Should Be Exciting Times

The year 2003 will be one of discovery. Even though the Application Service Provider (ASP) model for Dealer Management Systems (DMS) has been around, in one form or another for years, the industry is finally discovering it.

Modern ASP solutions take advantage of high-speed, low-cost telecommunications. They're available to virtually all auto dealers in North America. With the advent of ASP, companies providing information technology to dealers can reinvent themselves with entirely new offerings and updates.

These should be exciting times for all dealers and their IT service providers. Unfortunately, that's not the case.

Some providers lack interest in embracing a true ASP model and modernizing their offerings. In fact, a clear-eyed analysis points to some serious downsides for many DMS providers if their customers should demand a switch to ASP.

Specifically, the delivery of DMS systems via the Internet will take away a number of revenue streams for most providers.

Yet, there's a persistent, almost inexplicable belief among many dealers that an ASP delivered DMS will not be less expensive than the distributed server model that dominates the industry. Nothing could be further from the truth.

There are thousands of configurations for customers exploring the possibility of switching to an ASP system. In most, there is a reduction in direct IT costs to the client.

When the ASP dealer management system is properly designed and deployed, cost savings from 15%-30% are realized. In a few cases, real dollar savings can reach 60% compared with purchasing, implementing and maintaining a traditional DMS.

These savings come from a number of areas.

First, with an ASP model, the dealer doesn't need to purchase his or her own server along with the on-going maintenance and inevitable upgrades required over the years of the contract. The dealer still pays for the use of a server, but it's a sophisticated, high-powered piece of equipment shared by hundreds of other dealers and thousands of users. User fees are spread across this wide base.

Most of the other IT charges to which dealers have become accustomed will disappear or drop. These include charges for operating system upgrades, one-time software licensing fees, back-up tapes, tape “core” charges, click charges and communication fees for individual employee Internet access.

It would simplify the picture if dealers would look at the ASP model as a partial outsourcing of the IT services required to run their operations. An ASP system shifts all of the technical duties and responsibilities to the host provider for the DMS applications and traditional in-store server, while delivering all the same applications and programs the dealership currently utilizes.

A true IT hosting center is integrated and managed around the clock. Each dealers' data are backed up automatically as transactions are processed and stored at a separate and secure facility. Top ASP vendors will design solutions that allow for minimal disruption if a disaster occurred.

ASP is the way of the future for many dealers. But it doesn't answer all IT problems. When considering a new or upgraded DMS, arm yourself with facts. Ask around and get information from a source that's interested in what's best for you.

Matt Parsons ([email protected]) is vice president of sales and marketing for EDS's Automotive Retail Group. For a copy of the latest EDS white paper, “The 7 Keys to Successful ASP Implementation” (and some tough questions for your IT provider), visit www.eds.com/arg.