Join us on a fascinating journey with industry expert John Andersen as we unpack the evolution of dealer management systems in the automotive industry. We'll reveal how the industry seems to be in a standstill regarding dealer computer systems and discuss the public reaction to John's blog post about the changing landscape of systems and contracts. Alongside that, we'll share insights into how the exponential growth of technology has caused a shift from long-term contracts to short-term ones among software providers.
As we navigate the wild waters of the capital goods industry, we'll look at how the dealer business system providers, despite being crucial players, sometimes lack the industry knowledge, causing a disconnect with customers. Together, we'll examine the need and importance of a collaboration between dealers, suppliers, and software providers to ensure businesses thrive instead of merely getting locked into long-term contracts. We'll also bring into focus the essential role Chief Information Officers should play in this rapidly changing industry.
In the final leg of our chat, we'll expose the challenges and considerations in dealer business systems, particularly the implications of signing long-term contracts. Hear how the rapid changes in technology and customer expectations are transforming the dealership landscape. We'll emphasize why dealers need to keep their fingers on the pulse of customer needs and wants, and be ready to evolve as the industry does. So gear up for an enlightening ride through the lanes of the capital goods industry, assuring you a clearer understanding of the dealer management system, and tips on how to avoid hasty decisions in this fast-paced industry.
Visit us at LearningWithoutScars.org for more training solutions for Equipment Dealerships - Construction, Mining, Agriculture, Cranes, Trucks and Trailers.
We provide comprehensive online learning programs for employees starting with an individualized skills assessment to a personalized employee development program designed for their skill level.
Join us on a fascinating journey with industry expert John Andersen as we unpack the evolution of dealer management systems in the automotive industry. We'll reveal how the industry seems to be in a standstill regarding dealer computer systems and discuss the public reaction to John's blog post about the changing landscape of systems and contracts. Alongside that, we'll share insights into how the exponential growth of technology has caused a shift from long-term contracts to short-term ones among software providers.
As we navigate the wild waters of the capital goods industry, we'll look at how the dealer business system providers, despite being crucial players, sometimes lack the industry knowledge, causing a disconnect with customers. Together, we'll examine the need and importance of a collaboration between dealers, suppliers, and software providers to ensure businesses thrive instead of merely getting locked into long-term contracts. We'll also bring into focus the essential role Chief Information Officers should play in this rapidly changing industry.
In the final leg of our chat, we'll expose the challenges and considerations in dealer business systems, particularly the implications of signing long-term contracts. Hear how the rapid changes in technology and customer expectations are transforming the dealership landscape. We'll emphasize why dealers need to keep their fingers on the pulse of customer needs and wants, and be ready to evolve as the industry does. So gear up for an enlightening ride through the lanes of the capital goods industry, assuring you a clearer understanding of the dealer management system, and tips on how to avoid hasty decisions in this fast-paced industry.
Visit us at LearningWithoutScars.org for more training solutions for Equipment Dealerships - Construction, Mining, Agriculture, Cranes, Trucks and Trailers.
We provide comprehensive online learning programs for employees starting with an individualized skills assessment to a personalized employee development program designed for their skill level.
Aloha and welcome to another candid conversation. I'm joined today by John Anderson and this conversation has the potential to be rather interesting. Let me just use that terminology. Good day, mr Anderson, from sunny Ontario. I'm coming from wonderful Hawaii, good to see you.
Speaker 2:We couldn't be farther apart if we tried. Ron, You're probably in short sleeves and I've got on a hoodie.
Speaker 1:So John wrote a blog a couple of weeks ago about the changing world of systems and contracts, and John and I have been talking about this for some time now the evolution of systems and dealer management systems, or whatever you want to call them. And John was an owner of PFW, which was a well, john can give us better history on it than I came. But it started out as a dealer created software package that then was taken over by a bunch of professionals and then it has since morphed. I started out is in the operational side of the business and my boss called me on a Friday afternoon and told me to meet him at 8.15 in the data processing manager's office, because that's my new job. So with that is the starting point, john, let's get into where are we today with, let me call them, computer systems for dealers.
Speaker 2:Well, I think we're. Sadly, we're probably in a stall for computer systems, for dealers. I wish we had an awful lot more exciting things to talk about. I wish we could talk about all the new developments and all the new technologies we're using and how we're just going to blow up the world. I can do that in other industries, whether you like them or don't like them. You could talk about it in electric vehicles. You could talk about it in AI. You could talk about it in retail. There's so many places that exciting things are happening. Unfortunately, this particular industry, especially as it relates to business systems, is kind of status quo and, in fact, in my opinion and I should have warned you, ron, I'm a little spicy on this- that's a big change, John.
Speaker 2:Yeah, I don't think I ever wrote a piece that got this much traction and literally rang my phone off the hook.
Speaker 1:So recap the blog a little bit for people that might not have read it.
Speaker 2:Okay, so the blog was called Wait, wait, don't Sign it, and fundamentally it started because I had a number of dealer friends who called, who were under what they felt was pressure some felt extreme pressure to go ahead and start signing three and as long as five-year contracts with their existing software supplier. I think you'll go back even a few more conversations between you and I. I'm always harping on the rate of change and what you should expect from your software supplier, and we're not looking at five-year timelines anymore or three-year timelines. Things now are measured in days as opposed to years, so they're like well, should I be signing contracts for five years to see something change? Should I be signing for three years and where is my leverage? Interestingly enough, following up that particular blog post, I even got calls from the software suppliers, a couple that would politely ask me to shut up.
Speaker 2:So, clearly that means I'm on the right track somewhere, and even had one supplier who said hey, we've taken your advice, we won't give you credit for it, but our contracts are now limited to a year. And when I asked them why their contracts were limited to a year, they said well, if we can't prove and earn your business over a year, then you should have the right to look around. And that's kind of I guess that's an old-school mentality, but it's something that's missing in the market today.
Speaker 1:Let me go backwards a little bit. You referenced you and I have been talking about change and how this industry has always been behind on change and I'm not sure it's because we don't have the knowledge or we don't have the desire to do that. It's just that we're in a world that is kind of traditional. We sell equipment. Equipment has been around since the beginning of time. The first mechanic was a blacksmiths 5,000 years ago or whatever. But when I started in the industry I had a minor in computer science which meant that I learned how to wire unit record equipment amongst other things, and it was a bad market time to get a job. So I ended up working in a dealership in the operations. So I went through parts and service and sales and that brief intro. Rod Wallo, who was the president of Hewitt Equipment, the cat dealer I worked for, called me out late on a Friday afternoon and he said exactly what I said. Meet me in the data processing manager's office, because that was the new job. And the frame of reference that I want to give you is I came out of operations and Rod wanted somebody in data processing that could talk to the operational people and translate to the system people, because the system people didn't know the business and the business people didn't know systems, so they never were able to get things together. It took forever to get things done and we changed all that. So freeze frame on that for a second.
Speaker 1:There was a gentleman by the name of Ian Sharpe who had a company in Ontario called IP Sharpe Associates which was predicated on a programming language called APL which was invented by a guy by the name of Ken Iverson who was under contract to IBM. And that's the package. That's the language they use to develop their database, their DOS OS, their telecommunications kicks, db1, all of that stuff was all done in APL. Ibm had Ken locked up, ken had two sons. Ian hired Ken's two sons so he had Sharpe APL.
Speaker 1:And if you're a math guy which I am or was it's an array. It's a three-dimensional array when you program. So it's simple as hell. You do things fast as hell, and this is in the 70s. We built a complete dealer business system in a month and people laugh at me when I make those comments because it used to take many years to put together a system. Today it's mandate. So that's my frame of reference and the contract that I referenced when you and I talked about it is cell phones. You had to buy a contract to get a phone and you typically did it with financing, so you had two years. Now you buy a phone, you can cancel every month, so contracts are going away. Our grandparents had layaway programs before they could buy appliances, that's before credit cards. Everything should be getting on a shorter time paper, not a longer one, which is why I was so intrigued by your wait-wait blog. What in the hell are we doing having longer contracts today on anything for that?
Speaker 2:astounds me and I'm going to assume you're asking the million dollar question right now and I'm going to give you the billion dollar answer the challenge with those contracts right now. Let me step back. There was a time where the dealer business system was responsible, in partnership and in coordination with the dealer, to grow that software on a very regular basis. There was a real synergy between the software provider and the dealership. I'll give you an example. My background was I started installing in a dealership and when I later came into the company, the management of the company and eventually owning the company with some great partners. We all understood our whole goal was to give the dealer tools that would make them profitable, strong, grow as fast as we can. And ultimately, maybe we were a little naive because our answer was if the dealers do really well, we'll do really well, and that stood us in good stead for probably 20 years.
Speaker 1:So let me interrupt you for a second and go backwards, because I'm not sure everybody understands. In the early days of dealer management systems, the dealers were the ones that gave the software providers the ideas that they put into their system to make the system better. Is that true?
Speaker 2:100%. I mean they would come up with a what happened as a dealer, would come up with a genesis of an idea. They just knew what they needed to do to make their job easier, better, stronger, more profitable, better customer service. Whatever it happened to be, our job was to interpret that, grow it, fertilize it, water it and then see how we could spread that across more people and get a better idea, a stronger idea, something that was more fully developed, and deploy it. And even in those quote unquote old days we looked at this over at most a year and a year and a half plan. We never had, we never locked people into long term contracts. In fact, we never had a services agreement or a software subscription agreement with anybody. I have to go back and look, but I think it was 2007 2008 before that actually started.
Speaker 1:When was PFW put together with you and the others?
Speaker 2:1988. So 20 years later, yeah, 20 years later. And that's okay, because we were acquired by a commercial organization whose job was to see us grow and set in order to protect ourselves. As a publicly traded company, we have to do things like revenue forecasts and guaranteed revenue amounts and things like that. So consequently, you know people have to be signed in for at least a year contract so that you have some idea of what your revenue picture looks like as you progress through the year.
Speaker 1:So let me try and break that progression a little bit, from asking the dealers what they wanted, from hearing the dealers give you a genesis of ideas and then you incorporating it and enhancing the package all along. At some point in time user groups came in, and you do groups. To me this might be a different position, for you seem to be the software company being able to control the development of a package, because there's so many disparate needs across parts of a sales Reynolds admin that now somebody had to prioritize them and it was not going to be the dealers. And the dealers are never going to be happy with software companies because my idea didn't get the top of the pile. Does that make any sense to you?
Speaker 2:Yeah, it does, but it can be balanced, run and and, and you know, in 35 years that was my job was to balance it and I and you see me, you see me do it in the past and I tell you I'm going to do it in New Orleans on November again, and that is to stand in front of a bunch of dealers using a particular system and try and and and and, try and balance out what needs to be done, what needs to be prioritized, what's the biggest bang for the buck? I mean, obviously it's. It's. It really is a marriage. So what you're trying to do is say, okay, this is what I'm going to bring to the table, this is what you're going to bring to the table. How's it going to benefit at the end?
Speaker 2:The key piece to that was the dealer business system provider was vested in the success of the dealership. That was how they made their money. The answer to the billion dollar question of why things are changing is the dealer business system provider now answers to a whole different host of people, starting with, maybe a parent organization. They may eventually go to being publicly traded and have to answer to shareholders. Those shareholders may or may not even know what the industry is, let alone the intricacies of the industry. And right now, if you were to go talk to bottom through a lot of these dealer system providers, I would say you know, starting from a general manager's position on up, they've never even been in a dealership, let alone ride in the tractor, let alone stand in the field, let alone stand on the other side of a parts counter trying to get apart. So so it's pretty hard to be able to relate to your customer and provide them and, you know, nurture the genesis of their ideas If you don't really really understand what their businesses.
Speaker 1:It mirrors so many aspects of society. One of the things that struck me as you were talking customer service In America has gotten so bad. The comment is that it sucks. And and then I translate that into education, because of what we're doing with learning without scars, the schools that we're talking to and provost and presidents and vice presidents all say the same thing it's taking a couple of years now to take a student who graduated from high school and make them ready for the university experience, because critical thinking skills, analytical skills and communication skills have eroded, degraded so badly over the last 2025 years as to almost be unrecognizable.
Speaker 1:So as we look at software, we've seen a proliferation in the last 10 years, maybe longer, for specialized providers like sales force, like target and others foresight, intelligence with text messaging and a whole host of different things and their bolt-ons and, if I'm not mistaken, that was the primary reason that catapult or dropped out of the software business at the BSI. They couldn't keep up with all of the Desperate pieces to make a package that was standard. So when I'm brought down to the states, john and they brought me into run EBS, we had a software development group and Friday afternoon, they say, or one day during the week they say we're ready, we've got a new release. I said, terrific, friday afternoon will turn the system over to you. You've got it for the weekend. I want you to. We're going to strip the computer down, you're going to put it in, started up and I want to have a discussion about it Monday.
Speaker 1:And you know what releases were used to be like. None of them went clean. So they went, did this and on Monday morning when I went in they said, well, we couldn't even start the computer. I said congratulations. Now we know what the problem is. We never had a release that went out, that was not clean, tested that way again. We just had our bank here in Hawaii Do a new release of software. They had a security system on interactive online banking that you would get a text message that had a code that you had put in. It was a double check. They took it away because it was too cumbersome for some of the dealers or some of their customers. Nobody was told about it, they just did it. It's just everywhere in society these things are happening and technology is moving so quickly. The advancements are phenomenal and we're getting further and further and further behind and people don't know. Most people don't know what the house going on my wife with technology go away. I don't know how we reconcile all this.
Speaker 2:Well, the way you reconcile it is the fact that, fundamentally, you have to be prepared to change. The dealership needs to change, the dealers' expectations need to change. The suppliers the OEM suppliers need to change. The problem is that it's forced change. Nobody is willing, nobody is sitting down and saying okay, this is not what we want to be. This is who we want to be, and I think that's the fundamental difference.
Speaker 2:If I was a dealer, business system supplier today, this is who I want to be to my customer.
Speaker 2:I want to be a most valued partner. I want to be an asset to them, not in just the software that I provide for them, but the ideas that I bring to them that the collaboration that we can do to help that business flourish, because my business will flourish at the same time. Instead, what you're hearing and I've been called on this, like I said, I got a lot of phone calls Instead, what we're hearing is I want you to sign a five-year contract, because if I lock everybody into a five-year contract and I have 500 or 1,000 customers across North America that I have locked in at $15 billion, I can come up with a valuation for the company that is the $15 billion plus an X multiple, because it's guaranteed for five years. I can take it to Wall Street, I can sell it and ultimately make money. So how did that help the dealer? Where did XYZ dealer in the middle of Kansas benefit from that exercise, other than he signed his life away for five years?
Speaker 1:Let me suggest that we're missing something again. It's the actual consumer that's forcing this change. 15 years ago, amazon didn't exist. Today they're the largest retailer in the world. 15 years ago, the iPhone didn't exist or the cell phone didn't exist. It's ubiquitous. And I'm just finishing off a class that's predicated on Simon Sinek's book in Golden Circle called Start, with why.
Speaker 1:Everybody knows what they do and most people know how they do it. But you ask the question well, why do you do it? To make a buck? Yeah, making a buck is an outcome. It's not the reason. So when we build a system, the software supplier is talking to the dealer. The dealer should be talking to their customers and the customers are telling them. So here comes Caterpillar in 1990 with the storefront, and I don't think there's any dealer out there anywhere that has more than 10% of their parts business going on the internet. John Deere parts are available at Amazon today and Amazon will fill the void wherever the heller is one. We're so far behind them. We're so at risk from a systems perspective, not a dealer perspective. Maybe that's true too. Maybe the OEM is going to take over the retail business because the dealers aren't. Maybe the dealers aren't big enough anymore. I was talking with somebody yesterday that said that they have heard that the Caterpillar dealers are going to be at least $1 billion each.
Speaker 2:Imagine Well, but again, if you're going to be a billion-dollar company, if you're going to be, you brought up Amazon. I'll use that as a good example. You can bring up Apple, we'll use that when they're all good examples. Because, fundamentally, the people that they focus on is the end user of their products. It's about that experience when I keep saying it's not what you want to be, it's who you want to be.
Speaker 2:Amazon didn't say we want to be a billion-dollar company, a $15 billion company. What they said is we want to be your trusted partner. That started with the. We won't ever question a return. Return it, no problem. Nobody once has ever said did you buy that from us? Have you tested this? Are you really sure? And their answer was if you're not satisfied, we'll take it back. They created a culture and the dealerships can do the same thing. They can create that culture, but they're not getting any assistance from the back end because they're not dealing with software manufacturers that are coming in and saying okay, listen, we want to partner with you, we'll meet at your dealership with your top 20 customers and we want to find out from them, other than cost, what would be the single thing that we could do. That would make it easier for you to do business with us. Do you really think dealers know the answer to that question today?
Speaker 1:They don't. I have a little exercise that I call five things. It's a best practices type of thing in three different areas. List down five things that you'd like to do that would make your life easier at work. Write down five things that you do in your job that are a real pain in the butt for you to do. Give me five things that you'd like to do that would make your business, your company, your department more effective. What's remarkable to me is you get those lists from people and you make the language common. There's a lot of them that are on all three lists. It would make your life easier, it's a pain in the butt to do and it would make your company more effective. I ask that question all the time. If they're on all three lists, why isn't it already been done? It's not just the system side we're in a run on, it's the whole operation.
Speaker 2:In every other business that we look at outside of automotive trucking, heavy equipment it has been done. Just think about it. It's been done with online banking. I don't want to go to the bank, I don't want to deposit checks, I don't want to have to see a teller, I don't want to deal with it, I don't want to receive payments. If you think about it from the perspective of Amazon, I don't want to go to a store. I don't want to be worried about how I'm going to return things. The exact same thing In our business, and our business being that construction equipment, agricultural equipment, over the road trucking we don't have that innovation that says is there anything more that the customer could want? If we want to pull this back, I want to pull it back to the subject of hand, which was wait, wait, don't sign it.
Speaker 1:Before you do that, let me give you two other small examples Car and mining and Kamatsu and mining and Hitachi and mining I'm going to give them all the credit. Autonomous machines You've got an open-pit mine. There's nobody in the vehicles, nobody anywhere. That's chapter A. That's been true for quite a while. Chapter B forest agriculture.
Speaker 1:John Deere tests up in Canada, in Saskatchewan, where the farms are huge 20, 40, 80,000 acres. Now satellite will drive a harvester, a planter. It'll determine what the soil content should be, how deep the seed should go, what fertilization should be on it and the farmers in is barn driving his equipment. That wasn't because John Deere created it, it was because a farmer asked for it. It wasn't because Caterpillar created it, it's because a miner asked for it. Our clients, who are small skid stair operators they have their in their truck. We've got sensors all over them. We've got telematics all over. They know what the heck's going on. We've got mission controls of dealers now that are monitoring equipment all over the darn place. Your filters clogged up, your engine's overheating. You've been idling for four hours, so now go back to the contract. Wait, wait. The world is telling us to move. The world is telling us to change.
Speaker 2:And I think this is the opportunity to change, because, if my advice to a dealer and, like I said, this is not an argument I may have mentioned I had one of the suppliers who told me that I was naive about the marketplace and that I was building this argument on a straw house. So I'm just going to tell you how firm this foundation is in the first place, and that is if a business system supplier comes to me and says I want you to sign a five-year agreement for a software subscription. It's going to be a fixed cost this year of let's do simple math $20,000 with a maximum increase of 5% year over year cover cost of living, whatever it has to be. My first question back to them should be for my undying faithfulness here and signing this contract, can you tell me exactly what you're going to provide in the first 90 days, in the first 120 days, in the first year and in the second year? I don't think you can even start to think beyond that. But if you're going to charge me anything more than you're charging me right now, I need to know what is the value proposition that you're going to give me to be able to do that. If their answer is well, you know there's a lot of doublespeak there, but I really want to know what product, what's going to happen? And if the answer is nothing, I can tell you from the inside.
Speaker 2:Those manufacturers and those dealer business systems have already said he can't change, it's too expensive. So essentially they've got you handcuffed. And this is scary because any one of those dealer principles that I go to talk to they'll get their horns up in a big hurry and look back at you and say we did this before the business system was here and we can certainly continue to do it after the business system is here. Did we get a lot of efficiencies realized? Were we able to cut down on people? Yeah, but fundamentally, if that dealer business system provider says no, if you don't sign a three, a five-year contract with me, you don't get to do business with me, then I'll tell you what. It's time to go find another dealer business system, because they're out there and there are people who say I will work for you, with you for one year, for two years, for three years, whatever it takes to move your dealership forward. And the next question I have for them is so tell me what you're going to do for my end user customer. Because until you can make that business grow through the end user customer, that in fact is a house of straw. And that's where and that's what worries me, where we are right now.
Speaker 2:Growing by acquisition great, you're bigger, I get it. You want to make more money. You've got to have more customers. You've got to have more satisfied customers. You have to have more customers that are willing to buy more equipment from you. Do more parts business, do more service. Obviously you can make some of that up in price increases, but that only lasts so long because we're all going to go find the cheapest place we can.
Speaker 2:So this comes back to who do you want to be again, and is this a partnership that you have with your business systems supplier? Because if it's a partnership, hey, ron, let's make it real simple. You find a kid today, at 20 years old, and see how anxious they are to get married. Because they're not getting married, because they have a partnership. They find somebody that they can work with, somebody that they can live with. They don't turn around and run at the first fight, but they're not as vested in the fact that we're going to stay together forever because a piece of paper says we have to do it. They have to earn each other's respect and care. Every day, Same thing in the marketplace. Why doesn't a dealer business system have to earn your business every year, every day?
Speaker 1:Let's go into another room in the house. Let's talk about hosted systems versus computers at dealer locations.
Speaker 2:Do you want my opinion, of course, okay. Well, I wouldn't have a computer system at my location now under any circumstances, and I'll tell you the reason why because we are dealing with situations in terms of economics, geography, weather, geology. Whatever you want to do, there's a certain safety aspect, first of all, of having a system located. Second of all, we were all anxious to get out of contracts for our telephones so that we could buy our own phones. Most of us don't go to the Apple store and buy a brand new phone anymore. We still do it through a phone company because we still want to be able to have the facility to upgrade on a regular basis.
Speaker 2:I saw an interesting contract this morning and you talk about. This is a great contract because you cell phone as an example earlier. So the cell phone contract is $25 a month anywhere US, canada, mexico, 5g, all you can eat, no limitations, the threat that you may be slower if it's a busy time, things like that Phenomenal, of course, not available in Canada, but just a phenomenal package. And I thought how could it get any better? And this morning they emailed me and said we noticed you liked our $25 package for an additional $25. We'll give you, which would make it $50 a month. Ron, for $50 a month, we'll give you that same package. We'll give you the brand new, latest titanium iPhone 15 that just came out, and every year that Apple releases a new iPhone or a new iteration, just give us your old phone back, we'll send you a brand new one and you're ready to go. So you will always be using the latest and greatest technology.
Speaker 1:Ron, and if it's in America, and if it turns out you want to change your mind after 30 days, 70 days, 90 days, just bring it back, we're done.
Speaker 2:Ron, at any point, that's exactly it. Yep, so I think Ron, now why is that?
Speaker 1:now stay there for a second. Why is that not available in the far north in Canada?
Speaker 2:Ron, don't go there.
Speaker 1:Don't go there, I'm nagging a Canadian as an American now.
Speaker 2:Ron, yeah Well, that's a governmental issue but we don't worry about those folks. But fundamentally-.
Speaker 1:Ron. So hosted machines versus my own machine has another flavor to it. Everybody's going to have exactly the same package. There is no differentiation from dealer to dealer anymore, ron. Not necessarily, ron. I understand, but that's the way it's being presented.
Speaker 2:Ron, it can be presented that way. I think there's two ways to look at it. And again, this is where you have to have a relationship with that business system supplier, because some people just want to be a cookie cutter, they just want to be one of 20 examples of a dataset on that server. Use the same software, use the same hosting. I get that. That's fine and I can do that at a reduced price. If, in fact, I want to be different and I have some different packages on there and I have some other interfaces and I'm using some other bolt-ons, like you said, all exist fine, but I'm not going to be hanging out with everybody else. In doing that, you lose some of that benefit of some of the discounts that would apply based on quantity. So I'm now hosting 10 separate systems instead of one system 10 times and the price is different.
Speaker 1:So let me go into another room in the house. Hacking the ability that people have to get into your computer to extract monies to modify balance sheets, asset pools, is astounding.
Speaker 2:Yeah, that's not the part that scares me. To have somebody do that in a traditional sense, that's likely to be caught, found somewhere down the line, because there's enough audit trails that I would hope that most of that gets caught. That's not the part that worries me. The part that worries me is anytime your data is out of your control and by that I mean it's not on a piece of paper in your wallet, on your desk, in your drawer. You run the risk of ransom situations Because in most cases, the hackers I don't want to say they're not bright enough because they're beyond bright, but they don't have the business acumen to say, okay, this is a way that I can embezzle a dime at a time they would rather lock up your data, not even knowing what it is, but just knowing that it's valuable, and say, ron, it's going to cost you to get it back, which is a better example. For one of the reasons I would like to see a hosted solution, because most of the hosted solutions deal with redundant databases. They deal with redundant data centers.
Speaker 2:I'm a little guy in Canada. All of my stuff doesn't live here. I have one set of servers that lives in Finland. Thank you for visiting it last week. I have another set that sits in Germany. I'm hoping to go visit it this winter. I have two mirrored sets of servers in two completely different data centers, and that's just for my stuff.
Speaker 1:Let me go back on that ransom side again. I hope people listening to this are thinking about some of these things, this ransoming data, duplicate datasets, hosted or unhosted. What they're doing now is invading the database and disabling the system. It is causing people to take three, five, seven, 10 days to get their system back where they can even use it. At Finning in the 70s we had to operate manually for three months in the parts business 53 stores because one of the platters in a disk drive was warped. Today the risk is huge.
Speaker 1:Example one of my clients had a problem with their system because there was no firewall on the teleprocessing to survivors, modems and people came in that way. I mean, they're beyond smart, like you say. So hosted is a much more secure circumstance. Duplicative databases all over is another. But what bothers me more now is we've got these specialized software pieces all over the place bolted on. We don't have control of our database. We've got data fields that are being touched by three or four or five different packages and they don't talk to each other. Tell me about integrity of data anymore.
Speaker 2:So there is and now I'll come to the rescue of the dealer business systems guys who sometimes take a little bit longer to do things than we'd like to see. Ross Atkinson always worded it best he only wanted to deal with data that had been washed and cleaned because he didn't want it to make his system dirty. It was a very specific exercise that if you wanted to touch data from the dealer business system then you had to go through a rigorous set of APIs and validations and meet certain criteria to do it. It does add a layer of complexity into the time that it takes to develop. I'm okay with that, but it still pushes back. You're going to end up with diversified business systems, because nobody can be that good at everything.
Speaker 2:I don't think there is today a dealer business system that has a rental package that they install, maintain and take care of themselves. That would be listed anywhere in the top 10 rental packages. However, I would say the same thing about a piece of rental software that there is an integral piece of running a dealership that isn't in there. That's a prime example of two that should touch each other Again, if there's a cooperative effort there and people will really go to the effort of making sure there's data integrity across both, then it works fine. The challenge is bigger than that is when people are using independent spreadsheets and ODBC connections and things like that, because they're going to say hey, I'm going to start writing spreadsheets off of my system, then I'm going to update my spreadsheet dirty data, no validation, none of the things that happen in the business system. I'm going to take that and upload it back into the system again. That's where things just go haywire.
Speaker 1:It happens. Well, sure, but the fundamental foundation of database management started 50 years ago. Today you go to a dealership and I asked this question often who owns the parts price field? Who can change that field? Who has the authority to change that field?
Speaker 2:Where does the data come from?
Speaker 1:How does it get updated? How frequently is it updated? What's the financial implication? I get what I call the guppy look. Yeah, I'm just using that simple. It's every damn data field you want to talk about Again being in Europe, I was looking at financial systems and now I want a definition of cost to sales. You had financial systems coming out, you had balance sheets, you had operating statements, you had cash flow forecast. You go to different packages and Oracle, sap, jd Edwards, microsoft Dynamics, xap, m4, all of these folks they're talented people. Huge packages, so complicated. The dealers don't understand what the hell it is.
Speaker 2:Okay. So now it's my turn to take you to a different room, Because you can keep leading this conversation to the perfect spot right now for something that we talked about in a blog post or a podcast months ago, which is the need to be able to have some experience and expertise on the information side of things. We talked about the lack of chief information officers. You hear a lot of times talk about CTOs. Well, I'm the chief technical officer. Well, congratulations, that's great. You acquire PCs, you choose business systems, you negotiate contracts. I like that. But who in the dealership is responsible for knowing where all of these pieces of information sit, reside and how they touch each other and what the overall impact is? Because I'll tell you, except for some of the largest dealers out there, almost nobody has a chief information officer. Almost nobody has somebody who really understands all of those data sets.
Speaker 1:And not only do they not have one, those folks that have that job. They're unbelievably brilliant and are making a fortune. Because there's so few that have the skills to be able to deal with that, Because they got to understand the fundamental foundation of the business. Watch the moving chairs from Amazon to Blue Origins or whatever is Bezos's things. Elon Musk takes somebody from SpaceX and puts them into Tesla or into whatever. There's such a closed shop now, John, as to be rather astounding.
Speaker 2:You bring up a good point. It is a critical, critical function and whether it's CTO, whether it's CIO, it's a critical function and it'll bring us right back to the front of the house again. So what happens is we take somebody who doesn't understand the system. We take someone who doesn't know what it is that they require. They don't know what their roadmap is going forward technology-wise. They rely on a business partner, specifically their dealer business system, to guide them through that. And in comes a predatory shark that says no problem, sign this for five years, I'm going to give you everything you want, and wait, wait don't sign it Quite frankly.
Speaker 1:they're safe in making that statement. I'll give you everything you want, because the dealers typically can't tell you what they want. Exactly, exactly, and part of that and this is really a slam. The dealers aren't paying attention to what their customers are asking them to get. Buyers needs and wants. The customers buyers and needs and wants. The dealers aren't paying attention to it like they used to.
Speaker 2:You know I used to. I used one of my very early memories of dealing with a John Deere dealer in Nebraska. This fellow actually had, among other really neat ideas, he had a cafe in the dealership and it was just to make it convenient for people to come in and out and get their parts and stay there a little bit longer, and everything else. He could give you all kinds of justifications for it. He's since passed away, but the thing that I thought was really interesting was on Saturday mornings he bought, brought and paid for breakfast for 20 different customers. Every Saturday morning you get an invitation. It was kind of a big deal. You got to come have breakfast with the dealership in their own cafe. It was nice, it was well provided. They did that simply so that they could have that opportunity to interface with the customer and find out what the customer wanted.
Speaker 2:I can tell you in those days we took more good ideas from dealers who were in touch with their customers than we did from people who were in touch with their banks or in touch with their investors. The answer is if a dealership is in touch with the end user customer, if the business system is in touch with the end user customer. They are growing and changing at a rate that the customer is growing and changing. My question to a dealer today is are you changing as fast as your customer Isn't, or is?
Speaker 1:Yeah, a whole bunch of things.
Speaker 2:I got a. I think I see it on your face, ron. There is a Jack Welsh pro coming out of you right now, isn't it? What is it? It is going to be when the rate of change externally exceeds the rate of change internally. The end is near, am I?
Speaker 1:close, yeah, yeah, when the world around you is changing at a rate fast and you are, the end is near. However, what I was going to talk about the guy that did that with providing the lunch was Carl Sewell. He put a cafeteria in the middle of his service department. This is the guy that created the customer satisfaction index for General Motors. This is the guy who wrote a book called Customers for Life, with a professor from Yale, and he's still here. His kids are running the dealership. His family has had three generations now running dealerships and it's remarkable. It's absolutely remarkable. Pay attention to your customer, look after your customer, look after the people who look after your customers, the people I call heroes. They're the ones. The boss is not the top of the triangle anymore. The person who touches the customer is the top of the triangle, and all the bosses need to support them. Whatever they need, give it to them. End of story.
Speaker 2:So I'll take this and ask this question Do you think Carl Sewell made his customer sign a three-year contract or a five-year contract with him? He wouldn't dream of it. Wait wait don't sign it.
Speaker 1:I think we beat this up, but I think we've opened a whole bunch of other doors, john, that we're going to have to go into in this house. Customer service is the thing that is going to bond everybody together. Steve Clegg and his company is in TORO doing data analytics based on transactions, not financials based on transactions. Dale Hanna with foresight, intelligence, text messaging, progress on shop jobs, field jobs, back orders, supply chain issues. Joseph Albright, teaching at Bradley University, indian University, about supply chain.
Speaker 1:Imagine that being a subject matter 10 years ago, we found out since COVID our supply chain is rather exposed. I think we're finding out in the last, let me say, 20 years that our technology aspect of our dealerships is exposed. We're not being served the way that we used to be. The equipment is so much more capable today hydraulically, electrically, telematic sensors all over the damn place. Life cycle management is becoming so precise that we can predict when to take a machine out of service. But I don't have a tool that allows a customer at two o'clock in the morning to make an appointment at the service department at a dealership, because the software isn't available.
Speaker 2:The challenge is we developed software up until probably the last five years under the sole guise of how is the software going to enable the business whatever business it is, wherever you were in that chain, to make more money? And I think the answer now has to be we've made all the money we're gonna make. We have rung that towel dry. Now the question is how are we going to make people want to do business with us? How are we gonna make it easier for them to do business? How are we going to provide service levels above and beyond? I mean, it's the Amazon example. Again, I am an iPhone user, I know you're an iPhone user.
Speaker 1:I'm not dealing with old technology. I'm Samsung. I have an Android baby.
Speaker 2:So here's the big thing, though In either case they are not the best phones available, of course not they happen to be the best phones that serve the purposes that we need, and that's the part that people need to come back to Is it the best technology, or is it the technology that does the best?
Speaker 1:John. Think about the phone. It's a perfect example. It's not a phone anymore, nope, it's a database. It's a purchasing device. It's a camera that's better than a single lens reflux, it's all manner of things.
Speaker 1:But I think we're at a place where customers are going to be telling us and you made a really good point, several good points, but one of them is we're not going to be making more money. We've been making money on the fact that we've been reducing headcount. Gdp has been going up because the number of people working is fewer. It's not because we're necessarily efficient, but because we're abusing the workforce In the course of that mergers and acquisitions, the number of dealers playing in any pond we want to look at agriculture, forestry, mining, on-highway trailers, marine, whatever you want it's shrinking. It's going down by 50% in the last 25 years.
Speaker 1:Not only that, but the market share and I can only address parts and service. We haven't had good tools to measure it. The market share and parts and service has also gone down at the same time, but it's masked by the fact that our volume has gone up. Our sales volume has gone up because the number of people competing with us has gone down. Surprised, the volume's gone up, but our market shares is like the duck Looks pretty calm on the top of the water, but maybe are they peddling those legs pretty hard and the reason they're peddling those legs so hard is because the consumer has changed and nobody realizes it anymore.
Speaker 2:I used to buy from my dealership because my dad bought from my dealership, because his dad bought from his dealership. That world has changed. I fire it up now and he who gives me the best price and answers the fastest and promises me the best service and ways to continue and the easiest returns and whatever the indicator is, then that's where I go. So you get one chance If you screw up once. Now they're gone, used to be.
Speaker 1:You got a couple passes, you don't get a pass anymore, and the guy that made that it's called a moment of truth and that was Yann Carlson, who runs Scandinavian Air Services SAS, transformed the whole company. We're running out of time, John, so I don't wanna keep this thing going. We could do this for hours, but I wanna have a chapter two somewhere in the next 15 to 30 days. Well, how do you wanna close the wait? Wait, don't sign it chapter.
Speaker 2:Well, I guess the first question is you should never sign a contract under duress. That's the first thing that you need to remember. You do have choices. You do have options. We talked about ransomware. Don't be held ransom by your dealer business system supplier. Set the expectations when you write the contract.
Speaker 2:The contract is a good contract, makes both people feel like they were in a good position If they wanna have the good position of knowing that they're gonna be your business partner for the next year. If you need to go two years, go two years. If you have to go three years, it's not my idea. If you gotta go five, get your head checked, because the answer is if that's what they need, then what is it that they're gonna give you? And I'm not talking about a fixed price. I'm talking about a commitment to my business. I'm talking about a commitment to my customers and I'm talking about a commitment to growing my dealership. So I really need to know what you're gonna get for me.
Speaker 2:I think the other thing is don't assume that you can't change. You can change. If I hear one more business system supplier say the barriers of change, now the cost is not the barrier of change. The barrier of change is the people that you're dealing with, and the barrier of change is your own mentality on what we have to do for our business. Be prepared to change. I hope you don't have to pull that gun out of the holster, but just know that you've got it because you can change. So don't sign under duress, don't rush. Know that you got change. Explore your options. There's a lot of options to explore.
Speaker 1:At that find conclusion. I'm gonna say you weren't all that spicy. You were gonna be spicy. You weren't that spicy, but the topics are very, very, in my view, very important, and I hope that people that are listening to this are still with us and found this to be intriguing, and I want to suggest to you we're not done yet. We're gonna come back with more of this in a couple of four weeks. So thank you very much, john, for sharing your feelings with us so emotionally and intellectually purely, and for everybody out in the ether, thanks for being with us and I look forward to having you with us at another candid conversation in the near future. Mahalo.