The Role of Information and Communication Technology in Virtual Organizations

Zlatko Nedelko, Vojko Potoan, Ph.D. Faculty of Economics and Business, University of Maribor, Slovenia E-mail: zlatko.nedelko@uni-mb.si, vojko.potocan@uni-mb.si Abstract. New forms of organizational structures have emerged in response to challenges in modern information and communication technology (ICT), one of which is the virtual organization (VO). Technology (e.g. especially ICT) is a central construct around which the VO is built. The virtuality of VOs can be manifested in several ways. Participants of VOs frequently form virtual teams (VTs) in order to collaborate with VO members in different parts of the world. In this paper, we present two theses: (1) ICT is a central construct around which the VTs of VOs are built, and (2) VTs are a possible solution for connecting globally dispersed members of VOs.
Keywords: virtual organization, virtual team, ICT, geographic dispersion.

1. Introduction The hyper-competitive global economy has created a new competitive landscape one in which events change constantly and unpredictably [14, 18, 26]. The conditions of globalization require companies to transform from traditional and industrial to modern and post-industrial, with more flexibility and innovation. The trends that appeared simultaneously with the development and increasing application of ICT, and which have the greatest influence on the organizational structure, are [18, 26, 33]: (1) business globalization; (2) change in the employment structure; (3) elimination of boundaries not only between the parts within the organizations, but also between individual organizations; and (4) growing complexity. The VO is the newest form of business organization which has emerged over the past few decades [31, 51]. The term VO was first introduced by Davidow and Malone in 1992, who referred to the VO as a broad vision of the future which included any new form of organization based on ICT [1, 12]. Therefore, ICT is the central construct around which the VO is built and also enabled by [51]. Davidow and Malone (1992) had a vision of the organization of the 21st century by recognizing the potential and real capabilities of ICT for forming a modern organizational structure. The VO has the capability of the real organization, although it

does not have the prevalence of tangible assets and permanent employees, which is more common among traditionally structured competitors [25]. Virtuality in the VO can manifest itself in different ways, such as [45]: tele-work, virtual linkages with suppliers, e-learning, outsourcing, off-shoring, electronic market places, and VTs. In this paper, we explore virtual teams, which are frequently used in the business practice of VOs. Recent improvements in ICT have resulted in many new organizational forms as well as new ways to better use teams. One of these innovations is the VT [47]. VTs enable VOs to bring together members with specialized experts, who may be scattered around the globe and in different time zones, and who may work for different organizations [9]. VTs are only one among several possible ways to manifest virtuality in the VO, as VTs bring together geographically dispersed members of the VO. Due to the geographic dispersion of VO members, VOs must increasingly rely on VTs in order to achieve the benefits of the virtual organization (e.g. forming VTs). The paper discusses two theses: (1) ICT is a central construct around which the VTs of the VO are built, and (2) VTs are a possible solution to connect globally dispersed members of the VO. In this contribution, we shall, therefore, focus on: the framework for understanding the concept of VO, the role of ICT in the VO, a framework for understanding VTs and the role of ICT in the context of the geographic dispersion of the VO. 2. A framework for understanding the VO A distinguishing feature of the 21st century is the prevailing and pervasiveness of different types and forms of networks, whether digital, social, or organizational. The term network, both a noun and a verb, is one of the most widely used words in our everyday vocabulary [7, 54]. A VO is a collection of functionally or/and cultural diverse entities, scattered around the globe, which are linked by ICT. The VO is a combination of several independent

organizations, separated by a broad geographic distance [31, 41]. Members of the VO are bound by a long-term interest or goal, and communicate and collaborate through ICT [1]. The VO is a collection of business units in which people and work processes representing different business units interact intensively in order to perform work, which benefits the collective group [38, 39]. Although the virtual business organization has become a relatively widespread business approach to structuring companies, the underlying concepts of linking competencies across business units or organizations have been in existence for some time. These business linkages enable organizations to coordinate transactions and activities more tightly across a value chain. Virtual reality, virtual space, VOs, and VTs: virtual is todays organizational buzzword [7, 11, 14, 18, 27, 40, 51]. The VO enables organizational and/or individual core competencies to be brought together when needed and disbanded when no longer required [4, 23, 50, 53]. These new firms mirror the fluidity of the global markets, creating and disbanding resources as dictated by the marketplace. Global location, along with technical, workforce, and market expertise advantages, can be heightened through the use of a virtual organizational structure [11, 14, 16, 41, 51]. Instead of trying to develop a single definition of VO, we emphasize the following features of the VO, which are very common in the literature [35, 36, 42, 51]: (1) lower importance of physical structure, because there are fewer physical assets (e.g. offices, warehouses); (2) ICT is a central construct around which VO is built; (3) mobile work is enabled by ICT; (4) the organization does not have boundaries; and (5) flexibility and quick response to a turbulent business environment. The reasons for developing a concept of the VO are numerous [19, 34, 42, 51]: (1) improvements in ICT, especially during the last decade of the previous century and rapid development of the Internet; (2) changes in the business environment due to globalization and fierce competition; (3) the need for rationalization in different business areas of the organization (e.g. reduced travel expenses); and (4) the desire of members of organizations to work from home. Not all organizations are appropriate to become totally virtualized, as going virtual is either impossible or does not make any sense

[34, 51]. For example, a car manufacturer cannot become totally virtualized; because it cannot produce cars in virtual space, but on the other hand, it could (form) have VOs with its suppliers. There are five dimensions in which an organization can organize itself virtually [19]: (1) location from physical location (e.g. manufacturing organizations) to virtual location (e.g. amazon.com); (2) boundaries and interfaces between processes; (3) organizational processes automation and elimination of unnecessary processes; (4) products and services the organization can present its products and services in e-form, but the physical delivery still remains and services are different because the organization cannot produce services and send them to customers due to the nature of services; and (5) organizational structure, which explains the how the organization is organized. An organization can virtualizes itself in several dimensions. The degree of virtuality of an organization is dependent on the basic activity of the organization. It is also important to take into consideration which processes an organization wants to virtualize and if virtualization makes sense [19]. Due to fierce competition and the trends in the business environment mentioned above, many traditionally organized organizations focused only on core activities, and all other noncore activities were outsourced. The concept of core activities is based on strong integration between the remaining core of the organization and suppliers performing non-core activities for the core [22]. The rationale for forming a virtual business organization varies for the different entities involved in each relationship [18, 24, 46]. The desire to excel in a market characterized by hyper-competition has motivated a growing number of organizations and individuals to search for uncommon associations to help develop creative and perhaps more effective strategies. VOs are able to generate new products more quickly, decrease the risk of pursuing a new opportunity, increase the visible organization size, and decrease cycle times by relying on synergies of the core competencies of all members [8]. Some other benefits of forming VOs are: the possibility for VO members to work from home, information sharing between dispersed members of the VO, global presence (24 hour organization), elimination of the shortage of experts who arent collocated,

reduced expenses in the organization, and so on [17, 19, 34]. On the other hand, the use of a virtual organization also has several disadvantages, including [17, 19, 34]: Reduced possibility for social interaction among members of VO, who are scattered around the globe; Feeling of isolation due to the lack of physical contact among VO members or from working at home; Destroyed work-life balance, because working from home can be very dangerous if one is not self-disciplined; Increased expenditures from the purchase of (missing) ICT; Problems emerging from the 24-hour organization (e.g. working outside regular working time different time zones); Cultural differences among VO members, who are scattered around the globe and can belong to different cultures; and Lack of appropriate training for VO members regarding the use of modern ICT and other disadvantages. 3. ICT as a base for VO From the cognitions above, it is clearly seen that ICT has played a central role in development of the concept of VO and continues to play this role, especially in organizing the VO [36]. Even before the advent of the Internet, people and organizations collaborated and were linked through telephone lines, faxes, and satellite communications. Organizations now have a variety of options for collaborating with one other. We can find many terms which are used interchangeably to cover what the term ICT refers to (e.g. multimedia, information technology) [12]. One among several proposed definitions refers to ICT as a fusion of telecommunications and computers. Computers enable their users to work creatively, but users are limited because they cannot collaborate with other computer users and cannot access other sources of information. By adding a communication channel such as the Internet, the capability of the computer is significantly increased. The computer, which is connected to the Internet, is much more valued in comparison to the computer which is not connected to the Internet [21].

Another definition suggests that ICT consists of hardware, software, telecommunications, databases, and other technologies that an organization uses, not only VOs [13]. For our discussion, we conclude that ICT, which also enables the VO, is a general term and includes all information technologies used by the VO, including e-mail, the Internet, wireless communication, groupware, and other specialized business applications. Later, we will see that technology, which supports the work of the VT, includes groupware and according to our definition of ICT, is only one part of ICT. We distinguish between ICT and groupware in order to make it clear that ICT enabling VO in first row and groupware VT working. ICT makes the concept of VO possible, but on the other hand, to have a successful VO, much more is needed than just an injection of ICT in the VO [15]. Authors on VOs and VTs have different opinions about the mentioned concepts. Typical manifestations of virtuality in organizations are [45]: Outsourcing the partner relationship; Relationships with supply chain partners; E-business; E-learning; Virtual communities; Telework; Distributed teams (e.g. VTs); and Off-shoring. According to the characteristics of the VO, we assume that the VOs need to form VTs in order to connect the dispersed elements, which are scattered around the globe. VTs become very important for VO. We need to keep in mind that the advantages and disadvantages of the VO are very similar and, in many cases, are the same as the pros and cons of the VT. This is evident when VOs use VTs. We now shift the focus to VTs and to the part of ICT groupware. 4. Understanding the VT The VT is comprised of people who work across space, time, and organizational boundaries and are scattered around the globe [2]. According to several definitions of the VT, the four most common characteristics mentioned are as follows [3]:

Members are geographically dispersed; Teams are enabled by groupware; Members are driven by a common purpose, and Success requires collaboration across time, space, and organizational boundaries. Based on these characteristics, several challenges emerge. People who are globally dispersed are often of different nationalities, meaning that the virtual team will bring together diverse people who are in various locations. The inclusion of geographically distant members creates a new problem as well: dealing with different time zones, which can result in significant obstacles when trying to implement real-time collaboration within a virtual team [10]. From above mentioned cognitions we can conclude that the groupware is a central construct which enables VT members to collaborate [6]. Groupware includes a broad range of tools which are available for teams to support their work. These tools emerged over the years and have various names, with the most frequently used tools being: computer meditated communication systems (CMCS), computer supported collaborative work (CSCW), group support system (GSS) and groupware [6]. The most frequently used tools among VTs are [48]: Audio conferencing; Video-conferencing; Electronic mail; Voice mail; Document sharing; and Video-conferencing playback. Groupware available to VTs can also be distinguished into two groups [54]: Synchronous technologies information is sent and received almost simultaneously (e.g video-conferencing); and Asynchronous technologies the receiver receives information at a different time from when it was sent (e.g. electronic mail). Besides modern groupware, which emerged over the last several decades, the Internet is also of huge importance, because it is a base for communication between the dispersed members of VOs or VTs, if the VO forms a VT [6]. Besides groupware technology in VTs, another important component is communication among VT members [28, 49]. In comparison with traditional (face-to-face) teams in VTs,

much or all of the communication takes place outside of traditional face-to-face conversations. Communication and collaboration between VT members are enabled by groupware, which supports the work of virtual teams [29]. Communication channels available to VTs are various and include a variety of synchronous and asynchronous tools [37]. The key benefits of VT usage are [6, 34]: Flexibility the members of VT can be scattered around the globe with no need to relocate for participation in meetings; Reduced costs and minimization of lost time because of less travel, fewer office locations, and so on; Members are able to work from home; and Appropriate experts can be included because these experts can be located worldwide. However, on the other hand, VT members often encounter problems such as a lack of facial contact [6], feelings of isolation [30], destroyed work-life balance [47], communication problems, stress [28], and an inability to select appropriate technology according to the tasks of the VT [35]. 5. The role of ICT in VOs In the following section, we first present a model of how to measure the degree of virtuality. We focus on only one among several virtuality influencers and emphasize the role of ICT in comparison with the degree of the virtuality of the VO. The degree and dimensions of virtuality are rather fuzzy terms, and most of the discussions on these terms have been qualitative in nature [45]. Several authors have introduced the differentiation of VOs by looking at different characteristics like organizational routines and design processes, organizational structure, functions, and roles [32, 43, 45]. Little work has been done to develop a clear enunciation of virtuality in the VO. However, significant conceptual clarity seems to be emerging through recent research on virtuality in VTs [5, 45]. Virtuality in VOs has been examined by Scholz as a measurable construct [45]. Virtuality can manifest itself in different ways (see Chapter 3). An analysis of major manifestation points can be aligned along three dimensions [45]: the external customer direction virtuality with respect to all customer categories;

the internal customer virtuality with respect to all employees of the VO; and the value chain partner virtuality including linkages with all value chain partners (e.g. suppliers, alliance partners, subsidiaries, and service providers). According to the virtuality model [45] presented in the previous paragraphs, all customers, employees, and value chain partners represent members of the VO. Later, we will show that the geographic dispersion of VO members is only one among several virtuality influencers. Since the degree of virtuality of the VO is a complex criterion, and one which includes several important virtuality influences, we are unable to take into consideration all of the influencers of virtuality found to be important in the model. For the purpose of our discussion, we assume that the geographic dispersion of the VO members is a partial criterion (and/or a part of complex criteria) for the degree of virtuality in VOs. We defined geographic dispersion as the physical dispersion of VO members around the globe [44]. In our case, the continuum of geographic dispersion begins with a single location, where all VO members are at a single location, to global, where VO members are scattered around the globe. In order to emphasize the importance of ICT for the VO, we now focus on VTs, which are a manifestation of the virtuality of the VO, as well as on groupware, which supports VT work and is a part of ICT. The usage of groupware varies from minimum to maximum (see Fig. 1).

Global

Geographic dispersion

1.2 High geographic dispersion and minimal usage of groupware

2.2 High geographic dispersion and maximal usage of groupware

Single location

1.1 Low geographic dispersion and minimal usage of groupware

2.1 Low geographic dispersion and maximal usage of groupware

1.1 Low geographic dispersion and minimum groupware usage - in this case, the VO members are at a single location and the usage of groupware is close to the minimum. The proximity of the VO members enables them to meet face-to-face, because it is very inconvenient to form VTs when all members of the VO are in proximity. 1.2 High geographic dispersion and minimum groupware usage - members of the VO are no longer in proximity, as in 1.1. Now they are scattered around the world, but are reluctant to form VTs and do not take advantage of forming VTs. Members of VO waste the huge potential of using VTs in order to diminish the greatest obstacle in their collaboration geographic dispersion of the VO members. 2.1 Low geographic dispersion and maximum groupware usage - Although the VO members are in close proximity, they use VTs instead of face-to-face team meetings. In this case, they use the potential of groupware, but it is very time consuming and may not be, in some cases, the optimal solution in comparison to having a traditional face-to-face meeting. 2.2 High geographic dispersion and maximum groupware usage - The VO members are scattered around the globe and the usage of groupware is maximum, because its members form VTs in order to connect globally dispersed members of the VO. In this case, the VO is using much of the potential of ICT and is taking advantage of the use of the VT. VTs can be used to connect the VO members who are either in close proximity or globally dispersed (see Fig. 1). ). But this perspective left aside the role of ICT for VO, looking from the perspective, how dispersed are its members. Now we are emphasizing the role of ICT for VOs. There is a strong positive correlation between the role (importance) of ICT for VO and the geographic dispersion of VO members [45]. Due to the fact that groupware is a part of ICT, for the purpose of our discussion, we can assume that the role of groupware is also positively correlated with the geographic dispersion of VO members (see Fig. 2).

Minimum Usage of groupware

Maximum

Figure 1. Increasing role of groupware with geographic dispersion

Global Geographic dispersion

Global Geographic dispersion Single location Low High Low High Importance of groupware for VO Benefits of virtual organizing for VO

Single location

Figure 3. Benefits of virtual organizing for VO Figure 2. Positive correlation between the importance of groupware for VOs and the geographic dispersion of its members

The picture above shows that the importance of groupware for VO increases with higher dispersion of the VO members. When all VOs are in a single location, forming VTs is very time consuming and in some cases, it does not even make sense to have a VT session when all members are in close proximity. The importance of groupware to support the virtual team is low in this situation. On the other hand, when the VO members are globally dispersed, the importance of groupware for VO is crucial. In comparison with co-located VO members, globally dispersed members can not simply have face-to-face interactions. The cognitions above clearly show that groupware plays a crucial role in VOs in which all members are globally dispersed. The higher the geographic dispersion of the VO members is, the more important the role of ICT for the VO is. From the presented cognitions and experiences from business practice [2, 31, 34, 45] we can conclude that benefits of virtual organizing are higher when members of VO are geographically more dispersed. Virtual organizing could bring various benefits for VOs. The real benefits of virtual organizing occur when the VOs members are scattered around the globe [34, 45, 46, 47]. Otherwise the cost of organizing collocated elements of VO virtual, could outweigh the benefits of virtual organizing (see Fig. 3)

The possible benefits of using VTs (e.g. appropriate groupware) as a manifestation of virtuality are optimal only when we connect globally dispersed members of VOs. The key benefits, for the VO itself and for its members, are as follows: Reduced travel expenses and costs associated with accommodation; Less stress due to less travel; Higher productivity because less time is wasted on traveling; and Flexibility, because members of the VO can meet in virtual space and form VTs in a very short time (compared to face-to-face meetings). 6. Conclusion The VO can manifest itself in several ways. VOs frequently use VTs in order to connect globally dispersed members. ICT is a central construct around which the VO and its VTs are built. VOs differ among themselves in spite of the degree of virtuality. One of the many virtuality influences is the geographic dispersion of VO members. Groupware plays a crucial role in VOs in which members are globally dispersed, because they are not able to easily connect dislocated members. All VOs are organized virtually, but the real benefits of VOs are achieved only in those which members are globally dispersed. The key benefits are reduced travel cost and costs associated with accommodation and less stress due to a reduced amount of travel for VO members.

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