Article

How to Prioritize Your IT Budget

You must assess your current needs and define your business objectives to avoid overspending on hardware or underequipping your dealership.

February 2018, Auto Dealer Today - Feature

by Erik Nachbahr

Photo by grover_net via Flickr
Photo by grover_net via Flickr

Somewhere in your 2018 budget is a line item for information technology (IT). How are you deciding what to spend on your dealership’s IT infrastructure next year? Will you (a) ballpark an amount based on what you spent in 2017, deciding in a reactionary style — meaning that, if something breaks, you’ll fix it or buy new — or (b) strategically plan an IT budget based on your organizational objectives?

If you answered “b,” congratulations! Dealers with an IT strategy tend to spend less on, and have fewer problems with, their computer networks, internet connections, security, wireless and phone systems.

Unfortunately, I know there are many dealers out there who still spend their IT budgets inefficiently. Most dealership computer networks have been pieced together over the years without a strategy, which leads to problems like equipment incompatibility, security holes and inadequate bandwidth.

As a result of these problems, you may spend too much money on unnecessary services and equipment, and too many vendors. Spending in a reactive manner means you’re not spending proactively on the necessary infrastructure to support mission-critical applications within your dealership.

Your IT budget should be prioritized based on the following questions. First, are your current needs being met? Second, what are your business objectives next year and in the future?

Priority No. 1: Assess Your Current Needs.

Your first priority is to support your employees so they can do their jobs as quickly and efficiently as possible. I would estimate less than a third of dealerships have an IT network that falls into this category.

Network and internet outages, phone system outages, slow internet connections and outdated equipment can significantly hamper employee productivity and morale. The four areas your budget should address are:

• Refresh PCs. The top performance bottleneck we see at dealerships, by a wide margin, is outdated PCs. It’s virtually impossible for an employee to be productive using a computer that is four or five years old. PCs that old simply don’t have the processing capacity to support today’s software applications, and they may present a security risk.

By year’s end, take an inventory of all PCs in your dealership and record how old they are. Plan to phase out and replace all PCs older than four years by the end of 2018. Repeat this task every year. A new, basic computer costs less than $1,000. Over four years, that breaks down to about $20 per month, per employee. It’s a tiny investment that delivers big returns.

• Increase wireless bandwidth. Do you know how many enterprise-grade wireless access points your dealership has? Most dealers don’t, but I strongly believe this is something that every dealer needs to have at least a basic understanding of.

In recent years, there has been an explosive growth in the number of connected devices that depend on your IT network to function. Phones, mobile tablets, diagnostic tools in service — even wireless printers and coffeemakers — all require bandwidth. Many times, when employees complain about slow internet, they are actually complaining about inadequate wireless capacity.

The vast majority of dealerships don’t have enough Wi-Fi in their dealerships to support their current needs. The problem is so prevalent that some OEMs are beginning to mandate wireless bandwidth requirements, especially in the service department. If you’re not sure how much bandwidth you should have, get an assessment done.

• Re-evaluate carrier services. Historically, many dealers have looked at their internet service and asked, “What is the cheapest way to accomplish this?” Many dealers still opt for their carriers’ “small business”-grade internet service, which is woefully inadequate for a dealership’s needs. Every single dealership today needs enterprise-level internet service provided via fiber optics. No exceptions.

Whatever it costs, it’s a small price to pay considering that your entire business depends upon how well your internet is functioning. Think about your DMS, CRM, banking and credit bureau access, email, OEM communications, security cameras and everything else in your dealership that’s connected to the internet.

That’s why, in addition to superfast internet, you also need resilient internet. Be sure to budget for a second internet connection from another provider. One day without internet costs thousands of dollars in gross, so again, it’s a small price to pay.

Additionally, on a yearly basis, review service contracts with both your internet and phone carriers. If you haven’t done it lately, you’re probably spending too much. Dealers often discover they are paying for lines and equipment they no longer use. Carriers will also give better deals if you do your research and find out what other carriers are charging for your current service levels.

• Increase security. Network security requires a multi-layered approach that includes software solutions, best practices, appropriate insurance coverage and employee training. The number of dealerships being targeted and attacked by cyberthieves increases every year.

To protect against these threats, ensure that your dealership has the following defenses in place:

  • Intrusion prevention system (IPS)
  • Anti-virus software
  • Email spam filter
  • Centralized administrative controls
  • Web filter to control where employees go on the internet
  • Cyberliability insurance

Additionally, ensure your budget allows for the following best practices:

  • Perform security updates, a.k.a. “patches,” on a regular basis
  • Restrict local administrative access on employees’ PCs
  • Implement a 90-day password change policy
  • Confirm all wire transfers verbally
  • Backup retention greater than 90 days

Once you’ve allocated your budget to address your current needs, it’s time to plan for the future.

Priority No. 2: Define Your Business Objectives.

What are your business goals for next year and beyond? Write down what your primary objective is as a business, and write down a goal for each department in your dealership.

Do any of these goals involve implementing a new technology of any kind, such as mobile tablets in your service department? Do you want to improve the website experience for your customers? Perhaps you’re looking for a way to reduce employee travel between stores, so you’re considering a videoconferencing system.

One thing many dealers don’t account for when they consider a new technology or process change is the necessary IT changes. Software vendors may purposely avoid this subject during their sales process. Only after you sign on the dotted line do you discover that this whiz-bang new software solution requires half a million dollars in IT upgrades.

If any of your department managers are asking for new technology solutions in 2018, make sure they do their due diligence when it comes to finding out the necessary IT upgrades that need to be made.

The good news for dealers is that proactively planning your IT budget does not necessarily require an increase in spending. In the majority of cases, a re-allocation of funds results in the same or even a reduction in spending. Significant savings are often realized through a consolidation of vendors and elimination of unnecessary service and equipment expenditures.

Happy budgeting!

Erik Nachbahr is the founder of Helion Automotive Technologies and has expertise in transforming dealer networks into vehicles for mission-critical applications. Email him at erik.nachbahr@bobit.com.

Comment

  1. 1. Christina Shirk [ March 12, 2018 @ 04:57PM ]

    Really great article. Well written.

    --
    Christina
    dynamomarketinggroup.com

 

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