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IT Insight: The future for ADP/Kerridge

The acquisition of Kerridge by big rival ADP at the end of last year came as a surprise to many in the industry and the merging of two of the largest DMS providers will no doubt have implications for dealers and competitors alike.

On a worldwide context, the £173m deal increases ADP’s geographic coverage to 41 countries on four continents from 14 countries on two continents, and boosts turnover to an estimated £5.34bn.

The move is part of ADP’s ongoing expansion plans. It is increasingly finding that customers and vehicle manufacturer partners are demanding comprehensive systems with a global capability, and this has consequences for the UK market.

“With the introduction of our expanded services and software portfolio, we can offer a broader choice to the UK market,” says Vittorio Bozza, vice president sales and marketing Europe for ADP.

“We know from experience that our layered applications will have particular appeal, as they were conceived at the outset to offer real measurable business benefits, which is so important, especially during the tough trading conditions in the market at present,” he adds.

Using the strengths of both companies

The Kerridge heritage was a key attraction for ADP. The company was founded in 1976 and employs more than 1,300 people worldwide. Over the past 30 years it has fostered strong and lasting relationships with customers.

“We will continue to sell Kerridge’s dealer management systems. Its products have an enviable record, especially here in the UK and mainland Europe, but what few people realize is the range of the other markets where they are installed, such as China, Japan, Australia, the Middle East and the Caribbean,” says Bozza.

The acquisition of Kerridge addresses the geographic gaps in ADP’s international operations and means it can offer a wider range of software products. The integration of Kerridge’s highly skilled workforce and experienced management teams will also help the business to fulfil its growth ambitions.

Combined ADP and Kerridge teams are currently working on defining an “integration strategy” with the objective of taking the best working practices of both organizations and harmonizing the approach across the European businesses. The process has already begun and is likely to run for some months.

The spirit of partnership

“Once we have the foundations of the new business in place, we know we can go to the market with a very compelling proposition. ADP’s strategic objectives are to develop class-leading solutions that have a measurable return on investment for our customers,” says Bozza. “We will do this by watching closely the evolving demands of the marketplace, listening to our customers and manufacturer partners, and approaching all our business dealings in the spirit of a true partnership.

This will be welcomed by dealers, some of which believe Kerridge is too expensive. The company is well represented with larger franchised dealers and has relationships with 15 of the top 20 AM100 listed dealer groups. Its Autoline DMS is also approved by several manufacturers including Renault and Nissan and will now run alongside ADP’s own Optima21 DMS. Eventually, the company and all its products will be rebranded as ADP.

#AM_ART_SPLIT# A rebranding exercise

“We wish to be very clear on this point. Our brand name is ADP, although we are planning to introduce the ADP brand to the Kerridge markets in a transitional manner. Clearly, we need time to allow the loyal customers of both organizations to familiarize themselves with the brand values of the combined company, so it is impossible to put a time frame on the rebranding exercise in these early days,” says Bozza.

In terms of the competition, this rebranding is key. In the ever-changing DMS market, Bozza believes that stability and consistency are key, and having a strong global image that customers can easily identify with will no doubt be a great benefit.

“We certainly respect our competitors, but it’s clear to everyone that we are in an ever changing market place and our competitors of today may not necessarily be our competitors for the future,” says Bozza.

He believes that ADP’s traditional DMS competitors will find conditions becoming tougher and that it will see increasing competition from the global ERP (enterprise resource planning) providers that have historically shied away from the retail end of the industry. This would mean national DMS providers coming under increasing development pressure as the demands for integrated solutions increases.

The dealers’ principal suppliers, the vehicle manufacturers, are global organizations and they will prefer to exploit economies of scale with IT suppliers in the same way they have successfully done with component suppliers and the like.

“There can be no doubt that the motor industry is going through a difficult time with too many new vehicles chasing too few customers, but our willingness to listen to the demands of our users and developing class leading products will ensure we remain focused on staying the number one player. The key will be maintaining the focus on client. The customer comes first,” adds Bozza.

A chance for the opposition?

The acquisition of Kerridge by ADP was met, perhaps unsurprisingly, with a degree of scepticism by other DMS suppliers in the UK market. The competition seems unsure what strategy ADP will employ in terms Kerridge and what will happen to its current system offering.

“My first impression is that the market is confused by this merger, particularly as ADP paid a very full price and will, therefore, be looking to take considerable costs out of their acquisition,“ says David Hayward, managing director of MMI Automotive.

“The strategy is unclear. While there are synergies between the two there are also areas where they provide very similar products. For instance, only Kerridge has an importer system but both offer a DMS. The merged entity will have a better geographic spread but I believe there is a confusing product range and there’s also the question of manufacturers’ endorse-ments. With the vendor pool reducing, the chance of vendor monopolies increases.

Hayward believes that those most affected by the deal are the dealers planning to upgrade their DMS and are considering ADP or Kerridge. This is where he believes the competition could take advantage.

“These dealers will find it difficult to decide what to do: should they stay with their existing supplier, consider ADP/Kerridge or go elsewhere?

“This merger will increase the opportunities for all the other vendors in the market as customers look for a more certain future,” he adds.

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