There are four main types of companies: Centralized, Decentralized,
Networked, and Virtual. There has been a clear trend toward virtual
companies, especially in the tech industry, just as you mentioned in
your question.
[Benefits of Being Virtual]
“Cost” - Alpine Access takes full advantage of the cost savings of
being virtual by making a two-fold approach. First, they offer
cheaper outsourced customer service to their clients. Secondly, they
have extremely low overhead costs, because their employees are
actually contractors who work out of their own home. In fact, they
pay their employees only a few dollars over minimum, require that they
pay for their own Internet and 2nd phone line, provide their own OSHA
approved work area, and buy their own equipment. So, although it’s
obvious that the employee doesn’t benefit from this arrangement, other
than being able to work from home, the virtual company saves a great
deal of money.
“Flexible” – Virtual companies have the luxury of outsourcing their
services to an unlimited amount of contractors. Employee Assistance
Programs, although not traditionally virtual companies, are well known
for outsourcing their services, such as presentations, counseling,
etc… This works well, because it can often be much more simple switch
out a contractor than it is to switch out an employee (firing and
hiring).
“Lean Management” - Virtual companies generally have the ability to
have the structure of a small to medium sized business, but have the
impact of a large corporation. Although all companies are performance
based, most traditional companies cannot adjust to the changing
market. Virtual companies have the flexibility to make quick changes
within a volatile market, unlike large corporations. Geoff Moore,
with regard to the momentum of virtual companies, said, “It should
come as no surprise that the companies destined for success in this
venue are the ones whose leaders recognize the pivotal position at
which we stand and are prepared to act upon it by demanding the
necessary standards for long-term dominance and investing to create
and promulgate them.”
“Consumers” – The customer can easily benefit from virtual companies.
First, there is the issue of cost. If virtual companies can outsource
and reduce their overhead, then the savings can be passed along to the
consumer. It is very hard, and has been very hard, for traditional
businesses to compete with virtual companies who have very low
overhead. Secondly, there is the belief that virtual companies offer
better and closer contact with their customers. Anytime the customer
feels appreciated, loyalty to that company/brand rises.
[Technical Requirements]
Dr. Heinz Thielmann, from the GMD Research Center in Darmstadt, has
listed the following necessities for virtual enterprises
- multimedia networking
- workflow systems
- groupware tools
- asynchronous forms of tele-cooperation
- multimedia databases and retrieval systems
- systems for data security
[Legal Implications]
Because virtual companies depend on contractors to fulfill their own
services, contracts between the company and the contractor can pass on
liability to the contractor. Therefore, if the contractor doesn’t
perform for a job promised by the virtual company to the customer, the
contractor may be held liable for loss of business or legal action.
Therefore, there seems to be reduced legal risk with a virtual
company, as opposed to a more traditional corporation.
[Future Implications]
There seems to be two trends in business at this moment. A trend
toward virtual companies, and a trend toward corporate consolidation.
However, it is expected that as the economy recovers, virtual
companies will begin to again see an increase in creation and
production. As for what the results will be, that will be determined
by the influence of large corporations lobbying the government to
continue to give themselves more advantages, and making it harder for
virtual or small to medium sized business to function in an
environment of monopolies and anti-competitive practices.
I highly recommend visiting @Brint.com. They are probably one of the
best resources on the Internet for Virtual Companies. There you will
find hundreds of articles discussing competitive strategy,
outsourcing, and productivity.
“@Brint.com – Virtual Corporations, Communities, and Outsourcing”
http://www.brint.com/EmergOrg.htm
“Telecooperation in open networks”
http://www.hoise.com/primeur/96/pr-96-oct/UH-PR-10-96-3.html
“The Virtual Corporation: Can We Ensure the Momentum?” by Geoff Moore
http://www.opengroup.org/opencomments/winter96/1_text.htm
“Alpine Access”
http://www.alpineaccess.com/
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