McKesson’s Randy Spratt: Where IT Nirvana Meets Business Nirvana

Randy Spratt is the EVP, CIO and CTO of McKesson Corporation, a $112 billion company based in San Francisco, providing medicines, pharmaceutical supplies, information and care management products and services across the healthcare industry.  Spratt had been CIO since July of 2005, responsible for the global applications that serve the entire corporation and for the overall IT strategy and information security for the company. In April 2009, he added the chief technology officer role. In the company’s Technology segment and, to a limited degree, in its Distribution segment, Spratt is responsible for guiding the technology direction, strategy, and quality of the medical systems that the company sells, implements, and supports in the healthcare community.

Given dual internal- and external-facing roles, Spratt has had a chance to think a lot about the value the IT departments ought to deliver to the companies and customers that they serve. He also recognizes that they must solve the riddle of both remaining efficient and secure, while also forging efforts to innovate and add to the top-line of the company, as well. CIO Insight contributor and Metis Strategy President Peter high recently spoke with Spratt about his perspectives on "IT Nirvana" and how it can be attained by any CIO.

CIO Insight: Randy, you have spoken about the two sources of value that a CIO must bear in mind, one is growth oriented, and the other is leverage oriented. These can be at odds. How have you successfully managed this paradox?

RANDY SPRATT: It truly is a paradox. But it is the paradox that any business leader, any CEO faces. On the one hand, you need to innovate and be agile to serve the strategies of the business. On the other hand, you have a lot of activities that are commodity driven, and if you are not competitive with other entities that can provide those services, then you will be at a competitive disadvantage as a company. The more you can standardize, the more you can gain economies of scale and render the IT operation more efficient. On the other hand, the business needs non-standard technologies for innovation.

In my mind, business Nirvana is top-line growth. This suggests business-driven IT activity, and a high degree of IT agility. The businesses will want and expect new devices, new capabilities, new applications, new tools to reach and delight their customers. They are looking for social networking, iPad apps, smartphone apps, and linking into cloud-based services to reach their markets and deliver innovative products and services. IT nirvana is making everything the same, efficient, secure, leveraging economies of scale. In this scenario, IT controls things to a greater extent.

In many organizations, there is a pendulum that swings between these two scenarios, between Business Nirvana and IT Nirvana, never quite reaching either side before the momentum shifts in the other direction every three to five years. An innovative CIO is hired who focuses almost exclusively on enabling the business vision, and, for a time, achieves tremendous things for the organization. In many cases, this is a CIO within a business unit that is seceding from an overly controlled central function. In the process, our innovative CIO creates a shadow infrastructure, replicates existing functionality, and buys products and services at sub-optimal purchasing power and from unproven vendors. Projects fall behind, costs accelerate, and the desired speed and agility are not attained.

Next, a cost conscious CIO is brought in to rectify these issues. The business executives speak with great frustration about the cost and inefficiencies of the IT department and demand double-digit percentage cost reductions. That new CIO spends a lot of time fixing the mess, cleaning up the architecture and infrastructure, cutting staff, and instituting practices to make things more efficient. That CIO de-emphasizes innovative, top-line growth opportunities in favor of more efficient operations, greater buying power through standardization and scale, and more stable, reliable operations through solid IT processes. After a period with a lack of innovation, however, that CIO’s business leader peers become antsy about the lack of velocity and agility and the unproven top-line value IT is achieving, and the pendulum swings back again.

CIO Insight: You have said that CIOs must get off of the pendulum and to drive a technology lifecycle that takes its place. Please explain.

SPRATT: That’s right. The lifecycle is tricky, mind you, as IT plays a different role at each stage of the lifecycle.

Innovation, I think, starts in the business, where the customers are best understood. At the early stage of it, our business colleagues are the clear leader, and IT is there to consult. IT needs to give insights into the kinds of solutions that might be possible for the problems that the businesses are trying to solve. They also need to offer guidance about which technologies have the staying power to be leveraged for years to come, and how they best fit into existing systems. IT must take the role of assisting with experimentation. As some of the experiments become successes, and they become adopted either by our colleagues or our customers, IT must then work to make these solutions more robust and scalable.

As these solutions reach maturity, IT must provide these successfully adopted systems in a robust and stable production environment, surrounded by good IT operational support. [This] includes finding the lowest-cost providers, either internally or externally. From there on, IT must compress costs, driving to make management of these solutions ever more efficient. By the time solutions have been in production for four or five years, it stands to reason that vendors will have gotten into the space. These vendors may be able to manage these solutions cheaper and better than we can. At that point, we should contemplate outsourcing. Put differently, once we feel we have taken all cost out of managing a solution, we need to investigate if it is worthwhile letting an external party run it for us.

So, at the beginning of the lifecycle, IT advises. Then we help build experiments. Then we make successful experiments scalable and solid. Then we take cost out and, as the systems become commodities, we operate them at maximum efficiency and minimum innovation.

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