Keeping off the bleeding edge of information technology

CHARLOTTE, NC — David Boatman had his work cut out for him two years ago when he became chief information officer at Sonic Automotive Inc., a dealership chain with 116 stores.

Each of Sonic's dealerships had its own hardware and software contracts and there was no structure to support a multi-franchise corporation. There wasn't even an information technology department at the corporate level. There was no disaster recovery plan. The corporation had no direct access to its dealerships' data.

Now, the company is connected to all of its stores via proven-reliable frame relay technology with ISDN backup. Servers are centralized in two locations. Pricing agreements have been reached with information technology providers Reynolds and Reynolds and ADP.

Mr. Boatman says Sonic's IT strategy is to limit direct investment, and outsource as much as possible. He says that maintains the highest-quality systems with vendors without building a costly IT empire. Another IT goal is to centralize data storage, access and analysis.

The ultimate goal was to use proven technology that is widely used by well-established companies to gain greater control over operations and give managers better real-time information.

“Almost everything we do is with the idea of either improving operations by improving the tools our stores get at the same cost,” says Mr. Boatman. “Or by reducing expenses and cost to the dealerships by leveraging the technology that's available out there to most large corporations, but has yet been taken advantage of by the auto industry.”

So far, the new Sonic system has boosted the company's financial IT outlay, but a chart of future expenses forecasts decreasing costs through the second quarter of 2003 when they're expected to flatten out.

As part of the agreements with Reynolds and ADP, Sonic pays monthly, per-user access fees to use servers and communications lines dedicated to the megadealer. ADP's server — which serves 60% of Sonic's stores — is located in suburban Chicago and the Reynolds server — which serves 40% of the megadealer's points — is based in Herndon, VA.

The stores are connected to the servers via a frame-relay system using MCI Worldwide communications lines, which are backed up by ISDN lines.

“Under this design, if something happens to the MCI line, the ISDN line should kick in and carry the store uninterrupted until such time as you get that line repaired,” explains Mr. Boatman.

These connections, coupled with SonicNet — the company's wide area network — lets Sonic access their stores' data in real time and allow dealership employees to access centralized application specific programs (ASPs) from ADP and Reynolds.

“The hard drives are all centrally located,” says Mr. Boatman. “There's no difference to the person using the computer if the hard drive is in Herndon, VA and he's in California or if the hard drive is in his back room. It's still a single-store log-in, he still gets the information he needs on his screen instantaneously.”

Sonic launched it company-wide in July, The advantages of this system are many, says Mr. Boatman.

“We have full flexibility,” he says. “We're trying to outsource as much as possible so that we do not own technology but use technology. And that gives us the ability to take advantage of newer technology, both at the wide area network level and at the DMS level in this centralized set up”

The outsourcing strategy even has applied to equipment at the dealership level.

“We are starting to do things like rent PCs and software instead of purchasing PCs and software,” Mr. Boatman says. “Those are out dated in two years and licensing is a nightmare. It takes a lot of manpower to manage licensing.”

Even though Sonic is the first of the top 10 megadealers to completely centralize the servers for all of its dealerships, it refuses to get out on what Mr. Boatman calls the “bleeding edge” of information technology.

“Do we move right away when the new technology comes out? Absolutely not,” he says. “Is frame relay the latest in technology? No way. It's old technology, but it's the most reliable technology.

“We are absolutely open to new technology and we're always reviewing and testing new technology in different areas,” he continues. “But it took us a year to implement this and if for some reason we wanted to move to a new technology, it would probably take us the same amount of time.

“We're running a $7 billion corporation on these lines and our stockholders would not support us testing new technology at that level.”

With this new foundation in place, Sonic is preparing to further fine-tune its operation via IT. All company e-mail has been centralized and future projects include standardized accounting and other administrative activities.

One area that isn't standardized is each store's communications with manufacturers.

Some manufacturers (like Ford) use the Sonic-wide area network to communicate with the individual stores. Others (like Honda, Acura and Toyota) prefer to communicate directly with the stores.

Mr. Boatman says he hopes that some day a standard will be established for factory-dealer communications so that all manufacturers can use Sonic's area network. That could save money, he predicts.