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General Motors Awards
Major IT Contract to Quorum Information Technologies Inc.
Auto Dealership Mgmt. Software
(TSX V: QIS)
Quorum Information Technologies Inc.
Suite 200, 6715-8 Street N.E.
Calgary, AB, T2E 7H7
Telephone: 403 777 0035 Ext: 110
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
February 9, 2006
Mr. Marks grew up in an automotive dealership environment working in his familys
business for many years. He went on to pursue higher education and received a Bachelor of
Management (with Distinction) from the University of Lethbridge in 1988. In 1991, Mr.
Marks received his Chartered Accountants designation after articling with Deloitte
and Touche in Calgary.
Mr. Marks continued to work with Deloitte & Touche in the Management Consulting group
in the systems development area, building world-class ERP solutions for clients. From 1992
to 1995, Mr. Marks left Deloitte & Touche to begin consulting on computer development,
implementation, and system selection projects for various clients. Since 1996, Mr. Marks
has devoted all his time to building Quorum Information Technologies Inc., and
XSellerator, its proprietary software product for the automotive dealership market.
Quorum is a North American company with a primary focus on developing, marketing,
implementing and supporting proprietary software products for the automotive retail
vertical. Its key products are DISTRIBUTOR, a Windows and Web based network
solution, and XSELLERATOR, a dealership management software program which combines
to form a Dealership and Customer Relationship Management System (DMS) for the North
American automotive dealership market. What makes this software so exciting and different
from the competition is its current technology. The same Windows-based technology used by
every other industry is finally available for automotive dealerships. XSELLERATOR isn't
just a management system; it's a more efficient, productive and profitable way for
dealerships to do business.
Currently, Quorum has 17% of the GM dealership market in Canada, making it the third
largest Dealership System Provider for GM in Canada, and has recently been named by GM as
one of two providers of the GM Integrated Dealer Management System (IDMS) for North
America. The Company has grown rapidly in the past five years, expanding from 15 new
customers in 2000 to 155 new dealership customers across North America to date. Quorum has
been recognized by the Deloitte & Touche Technology Fast 500 as one of the fastest
growing technology companies in North America.
Quorum's success comes from developing, marketing,
implementing and supporting the best DMS System, products and services for automotive
dealerships, and from their commitment to total customer satisfaction. Quorum has
expertise in all aspects of Dealership and Customer Relationship Management, and employs
the best people in the business to deliver it.
CEOCFO: Mr. Marks, there have been some very positive changes
at Quorum recently; please tell us what is happening?
Mr. Marks: On January 3, 2006, General Motors announced
that Quorum was awarded, along with Reynolds & Reynolds (REY: NYSE), to be one of two
providers of GMs Integrated Dealer Management System (IDMS) throughout North
America. Under the contract, Quorums XSellerator software will be branded GM DMS
software. GM is now out there talking to the dealers about the IDMS program, and they are
promoting it across their entire dealership body of over 8,500 dealerships across North
America. With this backing from GM, we expect to see significant growth in the adoption
rate of XSellerator software, and as a result, significant earnings growth for our company
over the next few years.
CEOCFO: Are you competing with Reynolds & Reynolds?
Mr. Marks: As an IDMS provider, we will continue to
compete with Reynolds & Reynolds for individual dealerships, but we feel dealerships
are being offered two clear and distinct choices, with the Quorum choice being the modern
and technologically advanced DMS solution. We also see Automatic Data Processing (ADP:
NYSE) to continue to be a competitor in the GM space, however, since they are not a part
of IDMS we believe we have a clear competitive advantage in both technology and OEM
support over ADP.
CEOCFO: How influential is GM with their dealerships, given
GMs recent problems?
Mr. Marks: That is a good question. It is like many
franchise head office relationships, in that there are some franchise dealerships that
will operate in closer alignment with GM, and others who will choose their own path. We
believe that being named an IDMS provider by GM is a green light to a dealer to choose
Quorums solution with confidence with the knowledge GM has performed the extensive
due diligence on our product, they have negotiated the best value deal for its dealers on
price, and GM is standing behind the solution as a good choice for its dealers.
CEOCFO: Could you explain more what the Integrated Dealership
Management System means?
Mr. Marks: For GM it is about providing its dealers
with choice and value and facilitating the adoption of new technology and innovation in
the Dealer Management System (DMS) space. The Integrated part is about
bringing tighter business-to-business integration between GM and its dealers so both the
dealers and GM can conduct business more effectively and efficiently. Quorum has built a
extensive, advanced integration with General Motors in Canada, and now we are going to
leverage from that work to build integration to GM new global systems. Once implemented,
XSellerator will allow both the dealerships and GM to be a lot more efficient. We are not
stopping there; Quorum will work even closer with General Motors strategically to bring
new integration and functionality to the market. This allows us insight to align our
technology strategy with GM and with the opportunity to provide dealers with one
integrated, seamless business process for their sales, service and parts operations.
Keep in mind that dealers will be buying a solution
directly from GM and signing a contract directly with GM providing them an extra layer of
comfort knowing GM will back-stop the solution and insure that DMS providers meet all the
contractual commitments in their agreements.
CEOCFO: If a dealership is looking to sign, how do you
present yourselves to the individual dealership?
Mr. Marks: We will present ourselves as an IDMS
provider on behalf of GM. We will still demo the product and explain the incredible
benefits the dealer can achieve through the use of XSellerator. As well, we will present
the quote for the software, hardware and services to be provided to the dealer, and
deliver on behalf of GM, the standard GM dealer contract for IDMS. So the contracts
are all with GM and then we work on behalf of General Motors to deliver IDMS.
CEOCFO: How does that work out for you from a revenue
Mr. Marks: We had to negotiate pricing with GM, and
because of GMs buying power the dealerships will access a discounted deal compared
to what our current market rate would be. This is another plus for the dealership; they
are basically getting a bulk buy deal for their individual dealership. As well, there is
standard pricing for every size of dealership based on users accessing the IDMS software
so everyone participating can be sure of getting a fair price
CEOCFO: When does GM start pounding the drum?
Mr. Marks: They are starting right now; if you go into
the automotive space and you go to Wards Automotive, or Automotive News, there are
articles now that are starting to appear around the IDMS program. We have the North
American Auto Dealers Association meeting coming up in early February, in Orlando, and
thousands of dealers will attend this conference. GM will be promoting the IDMS program at
this conference; they have sent messages out to their field staff and messages out to all
of their dealers. Hence, the GM marketing machine is in gear, pushing the message out to
everybody. GM has many different touch points into their dealerships including;
newsletters, e-mail, and a field organization of area representatives who are visiting the
dealerships helping them from a sales, service, and parts perspective. Therefore, GM has a
lot of opportunities to talk to their dealerships about the IDMS program and explain its
CEOCFO: What are the challenges now that GM is in play? Are
you equipped for the increased business and hopefully other entities looking at you as
Mr. Marks: Quorum has been involved in the due
diligence and contract negotiation process put in place by GM with respect to the IDMS
contract for over 15 months. During that time, in anticipation that Quorum may be awarded
the IDMS contract, Quorum took many steps to meet the challenges that delivery on this
contract would present. Therefore, we have ramped up and streamlined our implementation
capabilities for scalability; we increased our software support services, and increased
our development bandwidth. We took as many of these steps pre-award as we reasonably could
and now that the contract has been awarded, we are increasing our expansion in all the
areas mentioned. However, there are limits to our pace of growth and we have been very
careful with General Motors to set the expectation that we can only grow so fast. As a
consequence, GM looks at this as a longer-term initiative and we both want to grow the
IDMS program at a manageable pace. You will see us continually ramp-up our Dealer install
capacity per month. We expect 2006 will be a building year for us and we will complete
roughly 100 new dealership installations, and 2007 we expect to be able to install roughly
250 new dealerships.
CEOCFO: About how long does it take to implement the system
in a particular dealership?
Mr. Marks: For the average store which has
approximately 25 users, our optimal implementation runs a duration of roughly six weeks
and involves about 45 days of person effort with approximately 21 of those days being
onsite at the dealership in over the shoulder training. We have really
streamlined our process to find the right balance between utilizing web-based training and
support tools and having the right amount of human touch at the dealership for the
go live process. When we do take them live, we have three or four people
onsite for the live week and then one person will be back for a return visit. We have a
very efficient implementation model when you consider that we have 21 days onsite for a
dealership where we are completely replacing their key system for all departments. We
believe our model is very scalable as we ramp up to meet the demand.
CEOCFO: You have something major happening; please address
potential investors and why they should be interested in you right now?
Mr. Marks: We believe that Quorum has built the best
product available in the DMS marketplace today, and in our minds, GMs award to
Quorum of the IDMS contract for North America validates this. We are at 155 dealerships
today and there are 8,500 GM branded dealerships today in the North American marketplace.
The marketplace has absolutely just opened up for us and we believe through this contract
we have a clear path to become the third player, along with Reynolds and ADP in the DMS
marketplace. A watermark for our potential growth is to extrapolate what we have already
achieved in the GM Canada marketplace before IDMS. Quorum has a 17% market share of the GM
Canadian dealers; with GM support behind us, is there any reason why we should not achieve
a similar or greater market share throughout the North American GM dealership world, in a
reasonably short amount of time? We believe we are a very high growth story with GM
support behind us.
CEOCFO: In closing, what are some of the other opportunities
that have opened up for you?
Mr. Marks: Ive talked a lot about GM and IDMS,
but this contract also gives us the opportunity to work with other manufacturers in the
North American marketplace and specifically in the U.S. marketplace. There are a lot more
dealer groups and multi-franchise dealers in the US, so you are going to see Quorum work
with other OEMs and we are actually in the process of building out integration to
DaimlerChrysler (DCX) which should be completed by the end of Q1. We plan to pilot some
DCX stores in 2006 and be ready to market, sell, and install at full pace to DCX in 2007.
Weve got a lot of opportunities with other manufacturers to build out on this whole
integration model as well. If you look at the entire North American marketplace, there are
25,000 dealerships, so it is a big market and weve got lots of room to grow.
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