful event, so you’ll also want to examine a provider’s implementation process. What kind of project management structure do they have in place? Will you have professionals on-site helping you every step of the way? A well-planned implementation and training process will diminish what I often call the “trough of despair.”

This is the point where your sky-high expectations for your new DMS wither in the face of new workflows and the feeling that you don’t know how to do your job anymore. A good provider will make that trough as narrow and shallow as possible through excellent project management and comprehensive system training.

Your role in the implementation process is also crucial. Ensure that you are committed to the change, and work with your entire team to map out a plan that they understand and support.

3. Robust Capabilities
The final factor you must take into consideration is the system’s capabilities. Your new DMS should easily handle all the business functions and workflows you require. Dealer groups will want to dig into questions such as: Do you share inventory between locations? Do you consolidate your books? Do you have a shared back office? Do you centralize purchasing? What kind of cross-store reporting do you require? Questions for independent dealers include: How do you share vehicle and customer information across your dealership? What vehicle and customer information do your various departments need? Determining up front what you want your new system to do will help you narrow down possible vendors.

When looking at capabilities, also consider third-party integration. You’ll want to look closely at how a vendor handles this type of integration. Can they export data, bring on third parties and handle two-way integration? Check to make sure they work with the partners you work with today, and ask how they would work with any new partner you might add down the line.

Finally, in addition to capabilities, look at how easy a system is to use. If it contains all the bells and whistles, but you can’t make heads or tails of the navigation, it won’t do you much good. Look for systems that are intuitive and customizable.

There are a lot of dealer management systems on the market. Narrowing them down can feel overwhelming. But if you practice due diligence and take the time to assess the technology, capabilities and partnership levels of each provider, you will find the best DMS to meet your needs.