1. How Corporate Governance Automatically Aligns IT with Corporate Strategy Arizona Technology Summit September 30, 2009 Jonathan Harber, CIO, Blood Systems, Inc. (BSI)

2. Steps to Alignment Have a documented and consensus strategy Have a documented and consensus governance process Have management support, acceptance, and compliance

3. The Company Needs Strategy Goals Documented Agreed to by all business units and Senior Executives Approved by the Board Measureable and testable, but broken down into actionable chunks –Great Ideas Have 20% margins Have 20% growth –Actionable Goals Complete 3 acquisitions or new affiliates Increase IT optimization of business process by automating one or more manual process in each division Increase cash on hand by 3 days each year

4. Requirements of Management To make corporate governance work, the following is vital: –A documented process –All Division Presidents and Senior Executives (they are the key stakeholders) have to be bought in and support the process –Has to have a measure of objectivity –The process has to have a method to bring conflicts to the table –Processes gain huge benefit from quantifiable ROI All stakeholders have to be equal partners and self-police each other!

5. Vital Steps to Effective Governance Clearly define what qualifies as a project. At BSI, we use the following: –Has a clearly defined start and end date –Has a clearly defined set of goals or objectives –Qualifies as follows More than 2 divisions.OR. More than 2 Central Office (CO) departments.OR. More than $10,000 in cost (excluding internal labor) outside your normal operating budget.OR. Takes longer than 2 weeks –Does one of the following: Creates a unique product, service, or capability. Improves a process or solves a problem. Clearly define the standard method, artifacts, and information required in a project request Clearly define exceptions

6. Vital Steps to Effective Governance Clearly define how the company will handle new requests –Must be submitted in the same manner as all other projects –Must be evaluated in the same manner as all other projects Clearly define Normal Operations Clearly define the differences between –Capital –Expense

7. How BSI Governs Work All actions that qualify as projects must be submitted during the budget cycle Project requests must be complete Project Governance Board (PGB) scores all projects according to strategic goals Q: Who sits on the PGB? A: All major stakeholders At BSI – Pres Blood Center Div – Pres Blood Systems Labs – Pres BioCARE Div – Chief Medical Officer – CFO – CIO – SVP Quality Management – HR VP – EVP Business Services Facilitated by Director, Project Management Office

8. Priority Setting Projects are ordered from highest score to lowest Build expense budgets in support of Normal Operations –Salaries, Merit Increases, Key Performer Pay, etc. –Amortization –Depreciation –Travel –Training –Etc. Build capital budgets in support of Normal Operations – For IT this is mostly replacing end of life equipment Layer margins on top of the above (including the need to increase/decrease Days Cash on Hand) The remainder is available for projects

9. Prioritization Example All numbers are notional No numbers are specific or related to BSI as a going concern Revenue$100.00 Normal Ops Expense($60.00) Normal Ops Capital($15.00) Margins @ 1.5%($1.50) Available for Projects$23.50

10. Priority Setting We have the list prioritized projects and their dollar amount We know how much we have to spend We move the line to 85% of what we have to spend –Accounts for unknown projects –Accounts the need to add personnel IT resources are allocated from first project to last of the affordable projects. In this case 85% of $23.50 = $19.98

11. Prioritization Example ProjectAmountScore Project 10$498 Project 5$896 Project 2$287 Project 20$385 Project 38$278 Project 18$572 Project 22$0.8071 Project 40$265 Project 12$2.554

12. Sample Scoring Sheet

13. Key Questions How does one align and balance resources –Meetings of key project stakeholders –History of past estimates –Tracking time supports the foregoing What if there are not enough resources to meet the needs of the approved projects –Hire new people –Outsourcing –Review scope of the project What about small pieces of work that do not require review by the PGB? What about new projects? How do you adjudicate resource contention?

14. QUESTIONS?