Sonic Automotive: Roadside Aid

 
 
By John McCormick  |  Posted 2003-10-17
 
 
 

Sonic Automotive: Roadside Aid


When Chief Information Officer David Boatman arrived at Sonic Automotive four years ago, the company was motoring ahead like it was on the acquisition Autobahn.

Purring like a Mercedes-Benz E55 AMG, the auto dealer had begun picking up dozens of independent dealerships in a buying spree thats barely slowed since, making it the nations third-largest dealership after AutoNation and United Auto Group. By 2002, the binge had revved up sales five-fold, from $1.4 billion in 1998 to $7.1 billion. Last year it acquired 31 dealerships and may add about 20 more by the end of 2003.

But in terms of information technology, the Sonic engine was working without a governor. When Boatman arrived, the acquired dealerships were using desktop computers from a hodgepodge of vendors. Support arrangements ranged from contracts with local repair shops to the phone number of the dealers computer-literate kid. Boatman had no way to back up dealer data, no way to know what software was in place, and no way to track software licenses. Sonic had scant control over its systems, or the associated maintenance costs.

The CIO had two options: He could build up a desktopsupport group within Sonic or he could look for outside help. Boatman approached professional desktop-management firms, including Centerbeam and Everdream, "to provide help desk, online backup [and] remote support for our PCs in our dealerships."

In early 2002, Boatman chose Everdream. Today, the PC- services company tracks what machines Sonic owns, upgrades software, manages licenses, backs up data, arranges for new hardware installations, provides remote testing and maintenance services, and gives around-the-clock user support.

Sonic wont disclose whether it actually saved money by contracting these services to a third party. But Boatman says he really didnt enter into the agreement to save money and hasnt even calculated his actual savings. He says his primary goals were to take control of Sonics PCs and increase technical support to the companys far-flung operations.

Sonic targets cities with populations growing faster than the national average, and has outposts throughout the South, Midwest and California.

Still, Boatman says Everdreams pricing beat that of his other choices. "They were working hard to get our business," he says.

Next page: The $55 desktop.

The


$55 Desktop">

The $55 Desktop

While neither side discloses actual pricing, Everdream says the type of services it provides to a company like Sonic runs about $55 per seat, per month. Sonic signed a three-year subscription for each PC Everdream will manage. Everdream argues that if a company similar in size and geographic spread to Sonic wanted to provide comparable services internally, hardware, software and labor costs would average out to about $125 per seat, per month.

Now, Boatman has negotiated a flexible purchase contract with Hewlett-Packard. But when Sonic needs a new PC, its Everdream that delivers it.

Everdream procures a Compaq d530 from hp, loads Sonics software onto it, ships the machine to the car dealer and takes care of all post-installation service and support. Over the past year and a half, Sonic has asked Everdream to service an increasing number of its PCs, and the desktop management firm says it now manages the machines at about 100 of Sonics 139 dealers—roughtly 3,500 of Sonics 5,000 PCs.

Sonic auto dealers sell everything from Lexus and Mercedes to Chevy and Honda. But Sonic derives revenue not just from sales, but from handling the financing and insurance, and providing parts and service. All of it is done digitally through the desktop. These days, the dealer PC "is the cash register," says Forrester Research analyst Mark Bunger.

So when Sonic acquires a new dealership, getting the right setup in place is key. Everdream usually is asked to replace all desktops at an acquired dealer. Sonic tells Everdream where a PC is going—the showroom, parts department or elsewhere—and Everdream outfits the machine accordingly.

The basic dealer package comes with Microsoft Windows 2000, Microsoft Office 2000 and Microsoft Outlook. Most showroom PCs are set up to access a dealer management system (DMS), which contains sales, service and other dealer-specific business applications. Sonic dealers use either the Automatic Data Processing or Reynolds & Reynolds DMS packages, each of which is hosted by its respective vendors and accessed by Sonic dealers over a secure network connection.

Everdream also loads each PC with a software agent, which tracks the attached hardware including printers and other devices and licenses to the installed software. Knowing how many software licenses Sonic has at a given point in time virtually eliminates the possibility that the dealer will waste money on unnecessary licenses; Everdream says such tracking might save a company like Sonic $25,000 a year.

Next page: Remote and in control.

Remote and In Control


Remote, and In Control

When its time to update software, Everdream electronically distributes the new programs. Everdream says customers like Sonic might want updates on a quarterly basis. It estimates onsite software upgrades, including travel and labor, could cost a company like Sonic as much as $750 for each store visit. If those numbers bear out, electronic upgrades could save Sonic as much as $300,000 a year.

Additional savings come from automatic backups.

Everdream copies all data from a users PC, usually on a daily basis, to an Everdream server. Should a machine get lost or stolen, Everdream simply reloads all the applications and files on a new PC and sends it to the user. Boatman says that kind of service provides dealers with a level of support theyve never had before and can be a real lifesaver, as he learned firsthand. Last year, Boatman and a deputy had their computers stolen from their car during a business trip in Houston. The two contacted Everdream, which sent them new laptops loaded with software and their files. Boatman, who left Houston that day on a scheduled ski trip, says his new machine was at his lodge the next day.

Cynthia Doyle, a desktop-management expert at International Data Corp., says that if desktop management companies are to stay afloat, their services must be clearly better than what a company could provide on its own. No matter how good remote service is, its still remote. Its hard to replace face-to-face communication with an onsite service person.

But Sonics dealerships are too spread out to make that feasible or cost-effective.

Boatman says hes satisfied with Everdreams service and savings, though nothings perfect. One hiccup was Everdreams decision to relocate a support center to Costa Rica in July, which resulted in some communications problems. Even when dealers connected to the desk properly, they had trouble communicating with personnel on the help line.

Some of the help-desk staff spoke English with a thick accent. "There were some language issues that popped up," admits Duke Prestridge, a program executive at Everdream.

But Boatman says Everdream has been quick to address problems. For example, he and his deputies can now personally interview and approve the Costa Rican personnel assigned to the Sonic account.

Everdream says calls from Sonic to the help desk are picked up in less than 15 seconds and that its been able to handle 80% of Sonics problems on the first call.

With Everdream, Sonic took a chance. Privately held, Everdream is relatively small, with a business that handles about 50,000 PCs. At $55 per monthly subscription, that would put annual revenue at roughly $33 million. Customers include real-estate firm Carr America and Federal Express.

Boatman says Sonic prefers to do business with big, prominent companies. But after meeting with Everdreams managers, including Chief Executive Officer Gary Griffiths, taking a peek at the companys finances, and getting the right terms, Boatman and other Sonic executives were convinced to give Everdream a try. "Some of it was Gary, but most of all because they had the lower cost model," Boatman says.

Sonic included provisions in the contract to safeguard against Everdream hitting hard times. For instance, Sonic retains ownership of its hardware and software. If Everdream, for some reason, becomes insolvent, Sonic doesnt have to worry about what might happen to its systems.

Boatmans next move: eliminating his PC costs altogether. Next year, he will start moving users to terminals with Citrix Systems software. With a Citrix box, applications are stored at a central server and users access them over the Web. "Eventually," he says, "well have what I call disposable appliances."

If a Citrix terminal breaks down, Boatman says, all the user has to do is unplug the device and send it to a repair depot or, if the unit is outdated or beyond repair, to an approved disposal company. Hell then send out a new terminal. Users will hook up the Citrix device to the Internet with one cable, plug the power cord into an outlet, and go.

In the Citrix model, Everdreams role would diminish. But Boatman says hes probably going to need some help managing the distribution of the Citrix boxes, so Everdream will likely have a role to play.

Either way, the use of Everdreams service or Citrix terminals takes technical issues off Sonics hands. Says Boatman: "It lets us focus on selling cars instead of fixing PCs."

Next page: The Sonic Automotive Base Case.

Sonic Automotive Base Case


Sonic Automotive Base Case

Headquarters: 5401 E. Independence Blvd., Charlotte, NC 28212

Phone: (704) 566-2400

Business: Sells cars and insurance, and offers repairs and maintenance services.

Chief Information Officer: David Boatman

Financials in 2002: Revenue of $7.1 billion; net income of $108.5 million, or a net margin of 1.5%.

Challenges: Simplify computing operations of a diverse, expanding network of auto dealers; improve technical support and reduce onsite visits.

Baseline Goals:

 

  • Expand dealer network to boost revenue, which rose to $7.1 billion in 2002 from $5.9 billion in 2001.

     

     

  • Increase product diversity. Parts and service accounted for 12.8% of revenue in 2002, compared with 11.5% in 2000; finance and insurance accounted for 2.9% in 2002, compared with 2.8% in 2000.

     

     

  • Keep a lid on expenses. Selling, general and administrative costs rose just slightly, to $847.2 million (11.9% of sales) in 2002 from $680.1 million (11.5% of sales) in 2001.

     

  • Rocket Fuel