How dealers pay for systems set to be key DMS topic of 2008 - Pinewood

7 February 2008

 

How dealers pay for their dealer management systems is set to be the key DMS topic of 2008.

 

DMS specialist Pinewood says that a divide is appearing in the market between DMS companies who sell software on a traditional sale and licence basis and those that follow the newer software-as-a-service (SaaS) model; which is the supply method they have championed since 2002.

 

Managing director Neville Briggs explained:
"This is an issue that has been gradually gaining ground in the DMS market. Dealers are increasingly realising that they have a choice about not just which products and suppliers they work with but how their DMS is supplied to them and how this impacts upon the total cost.

 

"We are seeing a divide appearing between traditional products that are sold to the dealer, installed on their server and then subject to regular licence, training, support and upgrade charges, and companies like ourselves with a hosted DMS that is provided through SaaS."

 

Briggs explained that many sectors of the software industry had moved to SaaS, where a monthly per user fee for a hosted solution is all that the customer pays and there is no requirement for a large, single upfront payment when the system is first installed.

 

He said: “The SaaS model is a more up to date way of supplying software services, with the DMS provider hosting the system utilising a hosted secure virtual private network (VPN) and providing all the key surrounding services for a monthly charge.

 

"In the world software market, Ernst and Young has predicted that global spending on SaaS, which totalled $4 billion in 2004, will reach $10.7 billion by 2009. Also, 61 per cent of North American companies with revenues over $1 billion plan to adopt one or more SaaS applications in the next year.

 

"SaaS can easily reduce the initial cost of acquiring a DMS by anything up to 75 per cent compared to the old model and there are no upgrade fees because the latest version is always the one being supplied to customers, which represents further savings."

 

However, Briggs conceded that some dealers were more comfortable with the traditional purchase route.

 

He said: "We do come across some dealers who are simply more comfortable with doing business in the way that they have always done. However, they are fewer and fewer, and an increasing number look at the choice between SaaS and licence purchasing in a dispassionate, rational manner."

 

Briggs added that many dealers distrusted traditional software provision because of three key problems - they often find the pricing structures confusing, the software licences sold are not portable and lastly, they feel they pay for services they don't need and find it difficult to work out whether their DMS is providing value for money.

 

He said: "We are coming across more cases where dealers are simply not willing to commit to a large upfront payment for a DMS system followed by ongoing fees for upgrades.

 

"This is especially true in cases where smaller dealers are offered a DMS product and pricing structure that is really aimed at larger companies."

 

Briggs added that the SaaS approach allowed dealers to work out exactly what their DMS was delivering in value terms.

 

He explained: "It is common for dealers to try to work out the value of their DMS by looking at costs and benefits per user.

 

"However, the established pricing model makes it difficult to do this because working out exactly what you will be paying and what you will be receiving is tricky and sometimes simply not possible. SaaS makes the exercise much easier. Our experience is that dealers are increasingly expecting DMS providers to offer much more agile technology and the delivery by SaaS is just a part of that."

 

 

For further details please contact Simon Wells at
Paperchase Public Relations on 01283 711311
or e-mail simon@paperchasepr.co.uk