Virtual organization in ecommerce study: the underlying concepts

Virtual organization (VC) (or network organization) is a complete business model, with its major functions being carried by different organizations (as nodes of a network). There are a few concepts underlying the model. They are as follows:

a. A company (as a leader of the virtual organization) leads and control the other VC nodes without owning these nodes; this is made much easier with the Internet platform (though this can still be done without the Internet)
b. A virtual organization overs the problem of geographical frictions with the Inernet; that is, the various VC nodes need not be spatially close to each other
c. A virtual organization is strategically opportunistic: it is formed promptly to take advantages of the opportunities in the marketplace. In this case, the business risk is shared by all the VC nodes and the fixed cost for doing so for the individual node is lower than otherwise.
d. A virtual organization is made up of nodes (ie individual organizations) that possess core competence in the functions that they share in the VC.
e. A VC should be capable of conducting Business Process Re-engineering at the VC level; to do so, individual VC nodes should have knowledge to carry out BPR (re: http://en.wikipedia.org/wiki/Business_process_reengineering) at their own internal business set-up.
f. A VC requires a virtual information system (VIS) to support; in this case, the information systems (IS) of the VC nodes should be able to "plug in and play" with the IS of other VC nodes. Major enterprise systems solutions are increasingly able to support this VIS requirement.
g. A VC is opportunistic in its dealing with the marketplace; on the other hand, the relationship among VC nodes depends on trust among the nodes; and trust cannot be implemented with IS; trust is not a technical/ engineering task in essence.

The following diagram is illustrative:

These are the main points about VC. You should also refer to Venkatraman and Henderson (1998) for a theoretical framework on this VC model, among others.
References

1. On Networked organizations: http://www.skyrme.com/insights/1netorg.htm
2. On Virtual Organizations: http://www.analytictech.com/mb021/virtual.htm
3. Plug and play: http://www.pcguide.com/ref/mbsys/res/pnp-c.html
4. Understanding virtual organizations: http://www.isaca.org/Journal/Past-Issues/2001/Volume-6/Pages/Understanding-Virtual-Organizations.aspx
5. Venkatraman, N. and Henderson, J.C. (1998) "Real Strategies for Virtual Organizing", Sloan Management Review, Fall, pp. 33-48.