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Software & Technology

Make Room for Microsoft

May 2007, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

Its soon-to-be competitors say the market is too well populated for a new dealer management system (DMS) provider. But the debate over data access has certainly made its venture relative. This month, F&I magazine’s Gregory Arroyo talks to John Reed, Microsoft’s director of automobile retail solutions, about the company’s strategy, data access and more.

Q: Technology was certainly a top-of-mind topic at the National Automobile Dealers Association (NADA) Convention, especially with respect to data access. Would you agree?

A: There are underlying issues causing technology to be partially relevant, and that’s one of the key reasons why Microsoft is getting into the market. We hear globally a pretty significant focus by manufacturers and retailers on improving the customer experience and operations, and that’s not just in the automobile industry. And once you peel back the layers on that, that really looks like focusing on optimizing various aspects of business processes, such as F&I, as well as responding to changes in consumer preference — which I think is testing the capabilities of a lot of the solutions that are already in dealerships.

Q: Well, it appears like Microsoft couldn’t have picked a better time to launch this new initiative. However, I understand this isn’t the first time Microsoft has made an attempt at building a DMS.

A: You’re right, we’ve been in the automotive market since Microsoft started. Car companies, big dealer groups and importers have been pretty large consumers of Microsoft technology. But let me preface my answer by saying that this is really Microsoft’s first direct entry into the market. So when we became involved in the North American market in the past, it was with Reynolds and Reynolds, which didn’t yield the market penetration Microsoft and Reynolds had hoped. So what we announced last July was a direct approach, which would have a product shipped under a Microsoft brand, off of a Microsoft price list, and with a Microsoft warranty. A key element of that strategy — from a third-party standpoint — was getting the third parties involved with the project, which led to that announcement in early February.

On the distribution and service side, we haven’t made public what our plans are, but we would expect to work with some resellers and service providers that would be closely aligned with Microsoft.

Q: Tell me a little bit more about your past effort with Reynolds?

A: We went through some efforts beginning in the late ’90s with a couple of DMS providers to get a portfolio of new solutions into the market. That worked out pretty well in certain areas, like Europe, but Microsoft didn’t really see the rate of new development in the North American market the way we had hoped. As a consequence, we’re taking a bit more of a direct route this time. We’re still going to be very partner centric in the sense that we’re working with a number of the large firms, but we think the underlying DMS is a key area for dealerships and one where a direct effort from Microsoft is warranted given the criticality of that for the industry.

Q: This is going to be one heck of an undertaking for Microsoft. This is a market segment that hasn’t changed much, and is already filled with some very well-entrenched solutions.

A: Our approach was to think of it from the dealer’s perspective. And from that perspective, the key question is going to be, ‘How does this improve revenue, decrease cost, or maybe make customers happier?’ Behind the scenes, if there are some benefits to making systems more secure and manageable, I think those things are relevant. But on the other hand, you hope that whatever investments are being made to address those issues will ultimately yield a better financial picture for the dealer. Dealers are certainly cognizant of the compliance and security issues, but at the same time they’re asking us the question, ‘Well, if we put all this plumbing in, how is that going to help us sell more?’ And I think that’s where we’ve tried to place a lot of our attention.

Q: Going back to data access, the debate has centered on the divide between Reynolds and Open Secure Access. However, I know Reynolds isn’t the only company that’s come under fire for guarding access to its system. To me, it sounds like the industry is in need of further standards. Is that your feeling?

A: The short answer to your question is yes. I think there seems to be some movement, at least based on the volume of discussion.

Beyond marketing, I think the key question for dealers is, ‘What is really available to dealers?’ I think it’s pretty easy for a company to put a good marketing effort around third-party integration and data access, but again, what’s available to the dealer? It’s going to be a combination of a couple different factors to get to the answer, but we still see a lot of requests coming from dealerships to Microsoft around DMS solutions, but even more critically, dealers wanting to know how they can use Excel or other reporting tools to get a better handle on a multi-store organization. I think we still have a ways to go in providing dealers with what they need in that area.

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