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What Is a Virtual Organization?


As Scott McNealy said:  “The Network IS the Computer”. How prophetic that seems to have become!


As more and more organizations look towards virtualization of their organizations we need to better define just what this organization may eventually become. The purpose of a virtual organization is to address critical resource, personnel and logistical issues as they relate to critical business processes that directly impact the functioning, management and profitability of the organization.


Concepts of a virtual organizations:

  1. A flexible network of independent entities linked by information technology to share skills, knowledge and access to others' expertise in non-traditional ways

  2. A form of cooperation between companies, institutions and/or individuals delivering a product or service on the basis of a common business understanding. The units participate in the collaboration and present themselves as a cohesive organization.

  3. Virtual organizations do not need to have all of the people, or sometimes any of the people, in one place to deliver their service. The organization exists but does not consist of tangible structures. It is a network, not an office.

  4. The structure of a Virtual Organization is distributed among multiple locations resulting in the capacity of bringing in a wider pool of skills and capabilities.

  5. Telecommunications and computing technologies serve as the enabler that makes a Virtual Organization exist. One could argue that Virtual Organizations have always existed--traveling sales staff, outsourced staff and staff working at home. However, what is new is that technology has made it much easier to support distributed work teams. Barriers of distance and time have been overcome by technology.

  6. Organizations no longer are constrained by traditional barriers of place and time. Virtual Organizations support dynamic changes to the organization including employee work environments and processing structures. Organizations can now be flexible to change products and services, geographic dispersion, communication patterns. This has the potential of leading toward higher levels of innovation and creativity.

  7. Integration--When different individuals, groups and organizations get together in a Virtual Organization, they need to interact collectively to achieve success. This implies greater levels of collaboration, cooperation and trust. Integration leverages the synergy of individuals.


Driving Forces behind the Virtual Organization Implementation.


  • A need for process innovation is often motivated by competitive pressures, stakeholder demands and other factors to achieve increased productivity and quality. There is typically a 30 to 50 percent increase in productivity as result of implementing Virtual Organizations.

  • Sharing core competencies within a Virtual Organizations help address the dynamic business and personnel demands in an organization that often result from start-up, turnover and retirements.

  • Globalization of skills available to an organizations are making available a vast pool of untapped skills, knowledge and capabilities throughout the world.

  • Cost reduction by Improving efficiency often means reducing overhead, such as physical assets used to support traditional work environments or redistributing costs over several physical locations.

  • Changes in employee values and attitudes toward work and quality of life is a growing factor; particularly in attracting and retaining quality employees. Employers have realized that a balance of work and personal life, family requirements, personal fulfillment and flexibility are important considerations among employees.

  • Costs and problems of traveling allow Virtual Organizations to address transportation issues, such as unproductive commute time, traffic hassles, the cost of fuel and the environmental impact of commuting vehicles.


Approaches to implement a Virtual Organizations include:


  • Telecommuting - individuals work at a location away from the usual workplace, but not necessarily at home. Computers and telecommunications equipment are used to maintain contact between the telecommuter and the home office.

  • Telecenters -These satellite offices typically are located in communities outside of major cities and provide space and equipment for workers commonly not available in the telecommuter's home.

  • Mobile working -This is the working environment of mobile workers who require tools such as cell phones, e-mail wireless devices, pagers and laptops.

  • Workspace Sharing -This arrangement is for offices in which staff members spend a significant amount of time on customer premises or working remotely. With the removal of permanently assigned desks to all or some of the employees, when in the office, they simply select a computer workstation where they can access their documents, files, applications and e-mail.

  • Virtual teams -Workers collaborate from remote locations using e-mail, groupware, the Intranet and/or video conferencing.


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