MOVING DMS TO WWW NOT EASY AS ABC

Once the Internet became such a force in the communications field, it was a matter of time before the auto industry would seriously start moving toward web-based dealer management systems and dealer communications systems.

As easy as it may sound, considering so many industries are doing business over the Internet already, it's a tough move. For one thing, it's expensive. Other issues concern standardization among manufacturers and consumer and corporate security.

Discussions at an eAutoWorld conference in Chicago lead one to believe that the retail auto industry is heading toward an application service provider (ASP) model. That would connect dealers to a central database from which much of the software needed to do business would come.

There are, of course, those aforementioned issues that need to be addressed before such a plan could be widely implemented.

"It's difficult to juggle the needs of both the dealers and the multiple manufacturers," explains Joyce Renata, vice president of information technology at AutoNation Inc. "Our dealers need multiple points of connectivity. They need to get to AutoNation for the things we provide, to the manufacturers for the things they provide, to other third parties for the services they provide. And that really drove a big change in our infrastructure. It's very costly and ineffective for our dealers to keep adding to single-point connections."

She says AutoNation is trying to provide its dealers with an infrastructure that allows them to conduct business-to-business with the parent company, dealership management system (DMS) providers, manufacturers and whomever else they want to do business with.

Such an open-architecture is somewhat more affordable for a giant like AutoNation.

"If I'm AutoNation it doesn't concern me nearly as much as it does when I'm five dealerships in Madison, WI," says John Lancaster, a Chevrolet, Toyota, Nissan and Lexus dealer in Madison, "because I don't have the ability to process that information or utilize that information like a bigger entity can do."

Mr. Lancaster outlines some of the other problems facing dealerships as the Internet becomes more a part of the DMS. One is that he needs to install multiple T1 communications lines - one for himself and one for each manufacturer whose products he sells.

He says, "If you look at it realistically, the cost is going to the dealer. And unless we get a new set of reward mechanisms for the dealer to do all of these things, why will he or she change?

"We have to reward the dealer for putting the correct infrastructure in place. I can't swallow those kinds of costs."

He calls for standards in the industry that would keep dealers from needing to buy multiple sets of equipment and software.

"The ASP or the manufacturer is going to have to create a business model that will allow all of us to participate," Mr. Lancaster says. "Somebody has got to take the lead. Somebody's got to break through all of these problems that we as individual dealers have because we cannot harness those levels of technology on our own."

Among the problems with standardization is security.

"The biggest pitfall is security," says Ms. Renata. "That's a lot of the debate about private and public connectivity. That's going to be a struggle for people to become comfortable with, at the dealer level as well as manufacturers and third parties. It's definitely do-able, as well as the ability to really use web applications."

Another ramification of going to an ASP business model, says Mr. Lancaster, is one of information sharing.

"And the old bugaboo starts to come forth about, `Is it my data or is it the manufacturer's data?' And how does that all play out," he says. "What is going to be the equilibrium with the manufacturer?

Because all of a sudden all of my information goes to that manufacturer and I'm not getting any monetization and he can't refresh it and send it back to me because we don't own the same company. It's illegal. So all of the sudden this new world that we're looking at is our assets starting to go on someone else's balance sheet, unless we can find some form of new equilibrium."

Despite the problems facing the brave new world of DMS on the World Wide Web, Toyota Motor Sales USA and AutoNation are forging ahead with their plans for the future.

Ken Goltara, vice president of business systems development for Toyota, says its current, "home-grown" DMS and dealership communication system (DCS) are out of date and do not integrate or trade information with any other dealer management system.

"Our connection to our dealers is probably one of the lowest-speed connections in the marketplace today between a manufacturer and a dealer," he explains. "The foundation is a distributed software solution, meaning when we want to update software on our systems we actually send out CDs to our dealers. The base foundation of that technology is about 22 years old and we've just continued to upgrade it."

Mr. Goltara says Toyota decided some time ago to get out of the DMS business, because it isn't one of their core businesses. Rather than just turn the business over to an outside company or companies, Toyota decided to construct agreements to make sure data could be integrated between the manufacturer's dealer portal called Dealer Daily and the DMS.

"We felt that the Internet would continue to play a more important role, and it was the best way to facilitate commerce and the most efficient way in the future," he explains. "How we will serve the needs of the dealer will be through a centrally located model of data, images, video, text, so we'll maintain that all at a central server at our location. That could also go to a hosted service provider at some point."

AutoNation also is moving toward a web-based DMS function.

"If our dealerships can get to the Internet, they can get to anywhere they need to go, and that is truly the ultimate low cost from a connectivity standpoint," says Ms. Renata.

"The other piece of it is ASP," she continues. "It takes the infrastructure out of the dealership, takes the cost out of buying piecemeal hardware, leasing hardware, hardware maintenance, peripheral maintenance and software maintenance.

"We've just put all of our dealers on a common payroll system," says Ms. Renata "We're completing that deployment through October of this year. That is all Internet-based. So we're doing payroll over the Internet for all our dealerships."

She says AutoNation is looking at various ASP proposals from the major DMS providers.