1.

VIRTUAL ORGANISATIONS An introduction

A virtual organization consists of a group of companies, acting as one company to fulfill a need
in the marketplace. These companies collaborate, share skills, information, products, services etc
in order to meet the goal of customer fulfillment. Indeed, a company can itself be a virtual
enterprise consisting of interdependent departments. These companies operate independently of
each other but work together to meet a common goal of meeting a need in the market. Indeed,
any company can partake in more than one virtual organisation so long as this does not result in
any direct conflict of interest. The creation of a virtual organisation creates one face that a
customer can interact with and relate to. Members of the virtual organisation are hidden from the
customer and do not see interactions between members, customers have one point of contact.
It includes:

Small IT & Management team

Headquarter is managing center for all actions

Expensive software networks

It excludes:

Factory
Headquarter Building
Distribution System
Retail store
Numerous Wages

Virtual Organizations consequently need virtual workers.

The skills virtual workers have:

Multiple communication skills (email, typing, phone, writing) because all work

communication include both verbal and non-verbal

Decision making confidence Since they are working on their own, firms do not want

its employees, when problem arise, to have them walking around waiting for help
Tech savvy - Companies need people with higher computer abilities.
Accountability when firm assign a time-limited project, it wants to have it done at
exact time.
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2. BASIC TERMINOLOGY
Virtual organisation (VO) is a temporary consortium of partners from different organizations
established to fulfill a value adding task, for example a product or service to a customer. The
lifetime of a VO is typically restricted: It is created from the network for a definite task and
dissolved after the task has been completed.
VO Breeding environment (VBE) represents an association or pool of organizations and their
related supporting institutions that have both the potential and the will to cooperate with each
other through the establishment of a "base" long-term cooperation agreement and interoperable
infrastructure. When a business opportunity is identified by one member, a subset of these
organizations can be selected to form a VO. A VBE is a more stable organization, though not
static as new members can join and members can leave. A key facet here is preparedness, i.e.,
being ready in terms of infrastructures, operating principles, trust, etc. to get involved in a
VO.
The performance of a VO strongly depends on the preparedness of the VBE behind.
Preparedness of a VBE is a special case of Work preparation. Work preparation expresses
how much effort or money is used to prepare for a certain task before the actual task is carried
out. In a market economy economic considerations are the most important factors in deciding the
degree of work preparation to use. I.e., for a given bounded task (e.g., production of a given
amount of products or of engineering specifications in a given finite time period) the aim is
to minimize the sum of sunk costs, investment costs and operational costs [Pedersen, Tolle,
Vesterager, 1999].
VO Participant / VO Partner / VO Member represents the organisation, enterprise or person
involved and (partly) responsible for fulfillment of the objectives and tasks of the current VO.

VO life cycle: A life cycle denotes all stages and corresponding transitions during the existences
of a system or organisation. Thus the VO life cycle contains all stages of the VO from creation or
identification to dissolution or decommissioning.

3. ORGANISATION STRUCTURE
The structure of a virtual organisation consists of two major formats; these are both shown in
figure
Figure: Virtual Organizations

Organisatio
n/
Enterprise 1
Organisatio
n/
Enterprise 2

Distributed
Core Virtual
Organisation
Model

Centralized
core virtual
Organisation
Model

Distributed
Core

Core
Organisation

Organisatio
n/
Enterprise 2
Organisatio
n/
Enterprise 3

Organisation
/ Enterprise
3
Organisation
/ Enterprise
4

Organisatio
n/
Enterprise 1

Customer
s

Customer
s

Organisatio
n/
Enterprise 4

1) The core organisation model

The figure shows how a core organisation/enterprise could take the lead in directing
partners/alliance partners to meet the requirements of a customer or group of customers. The core
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organisation may either be the face of the virtual organisation or it may create another brand or
new image to be the faade of the virtual organisation. The other organisations/enterprises that
constitute the virtual organisation provide a skill, resource, product etc that the core organisation
lacks and needs in order to meet the requirements of the customers. This structure can be created
to meet the needs of a long-term change in customer or market dynamics or to meet shorter-term
project needs and customer fulfillment. The satellite organisations/enterprises can come and go
depending on the needs of the customer/s and those of the core organisation. The core
organisation may even acquire organisations/enterprises and the virtual organisation could
become less virtualized. The core organisation directs change and the partners react to this
change, pulling together to meet that goal. The core organisation does not manage the partners,
but manages the relationship between itself and the partners and between partners where required

2)

The distributed organisation model

The second model is different since there is no one overall organisation/enterprise driving the
virtual organisation; all organisations/enterprises have their part to fulfill. All members rely on
each other to fulfill the needs of the market and the customer/s. The creation of the virtual
organisation is the only strategy for its members to meet market needs; the sum of their parts is
greater than those of the individuals. The customer/s sees interacts with one virtual organisation
but at the same time may be aware of its members but will not be able to interact with them
directly. All members have responsibility to meet the needs of the customer/s. Each member of
distributed core delivers a different skill, service, product etc in order to meet the needs of the
customer/s. All members are involved in planning, procedures and management of delivering to
the demands of the market and those of the customer/s. In deed a board of management, people
seconded from the members, could be created to bring better-defined management and processes
to this virtual organisation this depends on the size and the complexity of the project or the
virtual organisation itself. Organisations/enterprises can enter and leave the virtual organisation,
depending on individual goals and those of the market. This is less likely than in the core
organisation virtual structure, but remains a possibility and limited by the length of a project. The
shorter the length of the project, the lesser the viability of changing a member.
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4. BACKGROUND
(Mowshowitz, 1986) used the term Virtual Organization for the first time in 1986. Since then,
there has been a lot of research on this type of networked organizations and how they will
revolutionize the way we work in the 21st Century.
Traditional organizations integrated work vertically; that is, they delegated authority in a
pyramidal, hierarchical structure. As the pyramid shape suggests, power was concentrated
primarily among the handful of individuals at the top. This organizational form, shown in Figure
1, was first developed in the United States in the late 19th century with the advent of mass
production.

The prominent theorist of traditional hierarchical organizations was the renowned industrial
engineer, Frederick Winslow Taylor.
Hierarchical corporations often controlled and managed all activities of a business from, the raw
materials to their allocation to consumers. A centralized managerial hierarchy controlled the
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entire production process, with white-collar workers establishing rules and procedures to manage
a blue-collar workforce.
From World War II until the early 1980s, the trend was to build increasing layers of management
with more staff specialists. This centralized hierarchical structure was seen as effective for
managing large number of workers, but lacked agility and was unable to process information
rapidly throughout the organization.
THE NEW BUSINESS FORM
Ray Grenier and George Metes discuss the shift to this new organizational structure as a response
to unprecedented customer expectations and alternatives, global competition, time compression,
complexity, rapid change, and increased use of technology. They describe the virtual model as a
lead organization that creates alliances with groups and individuals from different organizations
who possess the highest competencies to build a specific product or service in a short period of
time (see Figure 2).

Above Figure 2 shows The Virtual Corporation - A network of organizations working

independently to bring a product to market

Grenier and Meters further explain that these alliances are virtual because products and services
are not produced in a single corporation whose purpose is longevity. Rather, these new virtual
organizations consist of a hybrid of groups and individuals from different companies that might
include customers, competitors, and suppliers who have a focused purpose of bringing a highquality product or service to market as rapidly as possible. These alliances may be temporary
with short concept-to-delivery cycles.
William Davidow and Michael Malone, authors of The Virtual Corporation, claim that virtual
corporations will be central to the new business revolution. Their concept of the virtual
corporation brings diverse innovations together such as just-in-time supply, work teams, flexible
manufacturing, reusable engineering, worker empowerment, organizational streamlining,
computer-aided design, total quality, and mass customization into a coherent vision for the
twentieth century corporation.
The virtual corporation is more permeable than traditional organizational forms. Interfaces in a
virtual organization between company, supplier, and customers continuously change, resulting in
a blurring of traditional functions. Inside the office, work groups and job responsibilities may
shift regularly. The virtual organization may not have a central office or an organizational chart.
Suppliers, customers, and even competitors may spend time alongside one another in the virtual
organization.

5. VIRTUAL ORGANIZATION LIFECYLCE

Any VO lives through four stages/phases, as defined: identification, formation operation and
dissolution.
During identification a VO initiator, typically some organization, selects potential business
partners (VO members) by using search engines and registries. Here it is important that potential
VO members are capable of providing the required services, which means they need to possess
an appropriate level of expertise, and are trustworthy. Trustworthiness is typically synonymous to

the reputation of a potential partner. VO initiator deduces security requirements for the VO,
identifies needed roles and makes sure that the partners can collectively fulfil them.
In the formation phase a VO initiator distributes configuration information, i.e. security and
adaptation policies to the parties. Security policies include obligations, permissions and
prohibitions. Adaptation policies describe what is to be done in case of security breaches, SLA
violations and other organizational changes, e.g. a new member joining the VO.
Operation is the main phase in VO lifecycle. It constitutes the execution of the VO tasks
according to the pre-defined business processes. At this stage the overall performance monitoring
and enforcement of policies are important. Service performance of each partner is monitored to
use as evidence when constructing the reputation. Any violation is reported to all other parties
and may result in contract cancellations/adaptations. All parties enforce security mechanisms at
their local sites and adapt to changes and violations. Dynamical changes of the VO structure
occur during this phase as well. Some partners may be replaced due to their completed mission,
contract term re-negotiation or contract violations. The initiator may also find new partners. In
such cases the structure of the VO is re-configured and a new partner is integrated.
Dissolution takes place when the objectives of the VO have been fulfilled or the VO was a
complete fiasco and partners were not able to operate successfully (as pointed out in [3]). This
involves updating the reputation information of the participants, invalidating all resource sharing
and resolving a common infrastructure.

6. CHARACTERISTICS OF A VIRTUAL ORGANISATION

Partners in virtual organizations share risks, costs, and rewards in pursuit of a global market. The
common characteristics of these organizations include a purpose that is motivated by specific
market opportunities, world-class core competence, information networks, interdependent
relationships, and permeable boundaries.
Virtual organizations represent structures that are motivated by specific market opportunities.
Once the alliance has been formed and the opportunity has been exploited, partners may move on
to new partnerships and alliances.
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Each partner in a virtual corporation contributes a world-class core competence, such as design,
manufacturing, or marketing. This ability of multiple firms to create synergies among worldclass functions and processes creates untold possibilities.
As organizations create these new linkages, advanced information technology becomes an
important element, and key to the success of a virtual organization. Computerized information
systems allow employees from geographically dispersed locations to link up with one another.
The virtual office may use desktop videoconferencing, collaborative software, and intranet
systems to enhance the flow of information among team members. Besides the need for
instantaneous communication with one another, members of these autonomous virtual teams
have increasing requirements regarding the amount and quality of information they need to do
their work.
Members of the virtual organization, in turn, create a network of interdependent relationships.
These relationships require firms to be much more dependent on one another than they have been
in the past, demanding unprecedented levels of trust. Strong interdependencies cause
organizations' boundaries to be blurred as competitors, suppliers, and customers enter into
cooperative agreements. These new relationships among firms obligate organizations to use
innovative management practices.

6.1 VIRTUAL TEAMS

Virtual teams are often the group structure used in virtual organizations. Jessica Lipnack and
Jeffrey Stamps define virtual teams as "a group of people who interact through interdependent
tasks guided by a common purpose." Unlike conventional teams, a virtual team performs work
across space, time, and organizational boundaries connected by interactive communication
technologies. Virtual teams may include employees, management, customers, suppliers, and
government working together to achieve common goals. These teams often stay together only to
perform its episodic task. They may work jointly on a new project, but when the product is
designed and goes into production, the project is finished and the virtual team dissolves.
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Lipnack and Stamps offer three key features for a successful virtual team. One is the choice of
team members with the appropriate skills and knowledge for the task; second is the definition of
a purpose to steer the group; and third is the effective linking of team members, including
communication channels, interactions, and relationships.
Virtual team members are required to learn a new set of skills. One skill is the ability to interact
with one another effectively despite infrequent or total lack of face-to-face contact. Another is
the ability to assimilate quickly and effectively into new teams. Virtual team members should be
technically adept to deal with the variety of required computer-based technologies. Additionally,
virtual team members may need intercultural skills to work effectively in multi-national
organizations.

6.2 VIRTUAL LEADER

Greiner and Metes discuss the new leadership skills required to lead in the virtual environment,
including the ability to manage a network of interdependent firms, to design virtual operations, to
create and sustain virtual relationships with internal as well as external constituents, to support
virtual teams, and to keep virtual teams focused. The leader of a virtual organization demands a
new set of skills unlike the skills required in a traditional hierarchy.

6.3 VIRTUAL LEARNING

Another critical element to the success of the virtual organization is the ability of the
organization to create world-class learning systems. These learning systems help leaders sustain
or create world-class competencies. Effective learning systems can create pathways throughout
the organization, in network fashion, enhancing the innovative capabilities of the organizational
members. An organization's ability to sustain a leadership position in the world economy
demands that organizations be on the cutting edge to develop rapid and elegant solutions to
emerging consumer demands.
Increasing numbers of firms are moving to these new organizational forms.
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Computer organizations that have successfully implemented forms of this new structure include
Apple Computer and Sun Microsystems. When Apple Computer linked its easy-to-use
software with Sony's manufacturing skills in miniaturization, Apple was able to get its product to
market quickly and gain a market share in the notebook segment of the PC industry.

7. WHY DO WE NEED VIRTUAL ORGANISATION?

Most markets require virtual organisations to fulfill the needs of customer/s that would otherwise
go unmet. There are some enterprises that have partially virtualized their operations; Cisco
operates virtual factories, so if we look at it from the point of view of the factories that produce
routers and switches Cisco is the virtual organisation. Indeed, Cisco works with partners in the
field of software, the equipment, consulting etc in order to fulfill customer/s requirements.
Virtual organisations will develop in many industries as customer requirements become more
difficult to achieve or where risk prevents enterprises from acquiring companies to fulfill
customer or project requirements on their own, markets become more project orientated, the
market consists of lots of small organisations and companies. The increasing prominence of ecosystem partnerships and alliances indicates the migration to the virtual organisation.

Other stimuli are driving the development of virtual organisations, this includes:

Increasingly dynamic markets having to react quickly to market demands; not all

organisations/enterprises have the core competencies to react to changing demands.

Changing value chains more services led as opposed to manufacturing led growth,
particularly important in the western world. Convergence between technologies, services,

products etc are changing value chains.

Eco-system partnerships or alliances, some, will evolve into virtual organizations.
Alliances with different organizations, some of which may be in other countries.
Mergers and acquisitions.
Emerging markets in different geographic locations globalization.
The desire of many people and government organizations for telecommuting.

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Enabling technology computers, computing applications, and communication networks

such as the Intranet are widely available and generally affordable. Of course, the need to
reduce costs is common to all organizations.

8. VIRTUAL ORGANISING
What aspects of an organization can be virtualized? There are five basic dimensions that
organizations can virtually organize along and each dimension is a continuum from physical to
virtual.

Location

Organizational interfaces or boundaries

Organizational processes

Organizational structures

Products / services

Note: Not all organizations can virtualize on all of these dimensions. Virtual organizing is
dependent on what the organization does. But most organizations can virtually organize on one
or more dimensions.
8.1 VIRTUAL ORGANISATION DIMENSIONS
This section provides a description and one or more examples for each dimension. The set of
examples provided is not exhaustive.
a) Location
A permanent physical location of an organization may not actually exist. Instead, an organization
may maintain an electronic presence in the marketplace. Physical facilities could be leased or
rented as needed. Manufacturing, if needed, could be outsourced.
Example

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Verifone is a good example of an organization with few physical facilities. Many employees
work out of their homes and keep in touch with each other and with company data via
information and communication technologies.

b) Organizational Interface or Boundary

Organizational interfaces or boundaries are generally linked to their business processes. These
interfaces include internal interfaces such as employee interfaces to business processes and
external interfaces such as stockholder, customer, supplier, trading partners, and government
agencies interfaces to business processes.
Example
Many organizations provide a virtual storefront, which customers can access, from the Internet
and browse through a catalog, order, and pay for products. Amazon.com is a company that sells
books through the Internet.
c) Organization Processes / Applications
An organizations business processes are easily linked to organizational interfaces for the
acquisition of products and the distribution of information. The automation of business processes
via computer applications has been a major industry over the last thirty-to-forty years.
Examples

Purchasing / Acquisition

Several companies have implemented an application to automate the purchase of office supplies.
These applications have a web interface that employees interact with. The business process has
not only been virtualized by being automated via software, but the access to it has been
virtualized in that employees interact with the application electronically and not through other
people. Amazon.com is an example of a company that has provided and linked its purchasing
and acquisition business processes with its external customer interface.

Education &Training
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A corporate training program or University can develop a set of training classes to be delivered
on-demand to students at their desktop or laptop computers via the Internet / Intranet.
Registration, payment, and assignments can be submitted via the Internet / Intranet. Questions
and answers can be facilitated through voice mail or email. Virtual Universities work in this
manner.

RFP / RFI Process or Hiring Process

An organization could place a Request for Proposal (RFP), a Request for Information (RFI), or
an ad for employment on the Internet along with response forms. Responding organizations or
people simply complete the form and submit it for processing. A number of companies,
Universities, and Colleges allow prospective employees to submit resumes via the Internet.

Customer Service

Customer service can be provided to customers via the Internet. Frequently asked questions,
known problems with fixes, trouble reports, and so on are easily created and made available to
customers. Electronic mail is another way to electronically reach out to customers.

Advertising

Products and services are easily advertised on the Internet. Advertising can be either static (e.g.,
a brochure) or dynamic where the advertisement can interact with customers. It seems as if every
organization has a presence on the Internet. Many resorts, movie theaters, and major corporations
advertise in some way on the Internet.

d) Organizational structure
Organizational structure refers to the degree of complexity, formalization, and centralization.
Robbins (1993, p. 487) defined organizational complexity as the degree of vertical, horizontal,
and spatial differentiation in the organization. Many of the elements of communication,
coordination, and collaboration among these distributed elements can be addressed by
information and communication technologies.

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Examples
Virtual teams are teams of people that primarily interact electronically and may never meet faceto-face. Virtual teams may include members of the same organization or may include people
from other organizations. It is immaterial where the team members physically reside. A good
example is a team whose members telecommute. Virtual corporations are corporations that have
expanded their value chain to include suppliers and / or customers to deliver better value to their
customers.
e) Products and Services
Products and services in the form of an electronic document, a video, an audio clip, a computer
application, and in some cases consultation can be ordered, paid for and delivered to customers
over the Internet. Images of physical products and services can be stored in an electronic catalog
and be ordered and paid for electronically. The physical item would then be shipped to or picked
up by the customer.
Example
An example of a virtualized service is a museum. Digitized images in a museum could become a
pay-per-view type of show. Customers could select a museum, pay the admission fee, and
browse through the electronic exhibits without leaving home. Common examples of virtualized
products include todays radio and television broadcasts.

9. RATIONALE OR BENEFIT OF VIRTUALITY

Some of the benefits of virtually organizing include the following:

Reduced operational costs.

Reduced costs of providing information.

A global presence (accessible from anywhere).

Always open for business (accessible at anytime).

Projects can be staffed with people based on competency regardless of physical location.
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People can connect with each other regardless of time, space, or organizational
boundaries.

Localized skills shortages can be overcome.

10. IMPLICATION OR COST OF VIRTUALITY

Some of the costs of virtually organizing include the following.

Additional hardware, software, and networks may have to be deployed.

Additional security may be required.

Some people may be required to virtually meet at non-traditional work times. For
example, people communicating in real-time but located in different parts of the world
may be several time zones apart. One persons workday may be other persons nighttime.

An organizational culture based on trust is a requirement for long-term viability.

People need to be trained in the technologies used.

11. CHALLENGES
Virtual organizations can be very complex and problematic; they fail as often as they succeed.
Among the many challenges of the virtual organization are strategic planning dilemmas,
boundary blurring, a loss of control, and a need for new managerial skills.
Strategic planning poses new challenges as virtual firms determine effective combinations of
core competencies. Common vision among partners is quintessential to cooperating firms.
Focused on a common goal, firms develop close interdependencies that may make it difficult to
determine where one company ends and another begins. The boundary-blurring demands that
these boundaries be managed effectively. Coordinating mechanisms are critical elements for
supporting these loose collections of firms.
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Virtual structures create a loss of control over some operations. This loss of control requires
communication, coordination, and trust among the various partners, as well as a new set of
managerial skills. Employees are exposed to increased ambiguity about organizational
membership, job roles and responsibilities, career paths, and superior-subordinate relationships.
This ambiguity requires management to rethink rewards, benefits, employee development,
staffing and other employee-related issues. Developing leaders who are able to create and sustain
these organizational forms is critical.
Les Pang offers a list of best practices, based on a review of successful implementations of
virtual organizations.

Foster cooperation, trust and empowerment.

Ensure each partner contributes and identifiable strength or asset.

Ensure skills and competencies are complementary, not overlapping.

Ensure partners are adaptable.

Ensure contractual agreements are clear and specific on roles and deliverables.

If possible, do not replace face-to-face interaction entirely.

Provide training that is critical to team success.

Recognize that it takes time to develop the team.

Ensure that technology is compatible and reliable.

Provide technical assistance that is competent and available.

Addressing the challenge of IT and Business priorities are also part of challenges.
The people challenges that need to be overcome include

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 Unrealistic expectations expectations of any part of the virtual organisation must be

achievable. Clearly defined objectives and solutions must be determined
Different culture members of a virtual organisation must be able to work together. Work
cultures must be similar; bit discrepancies will lead to problems
Collaboration over long-distances/time-zones people co-operate over long-distance or time
zones, this should not hamper workflow, the right IT solutions must be out in place
Diverse processes/procedures each member must understand his/her role, responsibilities and
objectives and so must the people that are included as part of the virtual organisation. These must
be clearly defined.
Management practices each member must be able to manage their objectives as part of the
virtual organisation to suit their needs and objectives.

11.1 SECURITY RISKS

The most challenging part of VOs is the establishment and maintenance of trust.
As pointed out, trust needs to be established at several levels: authentication, policy based
management, business rules. In it is claimed that trust is a cognitive phenomenon rather than an
affective one, meaning that it is based on rational calculations. The main challenges related to the
trust establishment are:

Each party has its own policies on access control and conditions of use.

The allocation of resources is often dynamic since the structure of VOs may change
dynamically. This implies that the VO initiator may not know until part way through the
job that additional resource X is required.

VO parties need to establish trust between them on a peer-to-peer basis.

Trust needs to be established on the fly, which means that some mechanism needs to
negotiate conditions of use, through the delegation of trust from one party to another.

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Parties may be located in different countries under different jurisdictions and, as a

consequence, adhere to different legal and business requirements.

Since VOs rely on IT, exposure to fraud or misuse of technology is a major concern.

Security systems of VO partners must be mutually trusted. This brings up the challenge to
come up with an effective and flexible security system.

Contract management needs to be effective in order to be able to quickly reconfigure in

VOs. Services for management of electronic contracts must be trusted.

SLA monitoring is important to ensure that parties perform according to contracts.

Confidentiality, privacy, integrity availability and accountability at a VO level have to be

assured. At the same time parties have to provide access to their services and resources,
as specified in agreements.

It is a challenging task to choose between different potential vendors/parties.

Sometimes options are closed and only few players are available on the market. In these
cases a VO initiator is to choose whoever is available.

It can be difficult to anchor an IT infrastructure in a VO.

People may experience as being forced to use it rather than as having it for assistance.

It may happen that dispersed project members are incapable of communicating in a

professional domain. For example, one may prefer open standard technologies, while the
other proprietary ones.

Trust is established by the means of digital identities, certification, access control mechanisms,
authentication, secure connection, reputation and inspection of the parties.

12. VIRTUAL ORGANISATION SOLUTION AND ENABLERS

Implementing a virtual organisation relies on the challenges above being adequately resolved.
The objective of the virtual organisation must be clearly defined and understood by its members
and employees. Part of the solution relates to empowering members and employees, this will
place them in control of their objectives. The implementation of a virtual organisation portal
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will enable members to effectively operate and access information, processes and applications to
enable them to achieve this goal. The information processes and applications must be globally
available in order to empower each member of the virtual organisation so that they effectively
operate. The virtual organisation portal provides a workplace solution on which members and
employees can:
Collaborate
E-learn
Information share
Web-conference
Delegate
Manage
Interact with customers, partners, suppliers
Project Manage
Transact Value
There is no hard and fast way to virtualize an organisation and which IT/Business path to follow,
there are many choices to be made, however some of the most important aspects that must be
addressed in order to create a successful virtual organisation include:
Virtualization must be based on user, market and customer requirements
Define SLAs with external service provider and internally if needs be
Integrate solutions end-to-end across the virtual organisation network
Implement security end-to-end across the virtual organisation network
Build in scalable solutions and flexibility
Make sure there is Value for each partner
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 Go for Some quick short term wins whilst developing the infrastructure /Organisation
Get hands-on management team even if it starts of as a project

12.1 ENABLING TECHNOLOGIES

There are a wide variety of information and communication technologies available from a wide
variety of suppliers, which provide the support for virtual organization.
Generic technologies include servers, personal computers, telephones, electronic mail, audio and
video conferencing, Internet / Intranet, browsers, databases, electronic catalogs, software
development tools, and applications such as accounting, financial, and human resources
packages.
The capability of these products is advancing rapidly. Some major trends that will enhance
virtual work in the future are continued miniaturization, lower costs, higher speeds of processing
and networking, increased storage capacity, and the convergence of voice, data, image, and
video. For example, there is newly available a cellular telephone that opens to a keyboard and
screen with access to the Internet. It easily fits into an attach case.

13. VIRTUAL ORGANIZATION PERFORMANCE MEASURES

They are critical for the evaluation of the success of the VO and its management. They are used
to follow the performance of:

VO as a whole: how the VO fulfils its objectives

VO partner performance: how a partner performs

VO collaboration measures: There may be different kinds of collaboration measures.

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They may describe the fluency of collaboration, achieved results, required coordination, errors
etc either as a whole or in bilateral relationships.

14. EXAMPLES
1) DELL
Dell Computers (US)--Companies are rapidly moving away from self-contained, vertically
integrated organizations to virtual entities that rely on business partners to fulfill major parts of
their supply chains. This means a company will outsource any part of its operations to companies
that can more efficiently, reliably and cost-effectively implement the work. For example, most of
the components in a Dell computer are made by other companies while Dell focuses on its
strengths--marketing, customer support and integration of these components into the final
computer products.
When buying a computer from Dell, the virtual organization includes the Dell customer service
rep, assembly line and assembly crew, supply people for various components, the UPS truck and
driver who delivers the computer and people from MasterCard who pay for it. All of the
inventory in the system, regardless of location and ownership of the company, can be viewed as a
single system.
Benefits may include overall lower inventory levels in the whole system and better customer
service. For example, Dell tries to keep as little actual inventory on hand as possible.

2)

AVENTIS

Aventis (France)--One of the world leaders in pharmaceuticals and agriculture, Aventis was
launched in December 1999 through the merger of Hoechst AG of Germany and Rhne-Poulenc
SA of France. Its engineering department in the United States was made up of many technical
islands that reported to different organizations and different businesses. There was no
consistency in work quality, no practical standards and little cooperation between any of the
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groups. In response, a virtual organization organized into five technical service groups (TSGs)
and one technology group (TG) was formed. The TSGs were developed around process
technologies and customer needs, not geography. The engineers in a TSG can be and are located
anywhere in North America. The TG is based in New Jersey primarily because of the economies
of a central lab facility. This new organization is highly mobile, focused on customer needs and
aligned with business goals. It shares technology, information and best practices.

3)

BRITISH TELECOM

British Telecom (Great Britain)--British Telecommunications PLC is one of the world's leading
providers of telecommunications services and one of the largest private sector companies in
Europe. In April 2000, the company announced a reorganization of its activities into new, selfcontained businesses that enable greater management focus. Process streamlining was initiated,
concentrating on the way in which orders progressed through the organization. The preparation
work was conducted in virtual teams where professionals from British Telecom and its
consultants worked closely. Using the Internet and the extranet, British Telecom was successful
in connecting the ordering system seamlessly to all the existing legacy systems in the
organization.
Processing time was drastically reduced within the expected time frame. The company can deal
with much greater volumes--three to four more than before--with the same number of people. A
BT spokesman indicated: "With better information more quickly available, it is easier for us to
convert leads into orders. Optimizing our electronic interface has vastly improved our
collaboration with telemarketing companies."

4)

SUN MICROSYSTEMS

Sun Microsystems has been considered another highly decentralized organization comprised of
independently operating companies. Sun positions information systems as a top priority, trying to
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achieve faster and better communication. With numerous "SunTeams," members operate across
time, space, and organizations to address critical business issues. Sun managers identify key
customer issues and then form teams with the critical skills and knowledge needed to address the
issue. This team might include sales people, marketing personnel, finance, and operations from
various places around the globe; customers and suppliers may become episodic members as
necessary. Weekly meetings may take place via conference calls. Critical to the team's success is
the selection of talent from the organization, defining a clear purpose for the team's efforts, and
establishing communication links among the team members.
Sun has been working on further development of technologies such as EDI (Electronic Data
Interchange) and RFID (Radio Frequency Identification technology). Both EDI and RFID will
impact information exchange globally and across numerous industries.

15. WHAT NEXT FOR VIRTUAL ORGANISATIONS ?

Virtual organizations are beginning to emerge and develop, the market conditions are right; the
technology is there along with the drive to do it. The appearance of true virtual organizations will
take time to appear; it may occur in a phased approach and develop out of many industries. The
automotive, IT/electronics and Telecoms service provision appear to be the most likely industries
to exploit virtual organization dynamics. Virtual organizations do not mean the imminent arrival
of another Dotcom type bubble; it is the creation of new business practices to meet the demands
of new market dynamics, being better able to react to the customer demands. Virtual
organizations will only work where there is benefit for all members, whether it is a centralized or
decentralized virtual organization. It is quickly being realized that in many emerging market it is
very difficult for individual enterprises to meet the demands of the individual and in many cases
expectations go unmet. These end-user needs can sometimes only be met through co-operation
and in a virtual way. Organizations and enterprises can work together in new ways without
leaving their core market and leverage becomes more important in these hard times of
commoditation. As convergence, integration, migration occurs between technologies, markets
and user demands, virtual organizations will be in a position to react to these changes.
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16. CONCLUSION
Organization needs and the enabling technology are now capable of creating new ways of
organizing people, processes, products / services, and interfaces and boundaries. Information and
communication technologies make it possible for organizations to virtual organize various
aspects of their business. Outcomes include virtual teams, virtual corporations, virtual
universities, virtual products and virtual communities.

BIBLIOGRAPHY
en.wikipedia.org/wiki/Virtual_organization
www.tekplus.com/TP0033R02V01.pdf
http://www.idi.ntnu.no/grupper/su/fordypningsprosjekt-2004/Jacobsen2004.pdf
www.isaca.org/Journal/.../Understanding-Virtual-Organizations.aspx

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