Industry needs to examine dealer management systems pricing - Pinewood

18 September 2007

 

Dealers and dealer management systems providers need to look at how their DMS systems are priced.

 

DMS specialist Pinewood says that there are three key problems with the way systems are priced - dealers often find the pricing structures confusing, they sometimes pay for facilities and services they don't need, and they find it difficult to work out whether their DMS is providing value for money.

 

Managing director Neville Briggs explained: "DMS systems generally continue to be priced in a manner that has fallen out of favour in most areas of the software industry - with an upfront payment covering a licence, installation and training, followed by a regular maintenance fee paid annually. There will also be periodic upgrade fees when the DMS is revised.

 

"However, it is a model with which we believe dealers are increasingly dissatisfied and one that we ourselves replaced a while ago. The DMS industry is doing itself no favours by persisting with this pricing method.

 

"We are coming across more and more cases where dealers are simply not willing to commit to a large upfront payment for a DMS system followed by ongoing fees. 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 explained that most other specialist sectors of the software industry had moved to the more transparent software as a service (SaaS) model employed by Pinewood, where a monthly per user fee for a web-hosted solution is all that the dealer 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 usually hosting the system through the Internet and providing all the key surrounding services for a monthly charge.

 

"SaaS can easily reduce the cost of acquiring a new 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 hosted, which represents further savings.

 

"Dealers additionally like SaaS because it provides a fixed cost - under traditional software provision there are always additional costs due to unforeseen circumstances such as hardware failure, virus attacks and business expansion. Also, smaller dealers are not penalised by the charging structure."

 

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."

 

Briggs added that he believed a general move towards SaaS in the sector would benefit both DMS providers and dealers.

 

He said: "The old pricing method does nothing to promote trust between dealers and their DMS providers. Our experience is that all parties are much more comfortable with SaaS."

 

 

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