Virtual enterprise

A Virtual Enterprise (VE) is a temporary alliance of enterprises that come together to share skills or core competencies and resources in order to better respond to business opportunities, and whose cooperation is supported by computer networks.It is a manifestation of Collaborative Networks and a particular case of Virtual Organization.

There is much discussion regarding the definition of virtual enterprises. Examples:

• "…a temporary network of independent institutions, businesses or specialised individuals, who work together in a spontaneous fashion by way of information and communication technology, in order to gain an extant competitive edge. They integrate vertically, unify their core-competencies and function as one organisation (or organisational unit)” (Fuehrer, 1997);

• “…a temporary network of independent companies, suppliers, customers – even rivals, linked by information technology to share costs, skills and access one another’s markets. It will have neither central office nor organisational chart… no hierarchy, no vertical integration…” (Byrne);

• “…a temporary network that exists through telematic networks and aims to share skills, resources, costs and benefits to achieve one or more projects answering to the market opportunities for products and services” (Pallet);

• "…an identifiable group of people or organisations whose use of ICT is substantially greater than with other types of organisation, thereby reducing the necessity of their physical presence together for the transaction of business or for doing work collaboratively in order to realise common objectives" (Hill, 1997);

• “…refers to a new organisational form characterised by a temporary or permanent collection of geographically dispersed individuals, groups or organisation departments not belonging to the same organisation – or entire organisations, that are dependent on electronic communication for carrying out their production process” (Travica, 1997);

• “…the VE does not exist in the physical sense but only on an electronic network representing a partnership of businesses existing as a nebulous form of business organisation that only exists to meet a market opportunity” (Campbell Alistair);

• "…a dynamic alliance between organisations that bring in complementary competencies and resources and that are collectively available to each other, with the objective of delivering a product or service to the market as a collective" (Ten Have amongst others, 1997);

• “…a strategic alliance amongst non-competing companies who share forces – using mostly ICT – for the accomplishment of a specific goal without losing their autonomy – except for the undertakings set forth in the VE agreement – and with the aim of avoiding the formation of a new legal entity” (Maurizio Raffaini, 2001).

Characteristics

All of these definitions indicate a number of characteristics common to virtual enterprises. The specific features can be summarised as follows:

* boundary crossing
* complementary core competencies
* geographical dispersion
* complementary nature of the partners
* participant equality
* extensive use of information and communications technology
* temporary
* no creation of a new legal entity

Projects

The following European Union projects are focused on virtual enterprises:
* Business Integrator Dynamic Support Agents for Virtual Enterprise ( [http://cordis.europa.eu/fetch?ACTION=D&CALLER=PROJ_IST&RCN=54837 BIDSAVER] )
* Working group on Advanced Legal Issues in Virtual Enterprise ( [http://cordis.europa.eu/fetch?CALLER=PROJ_IST&ACTION=D&DOC=1&CAT=PROJ&QUERY=1177336189612&RCN=54091 ALIVE] )
* Legal issues for the advancement of Information Society Technologiesand ( [http://cordis.europa.eu/fetch?CALLER=PROJ_IST&ACTION=D&DOC=1&CAT=PROJ&QUERY=1177337662233&RCN=71925 LEGAL-IST] )
* European Collaborative networked Organizations LEADership initiative ( [http://cordis.europa.eu/fetch?CALLER=PROJ_IST&ACTION=D&DOC=1&CAT=PROJ&QUERY=1177337407414&RCN=74487 ECOLEAD] )

Communities

A large community of the Virtual Enterprises area gather annually around the [http://www.pro-ve.org PRO-VE] conference.

Over the last couple of decades, we have seen a major shift from an industrial economy to that of an information economy. This has led to an enormous increase in competitiveness among companies, and new technology is needed to help capitalise on the information economy. Virtual Enterprises (VE) are a new and major trend in the cooperative business, or B2B, scenario. Virtual Enterprises allow businesses to specialize and be flexible within their environments. In the past, this business model has been applied to outsourcing and supply chains, as well as temporary consortia. Due to the fact that the formation of Virtual Enterprises is an intricate process, a new form of technological support has been developed. The most ambitious of the support systems actually intends to automate part of the creation process, as well as the operation of these enterprises (Cardoso & Oliveira, 2005).

The strategic guideline of virtual enterprise, where the objective is to sell goods rather than services, is the Electronic Commerce Model, which is made up of three factors: content, community, and commercialisation. The first two factors, content and community, are used to attract web surfers to a website for the first time, and then to keep them coming back. The third factor, commercialisation, is extremely important in determining the success of the virtual enterprise. After the content and community have been established, the virtual enterprise must use commercialisation techniques to come up with ways to earn a profit. The implementation of the three elements of the Electronic Commerce Model greatly influences the operational performance of a virtual enterprise (Tanlamai & Wattanasupachoke, 2005). Example: Amazon.com

As with all types of enterprises, virtual enterprises present both benefits and challenges. Organisations can benefit from virtual enterprises through more economical connections with suppliers, greater opportunities to create revenue, more efficient operations, and a reduction in administrative costs. The challenges facing virtual enterprises are: inexperienced users, security, expense control, and the level of incorporation required to create a successful virtual enterprise (Sun Microsystems, Inc., 2004).

Virtual Organisations defy the conventional rule for operating an organisation. They do so by accomplishing tasks traditionally meant for an organisation much bigger, better resourced, and financially stable. A company having the technical capability, one with the right human skill set, the other with the solution, may come together to create a VO.

Today, there are numerous virtual enterprises on the Internet. Virtual Music Enterprises ( [http://www.virtualenterprises.co.uk/] ) is one example of a virtual enterprise, and Virtual Enterprise California lists several other examples ( [http://www.virtualenterprise.org/] ).

Another example of a Virtual Enterprise would be an educational class operating worldwide and in which students in many locations come together in a "virtual classroom" to form a business. They do not conduct real transactions, nor do they sell real merchandise. The class is simply to learn how to start and run a business. The Business is usually replaced at the end of the year for the next group of students. The students do business with many companies, and even hold trade fairs and grand openings. More about this is here on http://www.virtualenterprise.org/

CNO-life cycle

Because a Virtual Enterprise (VE) is a manifestation of Collaborative Networked Organizations (CNOs), the Virtual Enterprise has a specified life cycle different from the Organizational Life Cycle of Quinn and Cameron (1983) in terms of time spend on creation (Entrepreneurial Stage) and dissolution (Decline). Next, a short description of the CNO-life cycle according to Camarinha-Matos and Afsarmanesh (2007);

The CNO-life cycle stages consist of the following stages;
* Creation (Initiation and Foundation): During the initiation a strategic plan is made for the operational stage and the foundation of the CNO is executed by the constitution and actual start up.

* Operation: Execution of operations within the defined scope of the strategic plan.

* Evolution: The context of virtual organizations is rapidly changing and therefore in continuous evolution of its operation within the current strategic plan, this means, minor alterations.

* Metamorphosis or Dissolution: Because a CNOs did gained much experience during it relatively short life (compared to Brick-and-Mortar Organizations) they either keep the knowledge my metamorphosing into a new organization (changing its form) with a new purpose or dissolute.

References

* Camarinha-Matos, L. M., and H. Afsarmanesh. "A Comprehensive Modeling Framework for Collaborative Networked Organizations." Journal of Intelligent Manufacturing 18 (2007): 529-42.
* Cardoso, H.L & Oliveira, E. (2005). Virtual Enterprise Normative Framework within Electronic Institutions. Retrieved June 7, 2006 from http://paginas.fe.up.pt/~eol/PUBLICATIONS/2005/esaw_post.PDF
* Quinn, R.E. and Cameron, K. “Organizational Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary Evidence.” Management Science 29 (1) (1983), 33-51.
* Raffaini, Maurizio (2001). Virtual Enterprise Legal Framework, in Bidsaver Project (IST 10768), Bruxelles;
* Raffaini, Maurizio (2001). The Virtual Organisation, in Proceedings of the 7th International Conference on Concurrent Enterprising, Bremen;
* Raffaini, Maurizio (2001). Microsatellite Pilot Case Legal Issues, in Bidsaver Project (IST 10768), Bruxelles;
* Raffaini, Maurizio (2001). Mechanical Equipment Pilot Case Legal Issues, in Bidsaver Project (IST 10768), Bruxelles;
* Raffaini, Maurizio (2002). The nature and legal identity of the VEs, in Alive Project (IST 25459), Bruxelles;
* Raffaini, Maurizio (2002). The VE Legal Identity and the actors’ roles, in Proceedings of the 8th International Conference on Concurrent Enterprising, Rome.
* Sun Microsystems, Inc. (2004). Identity Management: Technology Cornerstone of the Virtual Enterprise. Retrieved June 7, 2006 from http://www.sun.com/software/products/identity/wp_virtual_enterprise.pdf
* Tanlamai, A. & Wattanasupachoke, T. (2005). E-commerce Model of Virtual Enterprises in Thailand. The Business Review, Cambridge. Vol.4, Iss. 1; p. 296-302.