Archived Interviews with:
Quorum
Information Technologies Inc.
January 13, 2005
April 21, 2005
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Quorum
Information Technologies Inc. is bringing an incredible new value equation to auto
manufacturers and their dealerships through their DMS XSELLERATOR™ product
Technology
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
Maury Marks
President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
November 17, 2005
BIO:
Mr. Marks grew up in an automotive dealership environment working in his family’s
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 Accountant’s designation after articling with
Deloitte and Touche in Calgary.
Mr. Marks continued to work with Deloitte and 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.
Company Profile:
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 16% of the GM dealership market in Canada, making it the 3rd largest
Dealership System Provider for GM in Canada. The Company has grown rapidly in the past
five years, expanding from 15 new customers in 2000 to 145 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.
CEOCFOinterviews.: Mr. Marks, how has your GM Certification
helped in the US side of Quorum?
Mr. Marks: “We have generated lots of activity and
interest in the U.S. and we are just starting to develop awareness around our brand name.
The U.S. market has huge potential for us and is currently dominated by two big players,
Automatic Data Processing, Inc., ADP (NYSE: ADP), and Reynolds & Reynolds (NYSE: REY).
Both are billion dollar per year run rate companies which control 75% of the overall
marketplace. Therefore, building market awareness is critical to our future success. When
we mention to dealerships that Quorum has made it through the certification process with
General Motors Corporation (NYSE: GM), their perspective is, ‘Wow, that must have
been a mountain to climb.’ Well it was. We are very focused on building awareness
into the marketplace in specific regions and building excitement around that. So that is
step one, but probably more exciting for us is the work that we have been doing with GM
U.S. and working on positioning ourselves as being a big market player with GM U.S.
support - that has consumed a huge amount of our time.”
CEOCFO: Can you elaborate on what is involved?
Mr. Marks: “I don’t know that I can talk directly
about that, given that I’m under non-disclosure agreements, but I can talk around the
peripheral of it. If you look at what we are doing in Canada, we are GM Canada’s
integration partner and that has been our absolute focus. It is one of the major reasons
that we are now the third largest provider, next to ADP and Reynolds, in the Canadian
marketplace. We have garnered success by partnering with the OEM, and together we have
built the business-to-business integration model between the manufacturer and the
dealership that is the clear leader in the industry. There is an enormous opportunity from
a business-to-business integration perspective in automotive retail to build integration
links back and forth between the manufacturers and their point of sale retail outlets to
streamline the whole retail operation. Further, all the stakeholders realize this; the
dealers understand this, the manufacturers understand this; it is just that nobody has
come in and been the catalyst to build these pieces. And, Reynolds and ADP have proven
they are unwilling or incapable of bringing it to the industry. Therefore, we have to take
this integration model and the great relationship we have built with GM Canada and export
it South of the 49th parallel to Detroit. We are excited about the possibility
of working with General Motors Corporation and we are also in discussions with other
OEM’s. We have gained a solid foot-hold in the marketplace with our U.S. based
customers, evidenced by what we have built and rolled out to them.”
CEOCFO: Where do you stand now in the number of dealerships
using your XSELLERATOR™?
Mr. Marks: “We now service and support over 145
dealerships across North America, and we are continuing to bring on individual
dealerships. However, to gain real traction in the marketplace we believe a much more
efficient way would be to negotiate a deal at the manufacturer level and have the market
awareness push down from the manufacturer level.”
CEOCFO: Focusing on the highpoints, why should dealerships
and GM want to use the XSELLERATOR™?
Mr. Marks: “As mentioned previously, from the
dealers’ side, we compete against two large organizations, ADP and Reynolds &
Reynolds, both of whom deliver 15 year old technology and are widely known in the
marketplace. In the past both have tried to bring a variation of next generation windows
based applications to the marketplace and both have either shelved or written off the
applications. Reynolds & Reynolds just announced the write-off of over $90 million
from shelving their “next generation” product. The incumbents cannot seem
to get things done technologically, but we also believe it is a cultural chasm they cannot
cross. We bring an entirely new model to the dealerships; it is new technology and an
integrated system where all departments work together, be it sales, service, parts or
accounting. We take a customer relations focus instead of a departmental silo based focus
by orienting the dealers around their customers and imbedding CRM within our product.
Hence, we bring a whole new level of excitement in terms of how they can do business; more
efficiently, with more customer focus - this is a big change for them.”
CEOCFO: Is every dealership ready for this?
Mr. Marks: “No they are not and for some dealerships it
can take a fair bit of time before they actually realize the benefit. Some dealerships get
it right away. These dealerships have been looking for the tools that will allow them to
be more customer centric. The automotive industry is very competitive; to be successful
dealerships are finding that they must move in this direction to survive. In
addition, we see our customers as more than just customers; we see them as partners who
are helping to shape the future and direction of our XSELLERATOR product. We are
continually modifying our software and building and releasing new versions with the
dealership’s ideas added in. In our view, XSELLERATOR is the DMS software by
the dealerships for dealerships.”
CEOCFO: Do customers have to pay for the new versions?
Mr. Marks: “Like all DMS software, Dealerships pay for
monthly support and maintenance. However, unlike our main competitors, new versions of
XSellerator are included in the support payments that our customers make. All our
customers are on the same version of the software, which not only benefits them, but it
benefits us by allowing us to be more efficient and effective in the way we support the
software. As a result, we are able to bring all of this to our customers for less
than what they have been paying to ADP or Reynolds and Reynolds - we bring considerable
value to the equation. In addition, what we’ve also added to our value equation is
the most advanced integration through to the manufacturer. Over the last two years, we
have built 7 different integration points between us and GM Canada that they have never
had before. Let me give you some tangible examples. One example is Electronic Vehicle
Invoicing - we have built integration between the invoice that the dealership gets for
each car that lands in their lot, so that it is automatically dropped into their
dealership environment from the manufacturer, and they now have that electronic copy in
front of the sales manager at any point-in-time. Therefore, if the consumer wants to see
the options they can flip the screen around and say, ‘hey, here they are’. This
is because the dealership has all of the information downloaded into their XSELLERATOR
system. Another example is Vehicle Delivery Reporting. If a customer orders a vehicle at
the dealership and they want to know where it is, Quorum has built the integration through
to the GM order bank so that the dealership knows where all of the cars that have been
special ordered for customers are at any point-in-time.
A further example is GM Lead Integration. If, for example, a customer goes to a GM car
show, and leaves their name, Quorum has built the functionality to electronically
integrate the lead that comes from GM in to the XSELLERATOR system at the dealership.
Dealerships now can track and manage these leads electronically and report back results to
the manufacturer. Dealerships that do this effectively convert more leads into
sales, which is what both the dealership and the manufacturer want. These are only a few
of the examples of some of the business-to-business integration points that we have built.
They are very helpful to the dealerships, but the manufacturer also benefits because the
paper chase that used to go on between the manufacturer and the dealership is eliminated.
This reduces errors and transaction costs, but more importantly can increase conversions
and sales.
We are currently working on a project with GM Canada, which will take integration to a new
level. When completed this integration will enable both the dealership’s customer
data and the manufacturer’s stored customer data to be automatically verified and
updated against each other, in real-time, each time a customer is touched by either the
dealership or the manufacturer. This would facilitate effective marketing by the
manufacturer to an individual customer, and would assist the dealership in knowing exactly
what is going on with that customer for follow up purposes. Together the dealer and the
manufacturer will be able to take a coordinated, targeted approach to the marketplace,
instead of the very expensive shotgun approach, which is what is going on today. I could
go on for an hour on this topic alone; we are bringing so many efficiencies to both the
dealerships and the manufacturers. Further, it is not only efficiencies, but we offer a
whole new way of doing business by being customer centric. It is really exciting and we
strongly believe in what we are building.”
CEOCFO: Has the auto industry finally realized the need to be
customer centric?
Mr. Marks: “I think that if you went to the
manufacturers and asked them they would admit that they know it in their bones and if you
went to the dealers they also know it in their bones. However, not everyone will be ready
to make the change - those who do will be the winners in this very competitive business.
Quorum’s XSELLERATOR product is poised to make it happen for them. Looking back a few
years ago, there was considerable news discussing how the manufacturers were investing
hundreds of millions of dollars in technology to make the supply side of their business
more efficient. GM, Toyota Motor Corporation (NYSE: TM), DaimlerChrysler (NYSE: DCX) or
Ford Motor Company (NYSE: F) naturally focused on the costs of production first. Now
their focus is ‘How do we make the retail chain more efficient and customer
centric?’ The manufacturers, and in particular GM, have taken ownership of this issue
and are working with their dealers to figure out the best solutions. We believe
Quorum can play a large role in what they are ultimately trying to achieve. That being
said, it will be more difficult to implement change on the retail side because the dealers
are independent entrepreneurs who do things their own way. So yes, the manufacturers have
a lot of influence, but the choice of DMS software is the dealership’s to make.”
CEOCFO: On the other hand, if you have a system that will
save them time and make them money, they should sit-up and pay attention.
Mr. Marks: “Absolutely, and what we are selling works
very well for those who appreciate its extensive and revolutionary capabilities. We have a
current customer base of over 100 former ADP and Reynolds customers who would never go
back! We bring an incredible value equation through to the dealership, as everyone has
been on these old antiquated systems for years, but converting the masses one dealership
at a time is a slow process. This is why we believe our best strategy is to focus on the
manufacturers and, with their help, try to bring the paradigm shift to the industry –
we will gain some real momentum from that. We think that we are pursuing a really good
strategy, working on the manufacturer side of the equation, which will eventually pay-off,
and we hope to have some exciting news to announce early in the New Year (2006).”
CEOCFO: Tell us about the current financial picture of
Quorum.
Mr. Marks: “We continue to invest capital in both our
product and our company to prepare ourselves for some larger transactions which we believe
will drive many more customers to XSELLERATOR. As such, we currently are burning cash, but
at a rate we have anticipated and can manage as we get to where we need to go. We have
access to additional sources of capital as needed and our current investor base is a very
patient and committed group. In fact, many of our shareholders are our dealer customers;
roughly 20% of our shares are held by that group. This confirms that we have a product out
in the marketplace that really works. Interestingly, the largest group of shareholders
come from our board of directors or insiders, and other business associates. This group
owns over 50% of our stock. To date we have not made a concerted effort on the IR
(Investor Relations) side; our focus has been on executing our business plan and we have
been pursuing some larger deals. Upon execution, we are poised to raise significant new
capital and considerably broaden our shareholder base.”
CEOCFO: In closing, what should potential investors expect
from Quorum over the next couple of years?
Mr. Marks: “Our focus is to pursue transactions at the
manufacturer level, and concurrently enter into an arrangement with an integration partner
that would give us a lot more scalability. That is our primary focus, but after having
stated that, we really believe that organically we can continue to grow and become
profitable. To allow us to grow faster, we would like to sign a few big deals to
accelerate our whole growth plan. These larger deals have a longer sales cycle; we’ve
been working on them for quite some time and we believe we are getting closer. Stay tuned
because 2006 should be the year the automotive industry jumps on the XSELLERATOR.”
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