The DMS Is Vanishing… And Why It Matters To You

Posted by Motive Retail on Aug 4, 2016 3:34:16 PM

 

The End Of The DMS?

The DMS (Dealer Management System) is on the verge of radical changes if not outright invisible_man2.pngextinction. Bold statement? Yes. Is it true? Consider this quote from none other than Sandy Schwartz, President of Cox Automotive:

“... a DMS in the future "should be a smaller unit" within a dealership, he added, "not this big anchor." “And any such DMS should be open source -- something that integrates easily with whatever other products a dealer wants to use

Now, we hate to say“I told you so” (so we won’t), but a previous blog from last year predicted the changes that were coming to the DMS.

Everything in that previous post is still true, but several new wrinkles have been added. But before we get there, why does it matter if the DMS goes away?

In The Beginning

The DMS has been the core pillar of the dealership almost since the beginning of the industry. It began as an accounting program and then as the industry grew, additional functionality was added to handle new requirements. An entire industry of DSPs and IT firms has been built around the model of the DMS being at the center of the dealer’s business. This in turn has influenced the way that OEMs have developed and deployed interfaces and ultimately this model has greatly dictated the way that consumers purchase their vehicles.  A change in the importance of the traditional DMS will have vast implications. Below are a few factors that are already driving it into oblivion.

Architecture Weaknesses

Many DMS’s were first built upon the IBM AS/400 (often called a “green screen”, based upon the initial look of its interface), which has its genesis in the 1980’s. While state of the art 25 years ago, this architecture has been supplanted by multiple generations of hardware and software advancements. The functionality has been extended by the use of more modern hardware and user interfaces, and while a very powerful system, at its core is a very outdated technology. It is unlikely that these systems will be flexible enough to keep up with the massive amounts of data that will be generated from the connected car and various mobility options.

Rapid Evolving Dealer Environment

When the first digital DMS’s were installed, the following had not yet been invented:

      • World Wide Web
      • Smartphone
      • Connected Car

Back then, most transactions were done on paper (unfortunately paper is still way too prevalent in today’s dealerships), and the DMS was primarily an accounting system.

Fast forward to today, and just to stay in touch with potential buyers, dealerships need to have real time integration to their website, social media, 3rd party lead generation providers, CRM systems, and a host of other data sources.

Additionally, customers are expecting to:

        1. Complete much of the buying and F&I process before entering the dealership
        2. Have a much more rapid buying process (60 minutes or less)
        3. Participate in an engaging and interactive experience while at the dealership.

This will require interactive test drives and vehicle configurators, a nearly paperless process and real time integration with every consumer touchpoint. To date, no current DMS is remotely capable of meeting all of these requirements.

Big Data And Real Time BPI

Automotive has always been a top down model; manufacturers produced the vehicle, sold them wholesale to their dealers, who then retailed them to consumers. This essentially uni-directional paradigm only allows for a minimal amount of real-time data to be transferred “upstream” to the manufacturer.

Since the DMS was originally built as a central repository for collecting data, and not as a mechanism for transferring complex data in near or real time in multiple directions, it is ill equipped to support either real time BPI (Business Process Integration) or advanced analytics.

Instantaneous data from test drives, consumer behavior within the showroom (interaction with virtual sales devices, foot traffic mapping, etc.), and analytics from sales dealers within a specific buying region, could all be collected, analyzed and used to improve the buying experience for every potential buyer.

Just as importantly, this data could be used to impact the sales process while the prospect is still in the dealership. For example, how about an incentive customized for that buyer based upon total inventory, CRM profile, current sales activity and the amount of available leads, occurring within a specific region, in real time? This would allow dealers to make sure that they close the deal without giving away too much profit.

This data could also be used for improved predictive modeling for future manufacturing and delivery decisions. This in turn impacts supply chain, marketing, and corporate finance. This results in more efficiency and profits for manufacturers. Again we need much more flexible dealer system architectures to make this happen.

What’s Next?

As Mr. Schwartz quoted at the beginning of the article, the DMS must evolve into a much more flexible platform that can be customized and extended based upon each OEM’s and dealer’s particular needs. At a minimum, this will require an “open integration model” where virtually any type of functionality can be plugged into the dealer’s systems, with a minimum of cost and effort.

While going to a true open source model (think Android with a multitude of available apps) might take some time, a good first step that could be rapidly accomplished would be for OEMs and DSPs to open up their system to any willing and qualified information or system provider.

Currently several OEMs, including Daimler, are finding great success with this model. They have found it to be cost effective to implement while providing their dealers with the best combination of tools to run their dealerships efficiently.

Autosoft is an example of a DSP that offers a very flexible approach regarding 3rd party integrations. With nearly 100 partners, Autosoft delivers a platform that goes well beyond the traditional DMS. Dealers are free to choose the applications that exactly match their particular business needs.

How much time does the traditional DMS have left? While the obituary has not yet been written, the perfect storm of an aging data infrastructure, changing consumer expectations, and economic realities mean that the days of the DMS as we have known it are nearing the end.

Topics: DMS, dealer integration, BPI

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