Make Sure That Your DMS is Yours

Who will help? Running a dealership requires knowledge, training, and experience. However, shopping for a DMS is best approached using the assistance of someone with different knowledge, training, and experience. Consultants are available to help dealers understand what they need and how to get it. An attorney can help in working through the legalese of DMS contracts. Don’t be afraid to get help.
  
Hardware and Software Requirements. Mainframe? Intracompany network using PCs? Remote server? Specialized software for the departments of the dealership? You must consider and compare the hardware and software combinations that work for your dealership. A consultant can explain the benefits and detriments.
 
What Vendor Should You Use? Each vendor has different hardware and software options available. Each offers its own form agreement with a set duration and terms. The vendor to use will depend a great deal on the hardware and software you are looking for, the duration of the agreement you are prepared to enter, the available pricing, available benefits, response time, service guarantees, and a variety of other factors. The vendor should only be chosen from those who can provide what you need and want after you use a bidding process.
  
RFP. While it is time consuming to do, a dealer embarking on a search for a new computer system should start with a Request For Proposal or RFP. It should be the result of meetings involving the dealer’s IT personnel, department heads, heavy users, a consultant and an attorney. This document tells the computer vendors what the dealer wants, and it sets the ground rules for the bids of the computer vendors. This makes it easier for the dealer to compare the proposals of the vendors. More importantly, creating an RFP will force a dealer to understand the IT functions and performance required for the business. 

Preconceptions. Approach the purchasing process with an open mind. Forget your preconceptions about the vendors. The choice of the vendor should be driven by your specifications and the vendor’s willingness and ability to provide what you need and want. 
 
Performance. Be sure the agreement of the vendor provides certain performance representations and guarantees. Some computer vendors will attempt to remove all performance obligations on their part. Insist upon performance representations and guarantees.  You are likely buying a turnkey system which you expect will perform in a certain way for certain results. Ensure that the agreement provides that it will. 

Pricing. Initial pricing will depend upon the dealer’s ability to comparison shop and bargain. However, make sure that the price you negotiate stays for the term of your agreement. Many vendors seek contract provisions allowing them to impose unilateral price revisions. Make sure the price revision rights of the vendor are dependent upon a set formula or subsequent negotiations. 

Duration of the Agreement. The duration of the agreement will depend a great deal on the vendor. Some vendors still insist upon lengthy obligations. Others offer shorter term agreements. Unless the pricing, terms, and performance guarantees are so solidly in favor of the dealer that the dealer wishes to lock in the vendor, the shorter the duration of the agreement the better it is for the dealer. This will give the dealer maximum flexibility to shop for better equipment, software, pricing and terms in the rapidly changing tech market. 

Cancellation Rights. What cancellation rights do you have? Many dealers terminated by bankrupt manufacturers have found themselves stuck with long term computer contracts they can’t cancel. Negotiate for cancellation under certain circumstances. You may have to negotiate a liquidated damages provision to get out of the agreement. Do that. 
  
Hardware and Software Upgrades. Are you simply required to take whatever the vendor specifies for you as an upgrade? Is your system going to be down or degraded if you don’t take an upgrade? Make sure you control this process.   

Warranties. Computer vendors will, in their form contracts, generally disclaim all implied warranties of merchantability and fitness for the dealer’s purpose. Therefore, get specific express warranties. The vendor should warrant that the system and its components will conform to and perform in accordance with the specifications as required in the RFP.  

Data Ownership. Who owns the dealership’s data? Some vendors use form contracts that give ownership rights to the computer vendor. This allows the computer vendor the opportunity to share or sell this information. Make sure that the dealership owns its data. Make sure that the DMS vendor has no rights to share or sell the data. Make sure that the computer vendor agrees to comply with the FTC’s Information Safeguards Rule for non-public personal information of customers in the dealership’s system.   

System Availability for Your Other Vendors. Too often, DMS vendors want to control who may have access to your system. The vendor may impose large fees for access, or it may deny access completely in an attempt to make you buy the DMS vendor’s programs and services exclusively. Make sure you have the ability to grant to the vendors with whom you choose to do business access to your system without expensive penalties or punishing fees.
   
Response Time. You can be sure there will be problems and even that the computer will go down. How long will it take for the vendor to respond?  Being out of business for hours is too long, not to mention days. The agreement must set a standard for response time if there is a problem.  

Redundancy. While the DMS is critical for all aspects of a dealership, there are certain functions that, if lost, will stop business. If the F&I systems go down, the dealership will not deliver cars. If the service department system goes down, service advisers cannot generate repair orders to keep the service department operating. What kind of redundancy can be put into the system so that if the system goes down, the dealer can still perform key operations? 
  
Capacity. How quickly will your DMS capacity top out? Can the dealership add additional equipment? Can the dealership expand operations in each department? If it is a mainframe system, can it accommodate another store or other stores that the dealer may acquire? Additional capacity has become quite inexpensive. Make sure that your contract provides for added capacity. Adding it later when not originally contracted can be quite expensive. 

Flexibility. Is the dealership able to create its own reports? Or is it stuck with the reports designed by the computer vendor? And if there is flexibility, can the dealership create its own reports with its own IT personnel? Or must the reports be designed and created by the vendor’s personnel at extra cost?   Make sure your system can generate and deliver the reports you want when and in the format you want them.

Dispute Resolution. It may not be feasible to litigate or arbitrate with your vendor if you must go cross-country. Whether or not there is an arbitration provision, be careful where disputes are decided and what law will apply. To sell you the system, the computer vendor comes to your place of business. If there is a dispute the computer company is certainly in a position to come to the city or county where you do business to have the dispute determined. And, the law that should be applicable is the law of the state where the dealership is located.  Make sure you have the ability to effectively protect your rights. 

Statute of Limitations. Make sure there are no artificial time limits on the exercise of your rights. Make sure that you are not bound by a bill sent to you simply because you do not dispute the charges within thirty days or some similar shortened time frame. Make sure that your right to take legal action is not artificially limited to twelve months when your state allows a breach of contract or breach of warranty action to be filed within three to four years.  

Attorneys Fees. Who has the right to attorneys’ fees in any dispute? Make sure it is not one way in favor of the vendor. If there is an attorneys fee provision, make sure that you, as the prevailing party, are as entitled to recover attorneys fees on the same basis as the DMS vendor.