DMS Costs

[stevet]

Does anyone have a guideline for a % cost to income of DMS processing as a whole? Our owner is looking at changing because his perception is that our existing vendor is too high. Just trying to get him as much info for him to make an educated decision.

[Matt Parsons]

OK, I am sure that there are many opinions but a rule of thumb that I think works is 1-2% of total expenses directed towards your DMS.

Now, with that said, here is what gets tricky. What do you consider DMS expenses? You may say that is easy to identify as it is anything and everything billed to you by your DMS provider. This is where I heavily disagree. Although some DMS providers only offer the basic or core modules such as Parts Inventory Management, Accounting, Sales Inventory Management, F&I, and Service, others offer dozens if not hundreds of additional offerings. For example now that I work for ADP (coming from a provider with a much more limited array of offerings), I have heard dealers say that their bill is too high for their DMS. When we sit down and tear the bill apart and categorize purchases, what we often find is that the dealer is purchasing items such as their phone system, used vehicle history reports, credit bureaus, and marketing/advertising services from ADP in addition to his core DMS. When we look at the core DMS versus a competitive offering, ADP was within a reasonable range for the core especially when you take in to account the support and training services that come with the systems.

Hope this helps.

[stevet]

Thanks. That's what I'm afraid is going to happen here. As a fixed ops director, I know the difference between what I need to run my department on a daily basis and what I need to drive more business. I'm concerned my DP is lumping everything together and thinking "that's too high".

[texaslp]

I agree with Matt that you have to tear into the bill from you DMS provider and find out what is included in that bill and what is being expensed where. Also you need to look into everything that is going into data processing on your financial. There may be other things in that account that are not from your DMS provider.

The next thing to do is to negotiate with your current provider when your contract is up. Do some comparisons and factor in the cost of change(business interruption while learning).

The best way to as you said "get him as much info for him to make an educated decision", is to look at other systems and compare cost and functionality.