Randy SprattMcKesson CIO & CTO February 2011

H M G S t r a t e g y S u m m i t

C I O L e a d e r s h ip S e r i e s

The Transformational CIOAs a Competitive Weapon

A bit about my world

04/19/2023 2

Manufacturers 400 Pharmaceutical2,000 Medical-Surgical950 Consumer Product

Providers200,000 Physicians10,000 Long-Term Care Facilities5,000 Hospitals 750 Home Care Agencies

Health Plans600 Payor Organizations

Consumers25 Million Healthcare Patients

Retail Pharmacies26,000 Locations

Steady growth, well leveraged

FY06 FY07 FY08 FY09 FY1060

70

80

90

100

110

120

Revenue $B

FY06 FY07 FY08 FY09 FY10 $1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

EPS*

04/19/2023 3

6% CAGR

17% CAGR

*Continued Operations

Value Creation

04/19/2023

PROPERTY OF McKESSON CORPORATION

4

Value

Growth

Leverage

Acquire Share

Retain Base

Position in Growing Markets

Process Efficiency

Scale Efficiency

CustomerService

Execution

Strategy

Capital

Sourcing

Defects

Consumption

IT Life Cycles in Value CreationPerpetual Pendulum

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Business Nirvana Reality IT Nirvana

AgilitySpeedControl“cost”

EfficiencySecurity

Cost

IT Life Cycles – Another VersionVirtuous Cycle

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• Innovation New products New Services

• Adoption Customer Satisfaction Customer Experience• Standardization

Process efficiency Operational Excellence

• Commoditization Low Cost, capital High availability Demand driven Business Continuity

& Security

TOPLINE

GROWTH

BOTTOMLINE

LEVERAGE

Managing the Entire Life Cycle

• Collaboration at every step• Governance at every level• Execution and quality are table stakes• Business Strategy and Business Value Driven• Measure the value elements relentlessly• Allow experiments but make them transparent• Converge experiments based on success and

relevance• Move with velocity through the cycle but don’t force it

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Governance and Collaboration

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ExecCommittee

Shared Services Governance Board

CIOCouncil

TechCouncil

Corp ServicesCouncil

Working Groups

Tech Advisory

Board

TAB Committees

HR Council

Working Groups

Steering

DirectionFunding

Alignment

OperationsPlanning

McKesson Results

Metric 2005 2010

Business executive satisfaction with IT

12% Satisfied or better

96% Satisfied or better

IT Employee engagement

62%; lowest in McKesson

86%; highest in McKesson (IT GHP Norm: 80%)

Allocations YoY change

12%; demand unknown

-2%; demand up 17% avg

SLA Performance No SLAs 98% Met

IT Life Cycle Position Oscillating toward Business Nirvana

Engaging Virtuous Cycle

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2010 CIO Priorities*What are you working on?

Business Priorities Technology Priorities

1 Business Process Improvement Virtualization

2 Reducing Enterprise Costs Clouds

3 Increasing use of information / analytics

Web 2.0

4 Enterprise workforce effectiveness Networking, voice, data comm

5 Attracting and retaining customers Business Intelligence

6 Managing change initiatives Mobile Technologies

7 Creating new products and services

Data/document management & storage

8 Targeting customer & markets more effectively

Service-oriented apps & architecture

9 Consolidating business operations Security technologies

10 Expanding current customer relationships

IT Management

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NEW:• Saas

• iThings

*After Gartner 2010 CIO Survey

FY01 Technologies

FY11: Free.

Technology FY01 $

3 MP Digital Camera $3,499

Cell phone (99 number storage) $469

Portable Computer (300 Mhz, 6 Gb, 90 Mb RAM)

$1,699

Hi-8 Video Camera $1,899

Portable Voice Recorder $129

Portable MP3 Player (6 Gb disk) $499

Portable GPS, 3.7” Color $545

Total…. $8,739

Technology Headwinds

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• Disruptive business models to increase speed of new product development

• Application value tied to data value

• Social networking dominates advertising and marketing

• Healthcare is fundamentally a mobile experience

2009 2010 2011E0

50

100

150

200

250

300

350

Uni

ts S

hipp

ed (M

illio

ns)

Smartphone Growth

• Private and Public Clouds – an every day reality today, will be dominant tomorrow

• Applications and everything they use moving to a service model

• Healthcare Reform and ARRA depend upon a cloud delivery model

Data and Services

The Internet

You

• Aggregation enabled by cloud models

• Enables analytics, research, information search and exchange

• Healthcare data volume will explode in next 5 years

2005 2006 2007 2008 2009 2010 2011 -

500

1,000

1,500

2,000

2,500

Exab

ytes 20-fold increase

in six years

Digital Data Creation

• Embracing HIPAA / HITECH

• Risk Management

• Stronger Fundamentals – Best Practices, Analytics and Metrics

• Bookending: Prevention & Business Continuity

Thank You!