US Retail IT Spending Trends & Multi Sourcing National Retail Federation/AMR Study NASSCOM February 14, 2008 Ken Brame Retired CIO for AutoZone Inc.

Agenda Source of Research Data on Spending Trends Retail Technology Spending Trends Trends in Out- Sourcing/Multi-Sourcing Longer Term Trends for IT Labor in the U.S. Other Outsourcing Trends

Source of Research Data on Spending Trends

Retail Technology Spending Trends

Trends in Out- Sourcing/Multi-Sourcing

Longer Term Trends for IT Labor in the U.S.

Other Outsourcing Trends

Study Background and Objectives Fourth annual report Sponsored by the NRF CIO Council -- data supplied directly from CIOs More than 62 retailers representing approximately $404B of annual revenue have taken the survey over the past three years

Fourth annual report

Sponsored by the NRF CIO Council -- data supplied directly from CIOs

More than 62 retailers representing approximately $404B of annual revenue have taken the survey over the past three years

Respondent Demographics Study compares IT actual spending for 2006 with budgets for 2007 Input from 23 retail CIOs $90B in annual revenue represented Average annual revenue = $3.9B Large footprint of retail locations 2006 IT budget as a % of revenue = 1.9%

Study compares IT actual spending for 2006 with budgets for 2007

Input from 23 retail CIOs

$90B in annual revenue represented

Average annual revenue = $3.9B

Large footprint of retail locations

2006 IT budget as a % of revenue = 1.9%

Retail Technology Investment Trends

© 2007 AMR Research, Inc. | Page Capital Expenditures Breakdown

Packaged Applications vs. In - House Development © 2007 AMR Research, Inc. | Page

Retail IT Labor Expenses

2006 = $477K 2007 = $929K Security and Compliance Categories of Spend

Agile Supply Networks Product Development On-Shelf Availability Collaborative Data Management and Demand Intelligence Consumer-Centric Merchandising Store and Cross-Channel Operations Spending Trends Store and Cross-Channel Operations Spending Trends 57% budgeted to improve in 2007 E-Commerce 39% budgeted to improve in 2007 Workforce and Task Management 65% budgeted to improve or replace in 2007 POS Spending Trend Software Category

Consumer – Centric Merchandise Spending Trends Agile Supply Networks Product Development On-Shelf Availability Store and Cross-Channel Operations Collaborative Data Management and Demand Intelligence Consumer-Centric Merchandising 50% budgeted to improve or replace in 2007 Retail Planning 30% budgeted to improve or replace in 2007 Lifecycle Pricing 55% budgeted to improve or replace in 2007 Merchandise Management Spending Trend Software Category

Sourcing & Life Cycle Management Spending Trends Agile Supply Networks On-Shelf Availability Store and Cross-Channel Operations Collaborative Data Management and Demand Intelligence Consumer-Centric Merchandising Product Development 40% budgeted to improve or implement in 2007 Sourcing and Product Lifecycle Mgmt Spending Trend Software Category

Supply Chain Networks Spending Trends On-Shelf Availability Store and Cross-Channel Operations Collaborative Data Management and Demand Intelligence Consumer-Centric Merchandising Product Development Agile Supply Networks 45% budgeted to maintain in 2007 Transportation Management 60% budgeted to improve or replace in 2007 Warehouse Management Spending Trend Software Category

In – Store Systems Spending Trends Store and Cross-Channel Operations Collaborative Data Management and Demand Intelligence Consumer-Centric Merchandising Product Development Agile Supply Networks On-Shelf Availability 50% budgeted to improve or implement in 2007 Store-Level Demand Replenishment 25% budgeted to improve or replace in 2007 Store Receiving 30% budgeted to improve, replace, or implement in 2007 Inventory Management Spending Trend Software Category

Trends in Multi-Sourcing Most packaged software solution providers now have development staff or outsourced arrangements in India and other offshore locations. Many larger U.S. Retailers have outsourced development resources offshore Smaller U.S. Retailers are still primarily relying on in-house and domestic software consultants. They also are more reliant on packaged software solutions.

Most packaged software solution providers now have development staff or outsourced arrangements in India and other offshore locations.

Many larger U.S. Retailers have outsourced development resources offshore

Smaller U.S. Retailers are still primarily relying on in-house and domestic software consultants. They also are more reliant on packaged software solutions.

AutoZone’s Software Development Environment 65% in-house development at Corporate Headquarters 18% - our employees in Mexico 17% - outsourced development to partner India AutoZone’s Call Center Environment 65% of our employees are in Mexico 35% of our employees are in U.S.

65% in-house development at Corporate Headquarters

18% - our employees in Mexico

17% - outsourced development to partner India

AutoZone’s Call Center Environment

65% of our employees are in Mexico

35% of our employees are in U.S.

Examples of Successful Projects Loyalty Card Shelf Tag Extension of Mainframe Life Support of our Store Systems

Loyalty Card

Shelf Tag

Extension of Mainframe Life

Support of our Store Systems

What makes our partnership with MphasiS successful Utilize both on site and remote staffing – 3 to 1 ratio Flexibility – Core and flexible staffing Tiered Pricing Stability of staffing, low turnover rates Understanding of both business and projects Make sure their work is appreciated Long term relationship Good Communication

Utilize both on site and remote staffing – 3 to 1 ratio

Flexibility – Core and flexible staffing

Tiered Pricing

Stability of staffing, low turnover rates

Understanding of both business and projects

Make sure their work is appreciated

Long term relationship

Good Communication

Challenges to making partnerships work Distance and time zone differences make communications harder Cultural differences Rapid growth in the number of resources Accents and terminology – Southern US vs. Indian

Distance and time zone differences make communications harder

Cultural differences

Rapid growth in the number of resources

Accents and terminology – Southern US vs. Indian

Longer Term Trends in U.S. – Good News for You Enrollment in Computer Science / MIS Courses at universities is down significantly since 2000. The number of IT Jobs in the U.S. is higher today than at the height of the DOT Com Boom. The “Baby-boomer” generation will begin retiring in larger numbers over the next several years. Shortages of IT staff over the next 5 years is projected to be as much as 20% to 40%.

Enrollment in Computer Science / MIS Courses at universities is down significantly since 2000.

The number of IT Jobs in the U.S. is higher today than at the height of the DOT Com Boom.

The “Baby-boomer” generation will begin retiring in larger numbers over the next several years.

Shortages of IT staff over the next 5 years is projected to be as much as 20% to 40%.

Other Trends – The Bad News More companies are looking to China, Philippines, Eastern Europe, Mexico, etc. for outsourcing. Our experience in utilizing Call Center, QA and Software Development resources in Mexico has been very positive. Mexico offers advantages such as same time zones and easier travel to make training and communication much easier.

More companies are looking to China, Philippines, Eastern Europe, Mexico, etc. for outsourcing.

Our experience in utilizing Call Center, QA and Software Development resources in Mexico has been very positive.

Mexico offers advantages such as same time zones and easier travel to make training and communication much easier.

Summary There will be big opportunities for outsourcing to India over the next several years. Competition from other countries is increasing and will continue to increase.

There will be big opportunities for outsourcing to India over the next several years.

Competition from other countries is increasing and will continue to increase.