One of my favorite moments in the movie “Ghostbusters” comes at the end when the little accountant played by Rick Moranis, asks “Who are you guys?” and more importantly, “Who does your taxes?” When I heard that Warren Buffett’s Berkshire Hathaway was buying the Van Tuyl Group with 75 dealerships, I couldn’t help but wonder, “Who’ll be the DMS provider?” It appears that the initial management will be done by the existing Van Tuyl crew, who will most likely keep their existing old legacy DMS.
But could Berkshire Hathaway eventually look at that DMS system and wonder, “Why are these dealerships using technology developed in the 1980’s?” Warren Buffett is a fan of servers and open source, and known for modernizing the companies he buys. If you want to read a great book about his strategy and investment plan, try “The Snowball: Warren Buffett and the Business of Life” by Alice Schroeder.
After reading this book I found that Warren Buffet likes to find underperforming companies and make changes that increase sales and reduce expenses. I wonder how long will it take for the folks at Berkshire Hathaway to scroll down the financial statements and discover how expensive it can be to own an older legacy DMS. The core features of our top 3-4 DMS providers haven’t changed much in the past 30 years. Dealers keep buying more and more technology to fill the gaps. All of this has caused dealership technology costs to double, then triple in the past five years. One dealer told me that he has over a dozen logins to various software tools that he owns. Will the new regime start looking for ways to cut these technology costs by looking at the newer DMS systems created in this century?
“I wonder how long will it take for the folks at Berkshire Hathaway to scroll down the financial statements and discover how expensive it can be to own an older legacy DMS.”
Of course, in the past making a move from a legacy DMS to what some consider a newer system isn’t always a good thing. The Asbury Group left R+R and tried to go on DealerTrack DMS – but when that failed, they went to ADP. One of the problems was that the Asbury Group actually went from what we consultants call – “one frying pan to another.” The DealerTrack DMS is the system formerly known as Arkona, which was formally known as Ensign. It’s a pretty old system just like ADP and R+R. Years ago it was a good savings strategy, if you didn’t need all the features of a Tier 1 system like ADP or R+R, but lately we’re seeing the invoice creep for many of the older bargain systems like DealerTrack DMS. Dealers are paying more for the features that they need and many of the bargain systems are requiring contracts. Will Berkshire Hathaway find other ways to reduce technology expenses? The careful balance will be to trim down the right amount of technology without hurting sales.
As far as the challenge to increase sales, I’m hoping that the Berkshire Hathaway folks will embrace all the ideas that are coming out of each successful Digital Dealer Conference. As a speaker at this event for many years, I’ve had the pleasure to sit in on exciting sessions that have great ideas on how to use Digital Marketing and other technology tools to increase sales. With the next one in my backyard, April 21-23rd in Tampa – I plan to drive over to Tampa and get caught up on the latest technology. I hope to see you there!