Microsoft Corp.’s exhibit at the upcoming National Automobile Dealers Assn. Convention in Las Vegas likely will be swarming with dealers. The question is will they find what they are looking for?

The computer giant announced in July it intends to develop a dealer-management system for the North American market and likely will begin piloting the solution sometime in the summer of 2007. Microsoft’s solution possibly will have monthly contracts and initially will be targeted at dealer groups with 10 to 20 rooftops.

For many dealers, the prospect of the most powerful firm in computer technology entering the automotive retail market is intriguing. It is a space, some in the industry say, that far too long has been dominated by the Reynolds and Reynolds Co. and Automatic Data Processing Inc.’s Dealer Services Group products.

There are dealers looking for a DMS solution that costs less, allows for shorter contracts than today’s typical 5-year terms and allows for easier third-party application integration than Reynolds and ADP’s current products.

Microsoft’s Director, Automotive Retail Solutions John Reed says the company is developing its own DMS because it is frustrated with ADP’s and Reynolds unwillingness and inability to bring innovative products to the market.

Ironically, Microsoft was Reynolds’ partner in the failed and costly Generations Series, a Web-based DMS that was supposed to revolutionize the market.

Microsoft spent several months looking for a company that had a DMS built on its Dynamics AX platform. It ultimately acquired Infonizer Inc., a tiny firm created by a dealer group in Denmark. Infonizer now has offices in Ann Arbor, MI, and is developing DMS applications for the U.S. market.

Microsoft’s model closely resembles the company’s successful strategy of using partners to get its operating system and applications into every personal desktop computer.

That means Microsoft will not sell its system directly to dealers. Instead it will rely on other technology firms to do the selling.

Quorum Information Technologies Inc., a small Canadian company, announced earlier this month it had become the first company to agree to sell Microsoft’s DMS to dealers. The agreement is a second public relations coup for Quorum this year whose own solution, Xsellerator, is one of two products selected by General Motors Corp. for its integrated dealer management systems initiative.

Microsoft has the money and the name to create a lot of early buzz, but that does not mean grabbing market share from Reynolds and ADP is a sure thing. For one, an actual DMS still is a ways from actual development. Quorum officials admit Microsoft has a ways to go before its solution is ready for launch. So dealers looking for a solution in February at NADA might be disappointed.

Reynolds and ADP control the market for a lot of reasons. For all the complaining about their products – and much of that is from competitors – dealers know when they unlock the doors in the morning their systems will be working. One of the knocks against Microsoft Windows is its instability. Will the Dynamics AX platform have similar issues?

Also, ADP and Reynolds have formidable marketing forces, something Microsoft is unwilling to invest in. Both companies have databases of nearly every dealership rooftop, and their current DMS provider and how long the contract is for – all data Microsoft does not have.

Another strength the two giants have is its field-engineering departments that handle the migration from one system to another, as well as the maintenance of those systems. Those tasks probably will fall to Microsoft’s partners.

Reed knows entry into the DMS market won’t be easy and says Microsoft will be disciplined in its approach. In other words, Microsoft can take its time and get it right.

It may be three to five years before the company begins to see real growth. But its timing could not be better. Reynolds possibly will lose some market share in the next three years as dealers watch closely to see how the acquisition by Universal Computer Systems Inc. plays out.

Some of those dealers may make a beeline for Microsoft if they sense Reynolds changing its business practices.

And there is the tantalizing possibility ADP or Reynolds could become a Microsoft reseller. If that happens, Microsoft will be the major DMS player.

cbanks@wardsauto.com