SAP AG is extending its automotive software to appeal to auto dealerships and vehicle sales networks, targeting...
By submitting your personal information, you agree that TechTarget and its partners may contact you regarding relevant content, products and special offers.
the dealer management system market for the first time.
SAP recently purchased DCS Quantum, a dealer management system (DMS), from U.K.-based DCS Automotive, a subsidiary of DCS Group plc., for about $10 million. The acquisition adds dealer management functionality to the SAP for automotive software suite, which serves parts makers, sub-systems assemblers and car manufacturers. It will be rolled out as SAP Dealer Business Management.
The acquisition marks SAP's entrance into the DMS market in which it will compete against longtime DMS vendors Incadea, a subsidiary of Dayton, Ohio-based Reynolds and Reynolds Co., and Hoffman Estates, Illinois-based ADP Dealer Services. Incadea and ADP together account for about 80% of the DMS market in the United States.
SAP said it would first focus on the European market and then the Asia-Pacific market before making a push in North America in several years.
Auto dealer technology is evolving to become more global, open standard and enterprise grade, said Mark Bunger, a senior analyst at Cambridge, Mass.-based Forrester Research Inc. Dealers are looking for more lead-specific information, such as more detailed customer information to include owner history, current vehicle and pre-approved loans from a finance company.
"Automakers use SAP in their factories and headquarters, so it's very easy to let that float downstream to their dealers," Bunger said. "Auto retailers have lagged the rest of the world with their IT strategies."
Auto dealerships commonly have a tangled web of legacy applications used for sales and service, said Kevin McCollom, director of business development for SAP's automotive software set. As dealers updated their software over the years, many added separate applications for sales, service and accounting, resulting in duplicate systems, performance problems and inefficiencies, McCollom said.
In addition, many dealers added third-party software to connect to financial acceptance networks.
"The typical environment out there is a collection of point solutions and what I would call legacy dealer management system products today," McCollom said. "It makes sense for them to standardize their application environment and our technology enables them to connect to the vital systems they need."
Based on mySAP ERP, the new software allows vehicle importers, distributors, dealer groups and independent dealers to consolidate their legacy applications. It includes capabilities for business management within dealerships, dealer organizations, importers and OEM-owned sales companies.
The software suite includes core enterprise resource planning software for human resources, finance and controlling, and offers industry specific functionality for new and used vehicle sales, vehicle service and service parts management.
SAP's entrance into the DMS market also puts it against Microsoft and IBM, which have been active in marketing DMS software with partners, said Kevin Mixer, a research director at Boston-based AMR Research Inc., who analyzes the automotive and heavy truck industries.
"Microsoft has partnered in some unique regions to cater to this market, so it will be interesting to see how they respond," Mixer said.
SAP will likely aim its software at large companies in the industry that sell heavy equipment vehicles, such as dump trucks and sand mixers, rather than the small, independent auto dealerships, which have smaller IT budgets, Mixer said.
McCollom said SAP has a large number of channel partners that sell additional functionality for the auto industry. DCS Automotive will continue as a European reseller and implementation partner for the software, McCollom said.
SAP will launch Dealer Business Management in Europe later this year. The suite will be made widely available in the first half of next year.
Dig Deeper on SAP trends, strategy and ERP market share