Here Comes Microsoft

Microsoft Corp.'s first-time exhibit at February's National Automobile Dealers Assn. convention in Las Vegas likely will be swarming with dealers. But 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 it sometime in the summer of 2007. Microsoft's offering 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 that has been dominated by the Reynolds and Reynolds Co. and Automatic Data Processing Inc. Some dealers welcome a new arrival.

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

In a first salvo, John Reed, Microsoft's director of automotive retail solutions, contends the company is developing its own DMS because it is frustrated with ADP's and Reynolds' unwillingness and inability to provide 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.

For its latest DMS venture, 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 its 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 dothe selling.

Quorum Information Technologies Inc., a small Canadian firm, became the first to agree to sell Microsoft's DMS to dealers. The agreement is a coup for Quorum 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 early buzz, but that does not mean grabbing market share from Reynolds and ADP is a sure thing. For one thing, an actual Microsoft DMS still is a while from actual development. Quorum officials admit Microsoft has a ways to go. So dealers looking for something in February at NADA might be disappointed.

Reynolds and ADP control the market for a lot of reasons. For all of 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 almost every dealership and its current DMS provider and how long the contract is — all data Microsoft lacks.

Another strength of the two giants: 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.

It may be three-five years before the company sees real growth. But its timing is good. Reynolds could lose some market share over the next three years as dealer customers watch to see how the Reynolds acquisition by Universal Computer Systems Inc. plays out. Some of those dealers may beeline to Microsoft.

And there always is the tantalizing possibility ADP or Reynolds could become a Microsoft reseller.

Cliff Banks is editorial director of Ward's Dealer Business. He can be reached at [email protected]