How? First, to be clear, I’m NOT a vendor that has anything to do with your data, though I have been--I don't have my own economics in this dog fight, but I do know how this works against you, is what I mean. I’ve seen it for many years now: Several large DMS companies charge “data access fees” (my point about "data ransom") in the hundreds every month and require large initial payments to “hook up” to get the data a vendor needs to help your sales.
“So what? It’s the vendor’s problem, right?” NO. It is YOUR problem because ultimately you pay it. No way out of it. And it’s tens of millions siphoned from dealerships every year. Here’s how.
It's easiest to explain by looking at how this would work on just yourself: If you were, say, a professional runner, you'd want the best business management for your career, but you'd also want the best shoes.
Let's say shoes don’t come with any endorsement, but instead are shoes required for you to run and make money as a business. And that you go through several pairs a month. Well, if your business manager charged the shoe vendor 50% of their margin for access to your feet, how long before the vendor is financially stressed and doesn't invest in creating the best shoe? What if your manager comes along and raises it to 65%?
You could try and say "not my problem, I'll just get better shoes from another vendor"...except the next vendor also has this same issue with your business manager. It will always be YOUR problem that way, because EVERY vendor in this case has the same 65% margin arrangement with your business manager.
And guess what? It turns out your business manager (DMS) is the business manager for almost all runners, too! It's a closed market. And, so, unless you press your business manager for change, the shoes will eventually get worse from every vendor as they struggle, their production will slip, their support line for the shoes will suffer . . . and your feet and running career will suffer.
These uselessly-high Middle-Man Fees are hurting your dealership TODAY. Why do you think your CRM goes down? Yes, it could be a bad product, bad management, bad system, sure, or all of those--but what if the CRM vendor really can no longer afford to invest in the product or support staff because 65% of their margin goes to your DMS provider? Who's winning this situation?
Your business manager, or DMS, that's who! They've turned hostage access to YOUR data into a parasitic business revenue stream like this: Say 4 vendors need your data every month at $500 a pop to the DMS provider from them. That's an extra $2000 they get paid every month for merely HOSTING YOUR DATA. Across thousands of dealers, this is tens of millions of profit they skim from YOUR data ...
I’m sure you can see now WHY they do this, but they hurt you doing it by hurting your other vendors. Eventually, you get hurt, no matter what, with poorer products and services. And did I remind you this is YOUR feet--er, I mean, YOUR data?
It's a scandal, to me. Since I don't have a dog in this hunt, but I do have knowledge of it, you should take heed. And ask your DMS vendor about it. And maybe more. Am I wrong? I could be. What say you?
~P.S. Some DMS companies charge reasonable fees. Why? Well, my opinion is that they are dealer-centric and want healthy dealer partners. Not just targets for their parasite.
~P.P.S. Just because SOME vendors discuss the DMS fees they pay with you doesn't mean those fees don't hurt you. They do. In fact, ask yourself WHY you let the DMS vendor charge others for access to your data? Shouldn't YOU get a cut of that? Maybe that's another question you should ask.
By Keith Shetterly, Consultant