Overcoming the barriers of vendor lock-in when adopting new IT-based services

Inflexible IT infrastructures pose an obstacle on the way ahead. Picture by Travis Saylor

Complex IT infrastructures pose a roadblock on the way ahead for automotive dealerships. Despite facing an uncertain future and needing fast execution, dealers remain inflexible and locked-in. Traditionally, dealers have been forced to undertake painful and enduring integrations to adopt new tech solutions. Yet, a new smarter way of adopting new tech solutions is on the rise; seamlessly connecting rather than painfully integrating.

Autonomous driving, Connected cars, Electrification and Shared mobility (ACES) have throughout the recent years become some of the hottest topics within the automotive industry. These ACES trends are currently setting the agenda for development activities for OEMs through the distribution chain to the end-consumer. Even though the near future is expected to bring exciting changes, the automotive industry has been put under pressure due to the haste of which the changes are approaching.

In spite of increasing new-vehicle sales, sales margins in the automotive industry are narrowing, whilst traditional maintenance and service revenues are expected to decline drastically. Simultaneously, new, fast-moving, and innovative business models driven by technology are bound to capture customers.

Consequently, the first point of contact with the end-consumer, automotive dealerships, face a paramount challenge. If they do not manage to increase operational efficiency to compensate for decreasing margins and continuously attract customers, they will fail to survive the automotive transformation.

Dealers that on the other hand stay at the forefront of innovation and adopt new tech solutions with greater efficiency, will keep themselves relevant to consumers. Yet as it turns out, dealerships are facing a roadblock on the path towards survival, as Dealer Management Systems (DMSs) force vendor lock-in upon dealers and thus block adoption of new IT-based services.

An immediate call for agility meets inflexibility

A DMS is the beating heart of a dealership’s operations. Everything from digital marketing, lead-generation, CRM, payment, and even basic phone lines go through the DMS in one way or another. When being such a vital part of the dealership, shifting DMS vendor seems an almost impossible task to overcome due to numerous reasons, such as sparse in-house IT capabilities and little competition in the DMS market.

Not being able to effortlessly change DMS is not a bad thing per se, but in a setting where the automotive industry is transforming with extreme haste, dealerships need flexibility more than ever before.

New IT and tech innovations are constantly just around the corner. What this means for dealerships is that adopting new solutions is and will be key to staying relevant. But complex DMS-structures pose a huge challenge in regard to integrating new services — and it is nor free or easy.

Not only are integrations typically associated with monetary costs in terms of substantial fees and working hours, integrating new service providers also causes anxiety. The new service might not work as intended, onboarding employees to the solution might be exhausting and issues are almost always unavoidable.

The result? The best case-scenario; an expensive, slow, and exhausting integration process. The worst case-scenario; dealerships refrain from of adopting new solutions that otherwise would bring much needed value to the dealership — and ultimately the customers.

These challenges brought on by inflexible DMSs cause dealerships to be locked-in in times that call for agility, why at the end of the day, they cannot keep up with consumer trends and evolving customer needs.

Remaining agile in a rapidly transforming setting

It is difficult to completely avoid lock-in. DMSs are after all valuable, and indeed necessary, for a dealership’s operations and no one can completely avoid a certain level of integration. But there is a solution to the integration challenge that is both cheaper and far more painless.

The pressing point for dealers is that integrations comes with substantial fees, making the path from implementation to operational value long and painful. This has forced some service providers to rethink integration.

Fundamentally, the difference between the two approaches is how two given systems interact with each other. When integrated, the two systems act as one, which requires a more tedious integration process. When merely connected, one system taps into the other system’s data streams, while still being separate, which requires far less work and causes less pain.

What it means for a dealership is that they can utilize the value of their existing data streams without bearing the substantial integration fees that DMSs charge. In addition, the traditional long and enduring process of integration is considerably shortened, as the primary action is setting up an automatic delivery of data. Consequently, it requires very little of the dealership.

In the end, connecting a new service to the dealership’s existing data streams is greatly cheaper than traditional integration and relieves many of the pains associated with integration.

No one can be sure what will happen within the next 10–15 years in automotive retail. The important thing is that dealerships stay on their toes and act fast. The ability to adapt to new solutions and technologies will to a greater extent be a competitive factor, yet the mismatch between dealerships’ digital infrastructure and evolving consumer trends is a spanner in the works. Seamlessly connecting new services to existing data streams is proving to be a viable solution that helps dealers overcome this barrier with lesser effort and lower costs.

We are ag analytics. A hybrid tech analytics consultancy combining the best in strategic thinking, data science and preparatory technology. www.aganalytics.dk

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