CRM on the verge of something big

Customer Relationship management (CRM), which has been around for a couple of years, is on the verge of something big.

It's a technological advancement that allows computer access to much more data, and the ability to use that automated information to sell more to serious prospects and repeat buyers.

In the information technology world it's called integration — the ability of computer systems to assimilate data from all sorts of sources without system-to-system incompatibility mucking it up.

Current dealership IT systems for the most part aren't integrated. That's about to change.

Big info tech companies such as Reynolds & Reynolds, ADP and EDS are designing their entire strategies around integrated CRM. Players like Siebel Systems are jumping into the automotive retail industry because of CRM's new-wave promise.

Internet technology advances are creating the ability to integrate various computer-based systems and applications. That gives dealers and manufacturers access to more data about customers and their buying habits.

That data can then be used for the type of targeted marketing and customer interaction that can only come when you know your customers, know what they buy and when they're likely to buy it.

Dealership employees with Roledexes and 3-by-5 cards can track leads and customers in a rudimentary form of customer relationship management.

But modern CRM systems about to hit the market are juggernauts of the modern information age. They'll make old systems look antiquated.

“CRM is a business strategy that involves systematically collecting and acting on customer data,” says Baba Shetty, a senior automotive analyst for Forrester Research Inc.

While loads of customer data is generated daily, accessing that data and putting it to practical use has been impossible.

Current automotive customer information from dealerships, OEMs and system providers is “strewn across a fragmented landscape,” says Mark Dixon Bunger, another Forrester senior automotive analyst.

Systematically collecting, sorting and working that data is expected to enhance CRM's mission of garnering repeat business through targeted Internet-based marketing and interaction with a strong customer base.

“Dealers are just now beginning to recognize the value of that data. We really do want to be able to access it and maximize to its true value,” says Wes Lutz, owner of Extreme Dodge in Jackson, MI and chairman of NADA's IT committee.

Chris Rayl, ADP's director of VIP Programs, calls it “precision marketing.”

He explains, “It's being able to offer the right deal to the right customer at the right time. It's the ‘Holy Grail’ of CRM — how do I get more long-term and profitable customers?”

Says Kurt Olnhausen, Siebel's Automotive division's general manager, “It's about being able to view the customer from a 360 degree perspective.”

Integrating that data is a big problem on the dealership level. Dealers today are hindered from developing effective CRM strategies because they aren't able to integrate all of the data from their various departments into one database.

The service department doesn't know which customers have bought cars from the dealership, and therefore are valued customers who deserve special treatment. The dealership's sales department lacks access to which customers own vehicles approaching that 100,000 mile mark, and may be in the market for a new vehicle.

What about gathering all of the leads — from the call center, the Internet, walk-ins and phone ups — and placing them in one database? Most dealerships can't do that yet.

How about bringing that finance and insurance department's data into play? Again, not many dealerships can do it.

Most dealerships that integrate their data now do so only because they've jerry-rigged several systems together into a patchwork solution.

Because of technology advancements, dealers will be able to integrate data from all of the customer touch points in the store. And they can use that data to manage the customer across all of their various departments.

The benefit extends beyond just a single point store. Dealers with multiple franchises will be able to manage their customers across the various brands.

Making it possible is XML (see sidebar, this page), a new computer language that allows desparate systems to communicate with each other more easily.

Charlie Prophet, COO of AutoSoft International, a PA-based DMS provider, says his company already offers a complete integrated solution for dealerships, as do some of the smaller DMS vendors, like Arkona, PCB and others.

However, because many of AutoSoft's customers use some applications from other providers, the onus was on him to write software that allowed for integration. Once this open architecture becomes part of the industry, his company will be able to focus on trying to provide the best software.

The bigger technology vendors are starting to catch up, by migrating those green-screen legacy dealer management systems (DMS) to the Web.

Reynolds & Reynolds and EDS confirm they're moving in that direction.

ADP, the other big DMS player, is well into its strategy of migrating its systems to the Internet, according to company officials.

Reynolds & Reynolds' product, Generation Series, is a Web-based solution operating on Microsoft's .NET platform. It allows dealers to manage the migration of their DMS to the Web in steps, based on needs and budget.

“The smart migrations are the ones doing it in steps, says Reynolds CEO Buzz Waterhouse. “Our dealers will have the choice of when and what modules they want to migrate.”

Only two modules are available now — the customer management processes and Web brand management.

Other modules will follow — F & I management, fixed operations, business management and employee management — but Reynolds & Reynolds isn't saying how long it will take to bring those to market.

A complete migration could take years. So don't expect Reynolds & Reynolds' ERA legacy system to disappear over night. Each module, though, will be linked to the ERA system, allowing the data integration.

ADP began their strategy of migration three years ago. It's an all-or-nothing migration. Company executives say that they've learned over the past 36 months that the four core functions of the DMS — accounting, service, parts and sales — must migrate at one time.

ADP already has almost 700 smaller dealers operating on a completely integrated, Web-based system.

“Dealers need to ask what the technical complexity will be when you migrate those parts piecemeal,” says Keith Pigues, ADP's vice president of marketing for Dealer Services.

He says ADP won't force customers to migrate. “We're giving our dealers a choice of remaining with the UNIX (legacy) operating system,” says Pigues.

Most of the applications ADP is designing will work on both a Microsoft platform or on a Unix platform.

“Some dealers don't want to make the move and others have signed five year contracts for the legacy system,” says Rayl. “Having that choice is way to protect a dealer's investment.”

Meanwhile, EDS is shifting from a DMS vendor to a systems integrator. The company realizes it can't compete with ADP and Reynolds & Reynolds which together count about 18,000 of the 22,000 dealerships as their customers. There's little turnover in that business, say insiders.

EDS and the Cobalt Group introduced a proof-of-concept model called DealerSphere. EDS envisions DealerSphere as a data broker that will facilitate the exchange of information through a common industry standard and a Web-enabled architecture.

Someone must direct all of the data and EDS wants to do that.

“We want to operate the Black Box in the sky, routing all of the data transactions,” says Mark Allen, a vice president for EDS' Automotive Retail Group.

As this technology becomes more available and entrenched in the automotive retail industry, dealers should consider how best to implement CRM into their overall businesses.

It comes down to process — finding the right tool and developing the best process to manage those customers across the life of the purchase cycle.

But the first step says Lutz, is to make sure the dealership has the information technology infrastructure in place to handle the increased data flow.

That's where dealerships are currently lacking. Less than 30% of them are so IT capable today, according to an EDS survey.

Warns Waterhouse, “Dealers who ignore the benefits of this info-laden society will find themselves on the outside looking in.”

XML speaks many languages

Fueling CRM's technology advancements towards integrated systems is “extensible markup language” (XML), a new computer language for the Internet.

Where HTML (the language commonly used now) allows someone to view a company's web pages, very little interactivity is possible.

XML is a set of computer standards that allows different systems to communicate with each other. Such compatibility “standards” are necessary for true integration to occur.

XML, also called Web Services, allows disparate computer systems to talk to each other and exchange data. Theoretically, because of XML, data from any number of sources can be integrated and merged.

This new technology is creating an open Internet architecture. Before, when a dealer decided which dealer management system (DMS) provider to go with, the dealer was mostly locked into that company's products. It cost too much for application providers to write software that allowed for integration with multiple DMS providers.

But now, technology companies and application providers are giving up the strategy of proprietary software.

Instead of those costly and proprietary legacy systems, imagine an industry standard database on which several applications can interact. By developing products that interact on the XML standard, a company's products will be available to many more customers.

Essentially, it's going to be a “plug and play” world. Dealers will be able to choose the applications that best suit their business processes, then integrate them into their overall systems.

Nuclear disarmament talks? No, hammering out “standards” for true CRM data integration

Although XML is a fairly open architecture, industry-specific standards must be adopted before true openness is a reality for CRM integration of data.

Already working to develop those computer-code standards is an NADA-endorsed group, the Standards for Technology in Automotive Retail (STAR).

It's a daunting job for the auto industry.

Reynolds & Reynolds Co. CEO Buzz Waterhouse compares the standards' negotiations to “nuclear disarmament” talks. So far, neither ADP nor Reynolds have published standards.

The problem is, if ADP and Reynolds & Reynolds agree to completely open standards, then they run the risk of other vendors jumping in more easily and going after their business.

Asked if a completely open “plug and play” environment is possible, both Reynolds and ADP say, “Yes, but…”

Waterhouse likens it to a stereo purchase. “When most people buy a stereo, they don't buy parts of different systems and put them together — although, they could do that. Instead, they buy one complete system. It's more cost effective and easier technically.”

Reynolds and ADP are independently forming strategic partnerships with other applications vendors, providing them with the standards that allow for integration. In effect, they're controlling the level of openness.

Some industry insiders, however, believe the standards' initiatives have to come from the auto makers.

Dealer Wes Lutz, who heads NADA's IT committee explains, “Dealers trust the OEM more than they trust the DMS providers. It probably will be an OEM-led initiative.”

This is where a company like a Siebel Systems could come in and grab a large portion of the CRM market.

Siebel has been around since 1993. It specializes in developing CRM software for the large companies, such as General Motors.

Largely ignored was an announcement earlier this year of a partnership between GM and Siebel. GM has been quietly integrating all of their data from its various brands into one common database, and Siebel has helped them to do that.

From that database, GM will build more effective CRM strategies, says Chuck Kirk, the auto maker's general manager for Enterprise Customer Management.

The strategy is to share that data with various people, including dealers.

“Dealers are looking for the OEM to provide the leadership and standards, but they still want to maintain control of their data,” says Kirk.

“Siebel is the tool set around which we will build integration with our retailers. It will be our CRM standard,” says Stephen Freitas, a spokesman for GM's global sales and marketing technology.

Essentially, any company wanting to do business with GM or its dealers in the CRM space must interact with the Siebel standards.

Imagine a repository database in which all customer data gets placed. All of the various industry players that do business with GM will have some sort of as-needed access to that data. Dealers will be able to control their own data and dictate who has access to it.

These are the CRM “players”:

EDS

Product: DealerSphere

Strategy: Shifting focus from being a DMS provider to systems integrator.

Advantages: EDS knows the automotive retailing and enjoys strong relationships with dealers. Also, the industry is moving in the direction of open architectural standards.

Challenges: The DealerSphere product still is not a working model. Shown at the NADA Convention in January was only a proof-of-concept model.

Much success depends on the automotive industry agreeing on technology standards, something many observers doubt will happen to any large degree. Success also depends on dealers demanding vendors be DealerSphere compliant.

Siebel Systems

Product: Siebel 7, a complete CRM tool that can be used by the OEM and its dealer body.

Strategy: The company believes the OEM is the key to getting to the dealer body.

It wants to provide the dealer and OEM with the ability to take the data from every customer touch point and create a repository database that allows each customer interfacer to access the data as needed.

Advantages: Although little known in the automotive industry, many consider Siebel to be the CRM leader.

The partnership with GM makes Siebel a formidable force in the automotive industry.

Challenges: It's a new player in the auto industry, and lacks experience and the recognition with dealers. The product is one the most comprehensive on the market but could work against Siebel's success. Says Wes Lutz, NADA's Information Technology chairman, “Dealers want simplicity.”

Reynolds and Reynolds

Product: Generation Series — allows the dealer to manage and integrate any of the Web-based applications and services needed in the dealership.

Strategy: Modular migration of DMS to the Internet. Dealers choose when and how to migrate.

Advantages: The CRM product resembles Windows — many users are familiar with — a big advantage since dealers want uncomplicated products. Reynolds and Reynolds has a huge footprint in the dealer world. It will be very difficult to displace it.

Challenges: Many dealers are looking for a completely open environment — one that provides true “plug and play.” Could result in loss of market control by Reynolds & Reynolds.

ADP

Product: Right relationship 360 — comprehensive and completely integrated CRM tool.

Strategy: One stop migration — moving the core parts of the DMS — accounting, parts, service and sales at one time onto the Internet. Technologically more feasible for the dealer.

Advantages: The CRM tool is very easy and intuitive and resembles the Windows environment. ADP has a large footprint with 9,000 dealer relationships. Although comprehensive, the tool is simple to use — a feature dealers are demanding.

Challenges: Dealers want a completely open system — if that happens, ADP could lose control of the market.