Capturing IT TSS Spend in the Retail / eCommerce Space in 2014 Leslie Hand, Research Director, IDC Retail Insights A Webcast Sponsored by Avnet

Objectives  Retail Drivers  5 Year Omni-channel Retail Roadmap  Business Impacts  Investment Trends  Guidance © IDC Visit us at IDC.com and follow us on 2

No doubt - the customer is omni-channel! Why?  To maximize efficiency!  For convenience  Because I want what I want when I want it  For faster (& more or less) service – self determined  For price compare/validation  To obtain complete and trusted information  To get product recommendations & personalized offers  To be treated as the unique shopper I am 3

Retail Drivers © IDC Retail Insights Visit us at IDC-ri.com 4 Political and Economic Social Technology Business Mixed economic recovery, disparate incomes and wealth Recovering consumer confidence Intensification of competition from all quarters: Amazon, fulfillment, new entrants Pull to globalize business and localize presence and products Borderless, anytime-anywhere business Accelerating transition to sense-and- respond Big data and analytics; shortage of related skills Rapid emergence of cloud-based provisioning and services Increasing potential with tech mashups Varied adoption and mash-up rates of 3rd Platform Pillars Changing demographics: millennials, boomers, and cultures Ubiquitous mobile and social lifestyles Media spending and consumption shift to digital and mobile Increasing concern for privacy and security

5 Year Omni-Channel Retail Technology Roadmap Customer Engagement 5 Year Horizon Speed Reliabilit y Resiliency Engagement Innovation Now Orchestrated Fulfillment Optimized Fulfillment Dynamic Fulfillment Mobile Enablement Interactive Store Immersive Commerce Data-Driven Marketing Contextual Marketing Interactive Marketing Optimized Assortments Dynamic Assortments Localized Assortment s $4B- $8B $2B- $4B <$2B Investment Processes Watchwords: Relationship Reciprocity Relevance Watchwords: Relationship Reciprocity Relevance Value of Transformation

Workloads G R O W ! 6  Skyrocketing e- and m-commerce  Data explosion  Virtualized corporate applications  Cloud services  Backup of data from distributed network of sites (stores, datacenters, HQ)  Video and rich media everywhere  Voice over IP systems, where the traffic is time sensitive and requires the appropriate quality of service  Remote system administration  Emerging Internet of Things (IoT)

IT Investment Drivers – Adaptability, Security and Resiliency Rule © IDC Visit us at IDC.com and follow us on 7  Resiliency  Agility  Flexibility  Responsiveness  Security Source: IDC's 2013 Global IT and Communications Survey n=218

High Price of Failure © IDC Visit us at IDC.com and follow us on 8 Source: Crain’s Chicago, June 2013Crain’s Chicago

© IDC Visit us at IDC.com and follow us on 9 The 3 rd Platform Will Change the Skills for 95% of IT Roles Over the Next 3-5 years… …especially IT Management & Executives roles

High Cost of Staffing 3 rd Platform Positions © IDC Visit us at IDC.com and follow us on 10 Organizations will pay an average premium of 18% to fill these positions Source: IDC's 2013 IT Staffing Survey - Jun 2013 Question: For roles you indicated are “difficult to hire,” what % premium is your organization willing to pay to hire qualified candidates in this role? n=131

Growing Investments on Innovation © IDC Visit us at IDC.com and follow us on 11 Source: IDC's 2013 Global IT and Communications Survey n=218

IDC Retail Insights Top 10 Predictions for 2014 Digital Transformation Business Transformation Fulfillment © IDC Retail Insights Visit us at IDC-ri.com 12 Single Department or Business Unit Company-wide/ Industry-wide Multiple Departments or Business Units Time (months) to Mainstream Organizational Impact Omni-channel Experience 2-ERP and Merchandising Transformations 3-Immersive Commerce 10-Same day Fulfilment Prerequisites 6- Hyperpersonalized promotions 4-Big data & analytics 9-Omni-channel Fulfilment 8 – PLM and Sourcing 4 –Marketing Technology Investment 7- Commerce Investments 7 Bubble Size = complexity / cost to address Big omni-channel Investments Big transformation projects

Funding Transformation and Innovation: CapEx vs. OpEx Shifts CapEx = 39% OpEx = 61% 2009 CapEx = 43% OpEx = 57% 2012 CapEx = 42% OpEx = 58% 2013 (Planned) Focus: Business efficiency - IT efficiency - Greater innovation © IDC Visit us at IDC.com and follow us on 13 Source: IDC's 2013 Global IT and Communications Survey n=218

Internal IT Spend Allocations – Software is the big winner 2009 = 19.8% 2012 = 26% Software Application Development 2009 = 32.5% 2012 = 35% Hardware and Software Support/Maintenance 2009 = 20.5% 2012 = 18% System and Networking Management © IDC Visit us at IDC.com and follow us on 14 Source: IDC's 2013 Global IT and Communications Survey n=218

Internal IT Budget for Human Resources - % Internal IT © IDC Visit us at IDC.com and follow us on 15 Source: IDC's 2013 Global IT and Communications Study n=218

Example: Enterprise Mobility Comes at a Price Mobility comes at a price: Mobile Apps Mobile Security Device Management and Support Infrastructure Mobility comes at a price: Mobile Apps Mobile Security Device Management and Support Infrastructure 16

Plan for Retail IT Staffing Disruption - Example: Mobility © IDC Visit us at IDC.com and follow us on 17 The four pillars will disrupt application development, security and help desk roles Source: IDC's 2013 IT Staffing Study, Jun Showing % of respondents who believe the skills will significantly change in the next 3-5 years as a result of mobility n=131

IT Buying will be Disrupted as well Top 10 reasons that IT will survive Custom solutions 2.Systems of Record a utility 3.Systems of Engagement a priority 4.Packaged App migration to cloud TBD 5.Legacy Apps and Infrastructure - mature, stable, and scalable 6.Risk/Reward Ratio unfavorable 7.Security concerns 8.Cost control concerns 9.Cultural resistance 10.Business wants more IT not less! © IDC Retail Insights Visit us at IDC-ri.com 18 CIOs are not worried about the demise of IT. The real risks are the IT Talent and Innovation gaps! CIOs are not worried about the demise of IT. The real risks are the IT Talent and Innovation gaps! The CMO and COO is more involved in decision making but the CIO is the custodian of an even broader set of capabilities!  20% of IT Staffing Survey respondents say retail CMO is a key decision maker The CMO and COO is more involved in decision making but the CIO is the custodian of an even broader set of capabilities!  20% of IT Staffing Survey respondents say retail CMO is a key decision maker

Differentiators that win deals  Agile, Integrated Product Offering  Homogenous, service oriented omni-channel capabilities  Omni-channel accelerators for rapid time to market  Easy to implement, adapt and extend  Lower migration costs guarantee future proof investment  Choice in deployment models including cloud  Managed services  Financing  Broad selection of partners to work with (1000s of trained experts, 100s of partners)

Understand the challenges We've made significant progress over the past 18 months, but the process will never end, the ongoing objectives to keep improving the ease of use, personalization and connectedness of our online experience - Ted Decker, SVP, U.S. Retail Finance, The Home Depot. © IDC Visit us at IDC.com and follow us on 20 A lot of our IT enabling spend is for interconnected retail. So it's a capacity issue and not a dollar governing how much we're going to spend on CapEx. We're running out our strategic plans and our long-term financial plans – we haven't hit the value just yet. - Ted Decker, SVP, U.S. Retail Finance, The Home Depot

Creating Resiliency: Adapting to Feedback from Positive and Negative Events Documenting best practices and task- specific expertise Connecting the workforce with critical resources to report on adverse events and resolve pain points Simplifying access to successful workflows and practices Driving process standardization, integration, and consistent policies to reduce complexity Recognizing successful outcomes; predicting situations that contribute to profitable customer relationships Analyzing trends to prevent persistent disruptions and fraud in advance or in real-time Providing a platform to elevate employee (or task-related) success and creating a learning organization Gathering resources and expertise to speed corrective actions Mitigating Risk Adapting or responding to negative incidents Enabling Reward Incorporating positive outcomes into future work Resiliency: Adapting to changing circumstances Enabling Reward Minimizing Risk

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Questions? 23 Leslie Join us for conversations in our IDC Retail Insights Community IDC Retail Insights Community