Virtual corporation

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A virtual corporation is a firm that outsources the majority of its functions. Typically, a small group of executives will contract out and then coordinate the designing, making, and selling of products or services.

The defintion of virtual corporation as presented here (a firm that outsources the majority of its functions. Typically, a small group of executives will contract out and then coordinate the designing, making, and selling of products or service) needs be reexamined. It is not necessarily about "outsourcing" and the negative connotations that term implies. It can be about cooperative compensation in a network structure that encourages wins for all participants.

For example, Virtual Publishing Company wants to contract with writers to write ad then to sell those books over the internet in an e-book format. Virtual Publishing Company needs a website, a facility for trasferrring files, software for formatting e-books into acceptable and copy protected forms, advertising, etc. They do not need buildings, printing presses, paper, janitors, lunchrooms, corporate jets, etc. A cooperative compensation structure might involve network marketing at its best, offering commission sales to free affiliates who publisize and sell Virtual Publishing books via newsletters, websites, etc, perhaps in affiliation with such virtual companies as Commission Junction, Clickbank, LinkShare, or other such agencies. Affiliates can be paid commissions for direct sales. They can be paid comissions for sales through their own networks of agents. They can be paid commissions for bring writers into Virtual Publishing, writers whose e-book sell, generating revenue and profit for all involved. Because thee is little in the way of fixed costs and overhead, there is more money in the profit pool to share among all who help generate that revenue and those profits.

The motivation is to allow a small group of knowledgeable executives to find the optimum price/performance supplier for any given service and to concentrate internal efforts solely on the "big picture." Virtual corporation executives expect outsourced functions will be nimble, rapidly ramping up production without having to develop people and core competencies. In practice, successful virtual corporations are scarce due to difficulties in constructing contracts. Short-term, profit-centered relationships implied by the virtual structure discourage co-operation across outsourced organizations. Therefore, contracts must ensure that outsourced functions get the priority and quality needed to meet the virtual corporation's business goals. Like any outsourced function, contracted function partners must share the virtual corporation's interpretation of "quality," which is easier to enumerate for developed code (e.g., with test suites) than it is for some other functions (e.g., marketing, human resources). As a result, there is a tendency for partners (who may behave as disinterested suppliers) to defect (in prisoner's dilemma parlance) by providing products that are "up to specs," but that fall short of the quality level that is actually needed for overall business success.

The term was a buzzword in the 1990s for several reasons. The concept became popular during the dot-com era. Traditionally organized companies began to rely on outsourcing to perform functions that were either new services or existing services at anticipated lower overall cost. Some dot-com businesses took this to an extreme, with only the idea generator and a few colleagues as the employees of their actual corporation. The idea that you actually didn't need to have regular employees in all basic corporate functions to be a major player caught on. Thus, virtual corporation became one of the typical ways of describing this phenomenon. By the turn of the century, Some types of businesses (especially software-centered ones) were about to restructure into a web of temporary outsourcing deals. The existence of the internet enabled complex communication, coordination, and cooperation across the web of the virtual corporation's contracts.

However, the support technology of the time was not up to the support task. Now, with the advent of web services, new virtual corporation possibilities can be supported. With the advent of new web services, the virtual corporation structure does not just apply to fast-changing software-centered corporations. Other more traditional producers of consumer goods and services are experimenting with outsourcing or partnering on functions that used to be considered essential core competencies. Like the dot-commers of the 1990s, these traditional business executives hope to manage the complex structure of their entire value chain, while they focus on a more narrowly defined core competency or differentiator such as marketing or simply branding their products. At their worst, virtual corporations neglect financial and ethical responsibilities to the people who work for their outsourced suppliers/partners. News media and public pressure have caused some large companies to recognize their nobless oblige responsibilities.

Globewide Network Academy was one of the world's first virtual corporations ever actually incorporated, more than 10 years ago in Texas, Austin http://www.gnacademy.org/.

A virtual corporation, virtual organization or virtual enterprise is a manifestation of Collaborative Networks.

A large number of researchers in this area are organized around the non-profit SOCOLNET - Society of Collaborative Networks.

REVISED -

A virtual corporation is a company which exists in cyberspace and not in the real world. Instead of a physical address as registered offices, it has IP address. Instead of faxes they use email, and so on. With most documents being digital, there is no need for physical offices anymore.

[edit] References

• HarperCollins Publishers (1992). The Virtual Corporation. ISBN 0-88730-593-8. 
• Bob Travica (August 15-17, 1997). "The Design of the Virtual Organization: Research Model".