Business Software Solutions - DemystifiedBy Joanne Costin
Article Date: 01-01-2008
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
Leading software suppliers define the terminology and offer tips to help dealers select the right solutions for their companies.
Is your business intelligence what it should be? Do you need a new business software solution? Many dealers today are wrestling with these questions and finding themselves confused by an array of options and inconsistent use of terminology.
Unfortunately, understanding the acronyms that are bandied about the industry will probably do little to help you make a better decision about selecting software. Terms like ERP, SaaS, and ASP seem to have as many meanings as the industry has vendors.
"Confusion is caused when system providers bring terminology, frameworks and toolsets from a different industry into the marketplace," says Bob Morton, president of PFW Systems Corp., a provider of dealer software solutions based in London, Ontario.
Consider the term ERP (Enterprise Resource Planning System). While many providers use this acronym interchangeably with a DMS (dealer management system), others insist that the term doesn't apply to most systems in the dealer marketplace. Instead they define a true ERP as a new application based on modern technology, which can run on any platform. They say a true ERP offers more flexibility for configuring the system and greater integration. Business systems like those created by Oracle and SAP for the largest Fortune 100 companies fit this definition. Executives at e-Emphasys Technologies, headquartered in Cary, N.C., believe their eXtend Distributor Management System fits this definition.
A broader definition, supported by several software suppliers, applies the term ERP to any cross-functional integrated system. That means the solution must cover all aspects of the business process including accounting, inventory control and employee tracking. Using this definition, all the major DMS providers offer an ERP solution.
So, if terminology won't help differentiate systems, what will? Suppliers recommend dealers get back to basics and explore what they want the system to do.
"We see dealers swayed by the technology and terminology instead of really understanding how the system will work in their environment," said Morton.
Do Your Homework
Randy McIntyre, president of DIS Corp., a DMS provider based in Bellingham, Wash., effectively sums up what really matters. "How is this tool - the software - delivered, and how is it going to help further the businesses strategy? Unless you ask this, the terms mean nothing."
While his question may sound simple, the answer is not.
"Dealers need to make an investment in the process of selecting the system," said PFW's Morton. "It is not someone else's responsibility. Making the purchase is the easy part. The hard part is doing the homework and maintaining and motivating staff over time to use it well," he added.
That means each department needs to spend time defining their needs. Companies often make the mistake of leaving one person to make the decision, which, in the end, will not help foster wide adoption of a system throughout the company.
"One of the trends that we notice which often leads to difficulty is that the departmental managers or owners leave the election and decision-making process to individuals inside the organization who are less concerned with business process and more concerned with IT," said McIntyre. "IT considerations should certainly be given full weight. But the IT manager should not be making the ultimate decision that will guide the efforts of all departments."
McIntyre also cautions that dealers can't afford to be influenced exclusively by a great rental package, or a great CRM package.
"When you're looking at an ERP solution you have to look at it from the perspective of, ‘We can't overlook anything. We can't assume anything,'" said McIntyre.
Other considerations are also important. A system should be able to interface with a dealer's suppliers. According to Milind Bagade, CEO of Emphasys Technologies, a system also needs to meet an organization's need for both configurability and flexibility. Cost must be part of the discussion as well.
"Sure, they can do it," said Bagade, "but it can be expensive."
Bram Pieterse, general manager, product marketing, at e-Emphasys recommends that dealers consider the degree of personalization possible to individual users or functional departments.
"Dealers should ask if the screen can be reconfigured to fit the particular role of the user," said Pieterse.
Drivers for New Systems
Systems that no longer effectively meet a dealership's requirements naturally become an initial catalyst for shopping new systems. But suppliers also cited two other key drivers that get dealers looking at new solutions. The first is consolidation. The technology landscape among dealers is fragmented, with no one system dominating the market place. Consequently, when companies acquire dealerships that are running different systems, they can be thwarted from achieving the economies of scale that should occur in a multi-branch operation, Pieterse explained.
"In many cases they are hampered by their systems to really realize those economies of scale," he said, and that's when a new business system may be the answer.
The extent to which a system can standardize operations and take on new systems, while mitigating disruption, becomes extremely important. And if growth plans include international expansion, dealers need to consider the ability of their system to accommodate multiple languages and currencies.
Mobility is another key driver, as it can improve efficiencies and have a direct impact on profitability.
"Being able to create a repair order remotely or from a mobile location, being able to close that repair order ticket and automatically put it in the accounts receivable process, is a huge value to dealer operators," said Byron McDuffee, vice president and general manager of Alliance Group for ADP Services. The Hoffman Estates, Ill.-based ADP recently partnered with PFW Systems to deliver a hosting solution for PFW's IntelliDealer Dealership Management System. But mobility also requires a significant amount of infrastructure and adds a great degree of complexity to a system. Dealers need to evaluate the best way to acquire this technology.
Compared to selecting a software system that meets the functionality requirements of the organization, the decision of how to host and pay for your software system is secondary. There are three choices:
Hosting DMS software on your own on-premise server provides the greatest degree of control for a dealer. Applications updates and upgrades occur at your discretion using this model. But along with control comes the need for IT resources to manage and maintain the system.
- ƒnPurchasing the software outright and hosting the solution on-premis
- Obtaining software through an Application Service Provider (ASP)
- Obtaining it through Software as a Service (SaaS) solution.
In a traditional ASP solution, software is located off-site in a professional hosting environment and servers are dedicated to one client. The advantage of this solution is that it provides dealers with an opportunity to outsource all of the functions associated with the server. Dealers on this type of system typically renew both the server environment and the software licensing agreements when a three-to-five-year term expires. This ASP model, while offering advantages, is typically more expensive than an on-premise installation.
Confusion occurs because some suppliers use the term ASP to define a traditional ASP, while others are using the term to describe the next generation of ASP. In the newer version of ASP, the server is located off-site in a professional hosting environment, but instead of being dedicated to one client, the software serves multiple clients, and the solution is a Web-native application, rather than a client-server application. Some suppliers refer to this as the SaaS (Software as a Service) model.
Regardless of the name, the benefits of a next-generation ASP or SaaS are the same.
"There are far greater economies of scale," said McDuffee. "What that typically means is that the cost to serve a typical client is much less."
McDuffee believes that by removing the technology hurdle, the next generation ASP or SaaS model enables dealers to focus on core competencies and the things that drive their business.
"This will allow them to take advantage of technologies and capabilities today, as well as new things in the future, at a much greater rate, and at far less cost," said McDuffee.
In this model, new upgrades or releases to the software are automatically applied as part of the standard service for which users pay a monthly fee or subscription. This pay-as-you-go-system offers another advantage in that it takes capital expenditures for IT equipment and services off the balance sheet - an important consideration, especially for larger enterprise dealerships.
Software providers see growth potential in SaaS. However, they also recognize the model is not without challenges. According to Bagade at e-Emphasys, making dealers comfortable with hosting data at an off-site location will be a challenge for all suppliers in the category.
DIS sources concur.
"The difference between the two (ASP and SaaS) is still gelling" said Phil Conophy, development lead for DIS Corp. "There are key functions that can be provided through SaaS, and those functions will be far more cost effective under Web-based deployment. But there will always be aspects of the business where Web-based presentation will not be as efficient."
Technology is Not a Savior
Vendors also caution dealers that technology is not a savior for dealer business problems. Results vary greatly based on the efficiencies of the dealer's current system. And many factors other than technology come into play.
"Even among dealers who are running the same product and are all with the same OEM, there are vast gaps," said McIntyre, "not only in terms of the utilization of the system, but also in their own business process."
Before investing in new technology, dealers should look at utilization of their current tools, as well as their training efforts. At least one industry supplier feels dealers typically underemphasize training compared to capital costs.
"We think dealers spend money on the system and don't recognize the importance of training and retraining," said Morton at PFW. "About 20 percent of the system changes every year. If you don't keep on top of system changes - its capabilities - and stretch the organization to use the system more effectively, things get stale quickly."
A dealer management system has to fit your organization, and while some dealers may view themselves as pioneers in the IT arena, the consensus is that most dealers would rather use field-tested solutions.
"Most of them look at technology as a necessary evil," said McDuffee.
Nearly every provider recommends that dealers fully investigate suppliers before committing to a new product.
"You really have to make sure that the company you are working for is financially prepared, has the staffing level, track record and history," said Rob Ross, president of Alert Management Systems, a Colorado Springs, Colo.-based software supplier focused on rental solutions. "Find out who else is using the system, and contact them." Ask how many dealers are using the system. Be wary of promises and solutions that don't already exist.
A Means to Other Ends
There is nothing easy about selecting a dealer management system, and without a standard language to describe these systems and their functions, it is even more difficult to wade through the options. However, thinking strategically about your business and what you want to accomplish with a business solution will lay the groundwork for selecting the right system.
The same rule applies once the system is in place - there is nothing magical about getting users to adopt the new system. Top management's involvement is critical.
"Even the best system in the world will not work unless the organization is motivated to its fullest," said McDuffee.
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