A Shoot-out at the IT Corral?

Ward's has learned that Sonic Automotive Inc., one of the nation's largest publicly owned dealership groups, is preparing to consolidate all of its stores' dealer management information systems with one vendor — either Automatic Data Processing (ADP) or the Reynolds & Reynolds Co. in the next few months.

Two other major retail groups are reportedly considering such a consolidation later this year.

It would be a significant change in strategy for the nation's top dealer groups. Until now, they've maintained contracts with both vendors. Traditionally, as the dealer groups acquired individual stores, they kept the stores' existing IT vendors, leaving roughly a 50-50 split between the top two, ADP and Reynolds & Reynolds.

None of the major dealership groups would talk publicly about the potential shift, but consolidating Dealer Management Systems (DMS) with one vendor is seen as streamlining operations. It could put the dealership groups in a stronger bargaining position as well as make for better reporting processes and easier internal communications.

Neither Reynolds & Reynolds nor ADP would comment publicly, but sources at the companies acknowledge such contracts would be big and the fight to get them could turn into a “shoot-out.”

Whichever company walks away with either two or three contracts in such circumstances will have earned major time bragging rights for the next year, not to mention the money that goes with the extra business.

Chances are the contracts will be for the latest web-based systems — either ADP's W.E.B. 3000 or Reynolds' Generations Suite.

Matt Kemplar, an IT analyst for Sidoti & Co., says that landing two or three contracts of that nature probably would drive some momentum in the market.

“To put it into perspective — take Reynolds for instance — we estimate that it sold its DMS system to 400 plus dealers in 2003,” he says. “If it were to win all three contracts, the total dealership number gained would be about 300. That would put them on course for another strong year.”

But he doesn't think losing out on the contracts would be disastrous. “It might cause some hesitancy in the market, but I doubt losing all three contracts would make someone rethink an entire IT strategy.”

However it could create perception problems in the industry for the company that loses out.

There was speculation that Sonic would be the first to announce a decision, perhaps as early as the National Automobile Dealers Convention in early February in Las Vegas.

A spokesman for Sonic, though, says the company is still early in the decision making process.