Virtual organization or Network or Modular organizations

The Evolution of Virtual Corporations

The term was a buzzword in the 1990s for several reasons. The concept became popular during the dotcom era, when demand was high for new kind of services that traditionally organized companies relied on outsourcing to perform. In the day of the dot-com related businesses it seemed like everyone was so busy that they had to outsource most of their jobs to someone else. The idea that you actually didn't need to have a large number of regular employees to be a major player caught on, and thus virtual corporation became one of the typical ways of describing this phenomenon .

 The term represents the new information age and the partnering and outsourcing arrangements found in an increasing number of global companies The virtual organization is temporary network of companies that come together quickly to exploit fast changing opportunities. Typically a small organizations that outsources major business functions. Virtual organizations highly centralized with little or no departmentalization

A virtual organization or company is one whose members are geographically apart, usually working via networked computer applications while appearing to others to be a single, unified organization with a real physical location "an organization distributed geographically and whose work is coordinated through electronic communications."

Network structure
Is a cluster of different organizations whose actions are coordinated by contracts and agreements rather than by a formal hierarchy of authority Often network structure become very complex as a company forms agreements with a whole range of suppliers, manufactures and distributors to outsource many of the value creation activities necessary to produce and market goods and service

Virtual organization
Independent research and development consulting firms Advertising agency

Executive group

Factories in South Korea

Sales representatives

 Maximum flexibility, create networks of relationship that allow them to contract out manufacturing , distribution, marketing or any other business functions when management feel that others can do it better or more cheaply Virtual organizations share costs, skills and access to international market Each partner contributes to the organization what is best at its core capabilities

Three Driving Trends in Virtual Globalization of markets, products and resources/labour Information/Knowledge Work 70% of work is information intensive Technology Performance; Connectivity; Portability

Key attribute of virtual organization

Technology : partnership will be based on electronic contracts to speed the linkups Opportunism: company will band together to meet all specific market opportunities No borders: co-operation among competitors and suppliers Trust: sense of co-destiny means that the fate of each partners is dependent on the other Excellence: possible to create best of everything

Advantages
Why companies use a network structure to control the value creation process rather than perform all functional activities itself To the degree than an organization can find a network partner that can perform a specific functional activities reliably and at a lower cost, production costs are reduced To the degree that an organization contracts with other organizations to perform specific value creation activities, it avoids the high bureaucratic cost of operating a complex organizational structure Allows an organization to act in an organic way. If the environment changes it can quickly alter its network in response

Disadvantages
Mutual adjustment is needed to permit the groups to interact so that they can learn form one another and constantly improve the final product Managers must be there to integrate, the activities of the group to make sure their activities mesh well coordination problem It would be difficult to obtain the ongoing learning that builds core competences over time inside a company because separate companies have less incentive to make such investment. As a result many opportunities to cut costs and increase quality would be lost The boundary less organizations is composed of people who are linked by computers, faxes, computer-aided design systems and video teleconferencing, who may rarely or ever see one another face to face.

Networked virtual organization

Built on information, not hierarchy Adapts and grow, is not planned Designed to leverage the most important organization asset-the knowledge worker Based on process, not physical location of assets.

Telework definition
Telework is a form of organizing and/or performing work, using information technology, in the context of an employment contract/relationship, where work, which could be performed at the employers premises, is carried out away from those premises on a regular basis.
Source : framework agreement on telework, July 16, 2002

Market Forces Driving Mobility

Realities of Todays Economy Organizations must do more with less Globalization = geographically dispersed organizations Business Culture today Requires Communication Efficiency Information must be available 24 x 7 Enhanced collaboration Todays Workforce Expects Flexibility People want to live where they want to live New generation of workers demand flexibility