McKesson 2011 Annual Report Download - page 25

Download and view the complete annual report

Please find page 25 of the 2011 McKesson annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 130

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130

McKESSON CORPORATION
19
System errors or failures of our products to conform to specifications could cause unforeseen liabilities or injury,
harm our reputation and have a material adverse impact on our results of operations.
The software and software systems (“systems”) that we sell or operate are very complex. As with complex
systems offered by others, our systems may contain errors, especially when first introduced. For example, our
Technology Solutions segment’s business systems are intended to provide information for healthcare providers in
providing patient care. Therefore, users of our systems have a greater sensitivity to errors than the general market
for software products. If our software or systems lead to faulty clinical decisions or injury to patients, we could be
subject to claims or litigation by our clients, clinicians or patients. In addition, such failures could damage our
reputation and could negatively affect future sales.
Failure of a client’s system to perform in accordance with our documentation could constitute a breach of
warranty and could require us to incur additional expense in order to make the system comply with the
documentation. If such failure is not remedied in a timely manner, it could constitute a material breach under a
contract, allowing the client to cancel the contract, obtain refunds of amounts previously paid or assert claims for
significant damages.
Various risks could interrupt customers’ access to their data residing in our service center, exposing us to
significant costs.
We provide remote hosting services that involve operating both our software and the software of third-party
vendors for our customers. The ability to access the systems and the data that we host and support on demand is
critical to our customers. Our operations and facilities are vulnerable to interruption and/or damage from a number
of sources, many of which are beyond our control, including, without limitation (1) power loss and
telecommunications failures, (2) fire, flood, hurricane and other natural disasters, (3) software and hardware errors,
failures or crashes, and (4) computer viruses, hacking and similar disruptive problems. We attempt to mitigate these
risks through various means including disaster recovery plans, separate test systems and change control and system
security measures, but our precautions may not protect against all problems. If customers’ access is interrupted
because of problems in the operation of our facilities, we could be exposed to significant claims, particularly if the
access interruption is associated with problems in the timely delivery of medical care. We must maintain disaster
recovery and business continuity plans that rely upon third-party providers of related services and if those vendors
fail us at a time that our center is not operating correctly, we could incur a loss of revenue and liability for failure to
fulfill our contractual service commitments. Any significant instances of system downtime could negatively affect
our reputation and ability to sell our remote hosting services.
The length of our sales and implementation cycles for our Technology Solutions segment could have a material
adverse impact on our future results of operations.
Many of the solutions offered by our Technology Solutions segment have long sales and implementation cycles,
which could range from a few months to two years or more from initial contact with the customer to completion of
implementation. How and when to implement, replace, or expand an information system, or modify or add business
processes, are major decisions for healthcare organizations. Many of the solutions we provide typically require
significant capital expenditures and time commitments by the customer. Any decision by our customers to delay or
cancel implementation could have a material adverse impact on our results of operations. Furthermore, delays or
failures to meet milestones established in our agreements may result in a breach of contract, termination of the
agreement, damages and/or penalties as well as a reduction in our margins or a delay in our ability to recognize
revenue.