The document discusses the transition to the "third era of IT" and outlines three things that are important for CIOs in this era. 1) Deeply understand how your business creates value. 2) Align your IT strategy with the business's value creation problem. 3) Embrace the new normal in IT, which includes increased use of cloud computing, mobile access, and more agile and scalable systems. The document provides examples of how one company, McKesson, is making this transition by moving more applications to SaaS and cloud platforms over time to improve agility, reduce costs, and better support the business.

1. The CIO of the Future
Randy Spratt
Three things
for the 3rd Era

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The 1st Era of IT
Technology

3. Defects
Standardization
Technology
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Value Proposition Customer Service
Execution
Strategy
Innovation
Capital
Process
Efficiency

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The 2nd Era of IT
Technology Leverage

5. Sourcing
Defects
Demand
Standardization
Technology
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Value Proposition
Value
Customer Service
Execution
Strategy
Innovation
Capital
Leverage
Process
Efficiency
Scale Efficiency

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

7. Sourcing
Defects
Demand
Standardization
Technology
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Value Proposition
Value
Growth Acquire Share
Retain Base
Position in
Growing Markets
Customer Service
Execution
Strategy
Innovation
Capital Deployment
Leverage
Process
Efficiency
Scale Efficiency

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Thing #1 for the Third Era -- Evolve or Perish
Deeply
Understand
Value Creation
in Your Business

9. • Marriott International
• Toys ‘R’ Us
• Nordstrom
• Con Edison
• Dish Network
• Whole Foods
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Value Creation Problem

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*Analyst Consensus
60
80
100
120
140
160
180
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15*
Revenue $B
$1.00
$3.00
$5.00
$7.00
$9.00
$11.00
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15*
EPS**
**Continued Operations, Adjusted
Value Creation at McKesson

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Government as
Product Manager
The World of Healthcare is Changing...

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McKesson…Making an Impact

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Thing #2 for the Third Era -- Evolve or Perish
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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 ConstraintsMore
Agility
and Control
Increased
Reliability
Downward
Cost
Pressures
Greater
Security
and Privacy

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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

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Thing #3 for the Third Era -- Evolve or Perish
Embrace the New
Normal in IT

18. Business Nirvana Reality IT Nirvana
Agility
Speed
Control
Efficiency
Security
Cost

19. 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
Business
Differentiation:
High
Business Adoption: Expanding
Service Maturity: Defined
Cost per User: Falling
Standardize
WHILE GOING FAST
Technology: Stabilizing
Business
Differentiation:
Fading
Business Adoption: Broad
Service Maturity: Measured
Cost per User: Leveling.
low
Innovate
REALLY REALLY FAST
Technology: New,
Limited
Business
Differentiation:
Extreme
Business Adoption: Initial
Service Maturity: Initial
Cost per User: High
LEVERAGE
Multi-Speed IT

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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.com
Services/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
colo
Tier
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
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