Application service providers tempt tech-stumped auto retailers

Nearly 70% of car dealerships lack the necessary information technology to compete in the new Internet world, according to an EDS survey of dealers' IT attitudes.

There may be hope, however, in the form of an ASP. Not the venomous snake that got Cleopatra. ASPs are application service providers. For technologically challenged dealers, they can offer a relatively simple solution for managing a dealership's IT infrastructure.

An ASP is a third-party that manages systems and distributes software-based services.

A dealership pays an ASP a monthly fee to house and maintain off site the dealer's server and software. PCs are the only hardware needed in the store. A dealership logs on to accesses its data and software.

Although there are different ASP service levels, a good one completely manages the dealership's IT infrastructure.

That means installing a LAN — local area network — at the dealership and making sure there's the proper cabling, PC hardware, cabling, connections and bandwidth to handle all of the Web-based applications that are becoming more prevalent.

This is where most of the upfront costs occur. Most dealers must update from their current green screen terminals to PCs with Internet access.

That was a considerable expense, but “the costs of installing a LAN is getting much cheaper today,” says Wes Lutz, owner of Extreme Dodge in Jackson, MI and the chairman for NADA's IT Committee.

Because most ASPs charge a monthly rental fee, dealers are able to reasonably predict the annual cost of their IT system. Monthly rental fees means dealers won't be locked into a long five-year contract as they are today with their DMS vendors.

ASP services range from about $50,000 to $100,000 annually on average for a “medium” dealership selling 600 to 1,200 units a year.

In the ASP model, all of the dealership's data is transferred to an off-site server. The data, though, is still owned by the dealership. Any software application the dealer uses is installed onto that server. The ASP handles software and server upgrades.

The IT's “Big Three” — Reynolds & Reynolds, EDS and ADP — all have contracts with the major telecommunications companies so bandwidth and connections shouldn't be a problem. Dealers, however, should make sure the ASP provides the Internet connection at cost and doesn't add to those charges.

The benefits to dealers, especially those not wanting to deal deeply with IT matters, are that someone else completely manages the system.