The CIO of the Future

The CIO of the Future

Randy Spratt CIO & CTO, McKesson

Three things for the 3rd Era

5/7/15 McKesson Corporation Confidential and Proprietary 2

The 1st Era of IT

Technology

Defects

Standardization

Technology


Value Proposition Customer Service

Execution

Strategy

Innovation

Capital

Process Efficiency


The 2nd Era of IT

Technology Leverage

Sourcing

Defects

Demand

Standardization

Technology


Value Proposition

Value

Customer Service

Execution

Strategy

Innovation

Capital

Leverage Process

Efficiency

Scale Efficiency


Welcome to the 3rd Era of IT : Evolve or Perish

Technology Leverage Value

Sourcing

Defects

Demand

Standardization

Technology


Value Proposition

Value

Growth Acquire Share

Retain Base

Position in Growing Markets

Customer Service

Execution

Strategy

Innovation

Capital Deployment

Leverage Process

Efficiency

Scale Efficiency


Thing #1 for the Third Era -- Evolve or Perish

Deeply Understand Value Creation in Your Business

•  Marriott International

•  Toys ‘R’ Us

•  Nordstrom

•  Con Edison

•  Dish Network

•  Whole Foods


Value Creation Problem


*Analyst Consensus

60

80

100

120

140

160

180

FY07

FY

08

FY09

FY

10

FY11

FY

12

FY13

FY

14

FY15

*

Revenue $B

$1.00

$3.00

$5.00

$7.00

$9.00

$11.00

FY07

FY

08

FY09

FY

10

FY11

FY

12

FY13

FY

14

FY15

*

EPS**

**Continued Operations, Adjusted

Value Creation at McKesson


Government as��Product Manager��

The World of Healthcare is Changing...


McKesson…Making an Impact



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Align your Strategy with The Value Problem

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…Calling for Growing Demands on IT Freedom to Pursue

New Models without Constraints More

Agility and Control

Increased Reliability

Downward Cost Pressures

Greater Security and Privacy


IT Context The fundamental business model of IT is changing

From To

•  Hosted Applications •  Internal data centers •  Custom solutions •  Long-term architectures

•  SaaS •  Public/hybrid cloud •  Converged, standardized •  Agile, open, changing, scalable

PC-dominated access Multi-device, mobile, public

Structured information Diverse information: unstructured and structured

Business process optimization Information-based business models Buy, Engineer and Manage Broker, Integrate, Orchestrate

•  Secure the data center and network

•  Role-based security •  Identity Access Management

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Jobs to Be Done Leverage Growth

Enterprise Systems

Data & Analytics

IaaS & Platform Services

Customer, Employee

Experience

Operations

Modernized, Demand Based

Real-time, predictive, enterprise wide

Higher-level platform functions

Improved productivity & mobility

Adaptable, demand based

Rationalized

Simplified, localized

Automated

Easy to understand & automated

Predictable, repeatable, transparent



Embrace the New Normal in IT

Business Nirvana Reality IT Nirvana

Agility Speed Control

Efficiency Security

Cost

Commoditize FAST TO OPEX Technology: Hardened

Business Differentiation:

Low

Business Adoption: Enterprise wide

Service Maturity: Mature

Cost per User: Optimized

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GROWTH

Adopt REALLY FAST Technology: Maturing


High

Business Adoption: Expanding

Service Maturity: Defined

Cost per User: Falling

Standardize WHILE GOING FAST Technology: Stabilizing


Fading

Business Adoption: Broad

Service Maturity: Measured

Cost per User: Leveling. low

Innovate REALLY REALLY FAST Technology: New,

Limited


Extreme

Business Adoption: Initial

Service Maturity: Initial

Cost per User: High

LEVERAGE

Multi-Speed IT


McKesson IT Implications: Shift to SaaS In-‐House SaaS In-‐House SaaS In-‐House SaaS In-‐House SaaS

CRM SFA Med 50% 50% 20% 80% 0% 100% 0% 100% Assumes MTS to SF.comServices/Other Med 90% 10% 50% 50% 20% 80% 20% 80%

Procurement Small 90% 10% 20% 80% 0% 100% 0% 100%

Core ERP Large 95% 5% 90% 10% 80% 20% 60% 40% Opp for Dev/Test to public cloud

Warehouse Management Large 100% 0% 100% 0% 90% 10% 70% 30%

BI Large 95% 5% 70% 30% 50% 50% 30% 70% Will grow to be XXL

Ordering McKesson Connect Med 100% 0% 90% 10% 80% 20% 30% 70%

Integration (e.g. MQ, WebSphere, Xi) Med 95% 5% 50% 50% 30% 70% 20% 80%

DR Tier One Apps (e.g. Core ERP) Large 95% 5% 90% 10% 80% 20% 60% 40% Can consider coloTier Two Apps Med 50% 50% 25% 75% 20% 80% 10% 90% Can consider cloud

HRIS Core HR Large 100% 0% 75% 25% 50% 50% 25% 75%Time (Kronos) Med 100% 0% 100% 0% 100% 0% 50% 50%All Other Small 83% 17% 29% 71% 17% 83% 8% 92%

Web McKNet, McK.com, MyActions Small 100% 0% 100% 0% 50% 50% 25% 75% Assumes SP

End User SharePoint/Collaboration Large 95% 5% 80% 20% 50% 50% 25% 75%Email Large 100% 0% 0% 100% 0% 100% 0% 100%RIM/eDiscovery Large 100% 0% 0% 100% 0% 100% 0% 100%PC Backup Med 100% 0% 0% 100% 0% 100% 0% 100%Active Directory Med 100% 0% 0% 100% 0% 100% 0% 100%

IT Remedy Small 100% 0% 100% 0% 50% 50% 50% 50%Service Catalog Small 100% 0% 100% 0% 100% 0% 100% 0%Monitoring Med 90% 10% 60% 40% 40% 60% 25% 75%

Info Sec Small 85% 15% 71% 29% 60% 40% 47% 53%

Average 91% 9% 61% 39% 45% 55% 31% 69%Weighted Average 95% 5% 60% 40% 47% 53% 31% 69% Large=20, Med=5, Small=1

Jan. 2022 (+7 years)Notes

Relative Size

Current Jan. 2018 (+3 years) Jan. 2020 (+5 years)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

Current ~ 3 Years ~ 5 Years ~ 7 Years

External Cloud Internal Cloud On Prem

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Create and Nurture Critical Relationships

Align Your Strategy with The Value Problem

Embrace the New Normal in IT

Deeply Understand Value Creation in Your Business

3 Things for the Third Era: Evolve or Perish #1

#3

#2

The CIO of the Future

Technology

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