Case Study

Virtual Organisations
A small software company wants to bid for a new contract, which is beyond its scope of the resources. This company forms a Virtual Organisation (VO) with other similar small companies and by doing that it is suddenly able to compete with larger corporations to gain the contract.
A business traveller comes to a foreign country and wants to do something in the evening. He/she goes to a WLAN-equipped café and requests a multi-media city guide to be shown using his personal computer and the café’s facilities. This service can only be provided if the café, content providers, the user’s home service provider, and other network operators have previously formed a VO.
An Electronics Company (EC) produces equipment for broadband networks. EC develops software control modules for broadband networks and new strategic products. EC found out that it is more efficient and cost-effective to entrust the programming of the machinery to external parties. So, EC engaged itself in a VO relationship with multiple software vendors. EC runs several projects at a time and each project involves more than one vendor. External software vendors are small software shops situated either in the neighbourhood or far away. The business process goes typically in the following manner. A customer orders a network control unit from EC. EC assembles a project team responsible for this request. Project engineers design the product. A part of this product needs to be reprogrammed, and new code needs to be developed. Engineers determine the software specification. Software vendors are selected and the contracts with them signed electronically. Software specification is then sent to the vendors and after several days the vendor delivers the code electronically. Engineers download the code and continue developing their prototype for the customer. To develop new strategic products EC collaborates with similar companies located at other continents. These are long-term projects that aim to move broadband network technology forward.
The structure of a VO is distributed among multiple locations resulting in the capacity of bringing in a wider pool of skills and capabilities. Technology has made it much easier to support distributed work teams. Barriers of distance and time have been overcome by technology.
VO support dynamic changes to the organisation including employee work environments and processing structures. It allows the team members to willingly change products and services, geographic dispersion, communication patterns. This has the potential of leading toward higher levels of innovation and creativity.
? When different individuals, groups and organisations get together in a VO, they need to interact collectively to achieve success. This implies greater levels of collaboration, cooperation and trust.
Situations driving organisations to implement Virtual Organisations are:
? A need for process innovation–This is often motivated by competitive pressures to achieve increased productivity and quality. There is typically a 30 to 50 percent increase in productivity as result of implementing VO;
? Globalization–Many organisations are finally realizing there is a vast pool of untapped skills, knowledge and abilities throughout the world;
? Mobile workers– VO concepts can help the numerous companies employing mobile workers such as auditors, consultants, salespersons and service technicians;
? Cost Reduction–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–Quality of life is a major factor particularly in attracting and retaining quality employees. Employers have realized that a balance of work and personal life, family requirements, personal fulfilment and flexibility are important considerations among employees; and
? Costs and problems of travelling– VO address transportation issues, such as unproductive commute time, traffic hassles, the cost of fuel and environmental impact of commuting vehicles. When a large amount of companies is working after the virtual concept, big corporations producing mass products will have a hard time to survive. Their products are not custom made, so these products need to be cheap to make customers buy them. But when custom made products get almost as cheap as mass products, people prefer the personalized product.
Source: Gupta, S & Gupta, G. (2015). Information Security and Cyber Laws. Khanna Book Publishing: New Dehli.


  1. As the HR manager of an IT company – “Webbly”, your CEO has decided that as a web development organisation, it would be beneficial to transform the organisation into a virtual organisation. Compile a report to your CEO on the benefits and challenges that can be anticipated with a virtual organisation (30 marks)
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