CIO Speak: Trends in IT spending and Multisourcing – key to sourcing success, Ken Brame,AutoZone

US Retail IT Spending Trends & Multi Sourcing

National Retail Federation/AMR Study

NASSCOMFebruary 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

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

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%

Retail Technology Investment Trends

© 2007 AMR Research, Inc. |

Capital Expenditures Breakdown

© 2007 AMR Research, Inc. |

Packaged Applications vs. In - House Development

Retail IT Labor Expenses

2006 = $477K2007 = $929K

Security and Compliance Categories of Spend

Agile Supply Networks

Product Development

On-Shelf Availability

Collaborative Data Management and Demand Intelligence

Consumer-Centric Merchandising

57% budgeted to improve in 2007E-Commerce

39% budgeted to improve in 2007Workforce and Task Management

65% budgeted to improve or replace in 2007

POS

Spending TrendSoftware Category

Store and Cross-Channel Operations Spending Trends

Store and Cross-Channel Operations Spending Trends


Product Development


Store and Cross-Channel Operations


Consumer – Centric Merchandise Spending Trends


50% budgeted to improve or replace in 2007Retail Planning

30% budgeted to improve or replace in 2007Lifecycle Pricing

55% budgeted to improve or replace in 2007Merchandise Management






Sourcing & Life Cycle Management Spending Trends


Product Development

40% budgeted to improve or implement in 2007

Sourcing and Product Lifecycle Mgmt





Supply Chain Networks Spending Trends


Product Development

45% budgeted to maintain in 2007Transportation Management

60% budgeted to improve or replace in 2007Warehouse Management





In – Store Systems Spending Trends


Product Development


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



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.

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 Environment65% 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

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

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

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%.

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.

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.

CIO Speak: Trends in IT spending and Multisourcing – key to sourcing success, Ken Brame,AutoZone

Economy & Finance

Transcript of CIO Speak: Trends in IT spending and Multisourcing – key to sourcing success, Ken Brame,AutoZone