I believe we’re coming to the end of what I’ll call the Digital Chaos Phase of the automotive industry. Please note that I don’t use the word chaos as a pejorative. It has been chaotic for a couple of very good reasons.
Firstly, dealers and OEMs need software to do a wide variety of linked but discrete tasks, from booking a service appointment to serving up inventory to providing a great website experience and much more. Accomplishing all these tasks has required a tremendous amount of code, coming from a wide variety of vendors from all over the world.
Secondly, we’ve been (and are) living in a period of tremendous innovation across all aspects of the business, and that innovation is coming from a lot of different sources. It doesn’t surprise anyone that the best AI tool for predicting your customers’ fixed ops revenue potential won’t likely come from the same provider as your website platform.
What characterizes the phase we’ve been in? In part, lots of software offerings are bought as independent solutions, with the burden of making sure they all fit with your other systems falling on dealers and their OEMs. How many times a week does a new offering come to your door with a compelling pitch to add important new features and functionality to your business? How many software licenses do you currently have in place? More than a handful, I’m sure.
And how well do those different pieces of software function together to create a seamless experience, either for your customers, your staff, or ideally both? Not as well as you need, I expect.
Dealers operating in an agency model generally have to use the software toolkit the brand is working with, period. Choice of software at the retail level is traded for the promise of a more integrated and rich customer experience, and a less complicated business model.
So now we enter the next phase: let’s call it the Integrated Offerings Phase. So what are the signs that we’re entering this next phase of automotive software development and purchase? There are many and they’re worth watching as they represent different (and not necessarily mutually exclusive) paths. Here are a few:
- Companies like Authenticom and Zapier are creating middleware programs that are writing application programming interfaces (APIs) to connect a wide range of software, so that the software companies themselves don’t need to write them. In some instances this is a great option to quickly integrate new solutions to your existing legacy systems, but it comes with its own monthly bill;
- Companies like Autodata, Shift Digital and others are creating packaged solutions so that you don’t have to. They will evaluate providers, choose those they feel fit best, manage the integrations and standardize the contracts;
- Companies like Real World Analytics and others are creating analytics solutions that bring data from a number of sources into one dashboard to help support business decisions, without jumping from one tool’s analytics and reporting to the next. They make it a lot easier to get the whole picture from a bunch of component parts, if you have pieces they can integrate with;
- Major players like Cox Automotive, Keyloop and others are assembling integrated suites of tools that can support a wide range business requirements from a single provider;
- Amazon is building the AWS automotive marketplace to bring a B2B app marketplace to the automotive industry. Functioning much like Apple’s App Store, the AWS marketplace intends to make it easy to add new software to your business through a pathway that you already have a relationship with, and one that already has access to your data;
- Next generation tools like Tekion hold the promise of one software platform that connects all aspects of your business. That’s the promise. You’ll need to consider how well it delivers against your needs;
- OEM programs like Nissan Digital and Toyota Smartpath are creating walled gardens of software that promise an easier software selection, contracting and adoption path, using vendors pre-vetted by your OEM;
- The growth of the agency model will accelerate the transition to this next phase, as agency-model OEMs take programs like Toyota Smartpath one step further. Dealers operating in an agency model generally have to use the software toolkit the brand is working with, period. Choice of software at the retail level is traded for the promise of a more integrated and rich customer experience, and a less complicated business model.
There will be lots more to say on this transition going forward. All I’ve done for now is provide an overview. For now, keep two dates in mind.
On January 9, 2001 Apple launched iTunes. This revolutionized how consumers legally accessed and built music libraries (remember when Napster made us all pirates?). More importantly, it introduced a new way to license products that previously had to be purchased separately.
On July 10, 2008, Apple launched the App Store, and created a one-stop shop for all the software you could want for your iOS devices. Many, many vendors. One stop.
iTunes and the App Store show us the model of where we’re headed. While it won’t be as cut and dried as that, it’s worth recognizing that going forward you won’t be provisioning software for your business the way you used to buy records, one album and one artist at a time.
You will subscribe to a shorter list of services or providers than you do now, and they will bring you a much wider range of functionality with a much higher degree of integration. But you’ll need to choose those partners with care as the switching costs will be high in both dollars and process. Imagine trying to move to an Android phone after living for a while in the Apple universe. The switching costs are daunting. When it’s your business, those switching costs scale exponentially.
Be mindful too, that in some instances your OEMs will make the choice for you, in whole or in part. And that may or may not be a bad thing.
