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Last week I was listening to the CEO of Circuit City Jim Marcum and executives from FTI Inc., the consultants to the company managing Chapter 7 and the restructuring process, talk about how and why Circuit City went bankrupt. The decline of Circuit City of course did not happen overnight nor was the crash in the real estate market and the global economy the only reason behind its fall (as mentioned in their disclosures). The external events, however, did accelerate the collapse of the company and make its recovery from bankruptcy almost impossible. (If CC could have raised approx $500 – $600 million in DIP, they would have made it. I believe CC got very close but the tight credit market made it difficult to get the final $100 million or so it needed.)

What led Circuit City downhill was years of mis-management, wrong investments, lack of collaboration between different units and mis-understanding of the market. More importantly what was really surprising was that despite investing heavily into their IT infrastructure (approx $200 million annually) and having all the crucial data needed for analysis on their fingertips, the executives could not take advantage of it. Looking around, I realized that this situation is not unique to Circuit City at all but is a problem that many corporations (mainly non-software) face today.

So what is the right amount of investment in IT and Why do companies fail to leverage their investments?

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Ah, finally figured I should steal a few minutes from my schedule to discuss how my panel on “Virtual Organizations” went at the MIT CIO Conference. You can read a review about the panel and the conference in general on Dr. Irving Wladawsky’s blog but here is my take on it. Some of you must have read my previous blog post titled “From machines to humans – How virtual are we getting?“, a preview post for the panel where I talked about the role of  Virtual Organizations, how its role is expanding to connect everything from supply chains to end-customers and the myriad opportunities that it can enable if deployed properly.

While that is all very relevant, as I sat through the panel at the CIO conference, I realized why this topic is so encompassing from every angle, why it is so complex and why it requires a deep strategic analysis by CIOs. Simply speaking we can broadly analyze this topic from technology, business and cultural perspectives.

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Thanks to the green initiatives and cost-cuttings the latest buzz word in the high tech echelons today is virtualization – from machines to teams to supply chain to consumers… all are getting virtually connected in a huge complex matrix. While virtual servers abstract the hardware resources and share it efficiently to give a perception of a powerful dedicated machine to the end-user, virtual teams have to abstract location, vertical functional groups and leverage available employee resources efficiently to provide a single unified face to their end-users (who might be other internal groups/divisions, external customers, or the supply chain). However some of the biggest challenges in making this matrix work efficiently have not only been technological but also cultural in many ways especially when it comes to managing virtual teams.

virtual worldPicture Credit

From technology point of view although there have been several innovations (VPNs, Remote Terminals, Webex) that made virtual teams and collaboration possible, new challenges are cropping up each day. As more and more data from corporations is being made accessible throughout the globe to many teams, and intranet boundaries merge with the extranets, security is becoming a key aspect. Moreover, with widespread adoption of mobile devices into corporate networks, corporations face new challenges in integrating and managing multiple platforms and devices in their networks. Companies such as Cisco, Avaya, Lucent and others are investing big bucks into tackling these problems through unified communications (bringing all data – voice, video, data into a single pipe), device agnostic access solutions also known in some cases as endpoint virtualization (technologies that abstract the devices at end-user) and instant anywhere access solutions (giving sales and marketing teams the edge in their negotiations when they need it). Additionally, the challenges are not only limited to virtualizing corporations internally but now extend into supply chains and end consumers, bringing collaboration across the entire spectrum.

While technology is great to solve problems, its adoption and success totally depends on overcoming cultural barriers. How many of you have had managers who prefer that you show up in the office and do your work when you can do the same work from home (virtually) and be equally productive (show the same or better results)? Isn’t it just a cultural thing… I need to see you, otherwise I know you are not working!

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