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WhitePaper:AUTOMOTIVEANDTRANSPORTATIONDRIVINGCHANGEINTHEDEALERITENVIRONMENTWHITEPAPER1INTHISWHITEPAPER:1.ExecutiveSummary2.SeamlessIntegration:LinkingVehicleManufacturerswithDealerCommunities3.TheCost-DrivenDSPSupportModel•DealershipEnvironment•DealershipInstallation•OngoingSupport•EconomicModel•PricingModels4.AddressingtheChallengesofDSPs:SixStrategiesforVehicleManufacturers•Strategy1:LeveragetheInternet•Strategy2:DrivetheChange•Strategy3:DefineandExecuteaRoadMap•Strategy4:DriveStandards•Strategy5:ReengineerDealerCommunicationSystems•Strategy6:FocusonRevenue5.Conclusion:EstablishingaClearPathofValueDRIVINGCHANGEINTHEDEALERITENVIRONMENTDRIVINGCHANGEINTHEDEALERITENVIRONMENT2BEARINGPOINTExecutiveSummaryIntoday’sautomotiveindustry,vehiclemanufac-turersmustcontinuallyidentifynewopportunitiesforefficiencyimprovementandcosttakeouttomaintaintheircompetitiveadvantages.Currently,somemanufacturersseektoextendthemakeupoftheenterprisesothattheycanshareinformationandapplicationswithdealersinrealtimeaswellasprovidenewproductsandserviceselectronically.Bymakinginnovativeconnectionswithdealers,theyexpecttoachievemoreaccurateplanning,fasterresponsestomarketshifts,significantcostsavingsandincreasedsales.Torealizethesebenefits,however,vehiclemanufacturersfirstneedtodevelopstrategiesforaddressingthechallengesposedbythedealerservice/systemsproviders(DSPs)thatcontroltoday’sdealerinformationtechnology(IT)environment.Inthefollowingdiscussion,weprovidevehiclemanufacturerswithinsightsthattheycanleveragetobeginaddressingthesechallenges.Webeginwithanoverviewofthesystemsthatdealersuseforeverydayoperations,describingboththeneedforintegrationandthemarketdynamicsthatmakethisintegrationdifficulttoachieve.Next,wediscusstheimportantroleplayedbyDSPsintoday’sdealerITenvironmentandofferspecificinformationabouttheDSPbusinessmodel.Finally,weoutlinepotentialstrategiesthatvehiclemanufacturerscanusetocollaboratewithorworkaroundDSPsinleveragingnewtechnologiesandbuildingmoreproductiverelationshipswithautomotivedealers.SeamlessIntegration:LinkingVehicleManufacturerswithDealerCommunitiesAfewwell-establishedDSPscurrentlysupplythemajorityofautomotivedealerswithturnkeyITsystems—alongwiththeassociatedservicesandsupport—thathavebecomeessentialtoeffectiveday-to-daybusinessoperations.Knownasdealermanagementsystems,thesesystemsenabletheeffi-cientperformanceofback-andfront-officetaskssuchasinventorymanagement,salesandservicemanagement,financing,accountingandhumanresourcesmanagement.SeeFigure1.Inadditiontopurchasingdealermanagementsystems,dealersmustpaythecostofoperatingandmaintainingdealercommunicationsystems,whicharethesophisticatedapplicationsthatmostvehiclemanufacturershavealreadydevelopedanddeployed.Thesemanufacturer-mandatedsystemssupportcriticalfunctionssuchaspartsorderingandwarrantyclaimsprocessingandformanintegralpartofdealers’day-to-dayoperations.INVENTORYMANAGEMENTSALESANDSERVICEFINANCINGACCOUNTINGHUMANRESOURCEMANAGEMENTFIGURE1.COMPONENTSOFADEALERMANAGEMENTSYSTEMDRIVINGCHANGEINTHEDEALERITENVIRONMENTWHITEPAPER3Mostvehiclemanufacturershavedeveloped,forspecificsituations,strategiesforcopingwiththislackofintegration.However,continuous,seamlessintegrationbetweendealermanagementsystemsanddealercommunicationsystemshasyettobeachieved.Thissituationresultsinprocessinefficien-ciesfordealers,DSPsandvehiclemanufacturersalikeandresultsinrisingmaintenancecostsfordealers.Italsoleavesvehiclemanufacturerswithoutreal-timeviewsintotheirsaleschannels.Inaddi-tion,dealerscontinuetostrugglewiththemultipleentriesrequiredfromdealercommunicationsystemstodealermanagementsystems.Thischal-lengeisparticularlytroublesomeformulti-branddealersthatmustenterthesameinformationthreeorfourtimestosupportthemanufacturer,thedealerand,insomecases,thedealer’sparentbusinessunit.Automatedprocesses,rapidtransactionsandtightintegrationbetweendealercommunicationandmanagementsystemswillbeachievedonlyifmanufacturersadapttoorcreatechangewithinthepreexistingITsystemscurrentlybeingsuppliedbyDSPs.However,reformingtoday’sdealerITenvironmentisasignificantchallenge.Althoughprofitpotentialexistsinthedevelopmentofcustomizedextendedapplicationsandincreasedcollaborationwithvehiclemanufacturers,DSPsbelievethattheseadvancescouldcannibalizeexist-ingmarketshareandopenthedoortogreatermanufacturercontrolandcompetition,thusunder-miningtheviabilityoftheDSPbusinessmodel.Nonetheless,thereareseveralstrategies,discussedlater,thatvehiclemanufacturerscanpursuetoaddressthechallengesposedbyDSPs.MANUFACTURERDEALERINFRASTRUCTUREBUSINESSAPPLICATIONSANDSERVICESDealerCommunicationSystemsDealerManagementSystemsFIGURE2.INEFFICIENTBATCHMETHODOFDATAEXCHANGEAsaresultofallthesecomponents,dealersincursubstantialcostsinoperatingthesesystems.Forexample,dealercommunicationandmanagementsystemseachrequireexpensivein-dealerhardwaretopowerthevariousfunctions.TheITcosttomanagebothsystemscanaverageapproximately0.6percentofrevenuesforatypicaldealergrouporaddapproximately$100pervehicle.Fromtheperspectiveofvehiclemanufacturers,however,thegreatestchallengeposedb