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Dealers Blow IT Budgets on Unnecessary Services, Helion Automotive Finds

September 15, 2015

TIMONIUM, Md. — A majority of dealers are spending their information technology (IT) budgets inefficiently, according to a new study conducted by Helion Automotive Technologies. The IT solutions provider found that dealers are spending too much money on unnecessary services and equipment, along with too many vendors, and not enough money on mission-critical services like Internet bandwidth and security.

"This really comes down to understanding what services you are purchasing from different carriers, and a lack of prioritizing service selections from a productivity standpoint," said Erik Nachbahr, president and CEO of Helion Automotive Technologies. "How important is it that your Internet never goes down? How important is it that your phones never go down?"

Nachbahr recommends that auto dealers prioritize their IT spending in the following three areas: 

Carrier Resiliency: Carrier resiliency involves having redundant connections to mission-critical phone and data networks. Carrier networks have grown increasingly complex in recent years, and network outages lasting from several minutes to several hours are commonplace. Considering that a one-day outage of Internet and/or phone service can result in a loss of thousands of dollars in gross, dealers should allocate a greater percentage of their IT budgets to expanding carrier networks and testing to ensure that when one network goes down, another carrier provides uninterrupted service.

Internet Bandwidth: Recent technology trends have created a need for increased Internet bandwidth. Providing customers with free Wi-Fi, using cloud-based applications such as CRMs, implementing mobile technology solutions, and downloading videos and other large files over networks all require high-bandwidth Internet solutions.

"Historically many dealers have looked at their Internet service and asked, what is the cheapest way to accomplish this?" Nachbahr said.

The majority of dealers currently opt for their carriers' small business service, which is basically a re-branded residential-level service that costs several hundred dollars per month. Instead, dealers should be opting for the enterprise-level service that may cost one to two thousand per month.

"The thing dealers need to understand is that these days, their entire business is dependent upon the Internet," Nachbahr added. "Their DMS, CRM, banking, email, parts look-up, OEM communications, security cameras — everything is on the Internet. If the Internet is slow you're literally waddling down the street with your pants around your ankles. How much does that loss of productivity cost?"

Network Security: The number of cyber-attacks on businesses has increased dramatically in recent years, as evidenced by news coverage of high-profile incidents such as hackings of Target, Ashley Madison, Snapchat and eBay. And many smaller companies including several auto dealerships have been hacked as well, though these incidents have not made headline news. Cyber thieves commonly target customer data and dealership bank account information.

Although siphoning funds out of a dealership bank account can be devastating, of greater concern is a potential breach of customer data. Auto dealers are legally responsible for compliance with the Gramm-Leach-Bliley (GLB) Act and software copyright laws. Violations typically invite investigation, audits, lawsuits and possible FTC action — all of which can add up to hundreds of thousands of dollars per incident.

"Most dealerships do not have a comprehensive security plan in place," said Nachbahr.

Additionally, many dealerships have several different vendors managing services such as phone and data network support, IT support and application support. Having different vendors managing different parts of the network can create holes, increasing vulnerability to an attack. The good news for dealers is that implementing these mission-critical IT strategies does not require an increase in budget.

"In the vast majority of cases, a simple re-allocation of funds results in the same or even a reduction in spending," Nachbahr said. "Consolidating vendors and eliminating unnecessary service and equipment expenditures can save dealers thousands of dollars per month, enabling them to take care of these priorities."

Nachbahr will present these findings and more at the AICPA Auto Conference, Oct. 19-20 in Orlando, Fla. For more information, click here.

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