Virtual enterprise

A virtual enterprise (VE) is a temporary alliance of businesses 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 distributed collaborative networks.^[1] A virtual enterprise is a particular case of virtual organization.

Contents 1 Definitions 2 Characteristics 3 Projects 4 Communities 5 CNO life cycle 6 References 7 Further reading

Definitions

Several definitions include:

• "…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 some common characteristics summarized as:

• 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

Several European Union projects in the Framework Programmes for Research and Technological Development focused on virtual enterprises:

• Business Integrator Dynamic Support Agents for Virtual Enterprise (BIDSAVER) from January 2000 through June 2002^[2]
• Working group on Advanced Legal Issues in Virtual Enterprise (ALIVE) from January 2000 through December 2002^[3]
• Legal issues for the advancement of information society technologies (LEGAL-IST) from April 2004 through March 2007^[4]
• European collaborative networked organizations leadership initiative (ECOLEAD]) from April 2004 through March 2008^[5]
• Secure Process-oriented Integrative Service Infrastructure for Networked Enterprises (SPIKE) from January 2008 through December 2010^[6]
• Glocal enterprise network focusing on customer-centric collaboration (GloNet) from September 2011 through August 2014 ^[7]

An overview of related projects (up to 2005) can be found in a book by Camarinha-Matos et al. (2005)^[8].

Communities

Since 1999 the International Federation for Information Processing (IFIP) and Society of Collaborative Networks (SOCOLNET) sponsored an annual conference called the Working Conference on Virtual Enterprises (PRO-VE).^[9]

Over the last couple of decades, we have seen a major shift from an industrial economy to that of an information economy. This led to new technology to help capitalise on the information economy. Virtual enterprises allow businesses to specialize and be flexible within their environments. This business model had been applied to outsourcing and supply chains, as well as temporary consortia. Because 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.^[10] A comprehensive overview of the state of the art, methods and tools can be found in Camarinha-Matos et al. (2008) ^[11].

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.^[12]

As with all types of enterprises, virtual enterprises present both benefits and challenges. Benefits include more economical connections with suppliers, greater opportunities to create revenue, more efficient operations, and a reduction in administrative costs. Challenges facing virtual enterprises are: inexperienced users, security, expense control, and the level of incorporation required to create a successful virtual enterprise.^[13]

Examples of virtual enterprises on the Internet included Virtual Music Enterprises (from about 2004 through 2010)^[14] and Virtual Enterprise California which is part of the Virtual Enterprises, International educational group.^[15]

CNO life cycle

Because a virtual enterprise is considered a collaborative networked organization (CNO), its organizational life cycle is different in terms of time spend on creation (entrepreneurial stage) and dissolution (decline).^[16] The CNO life cycle includes the stages:^[17]

• 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

Further reading

• Chakma, J., Calcagno, J.L., Behbahan, A., Mojtahedian, S. Is it Virtuous to be Virtual? The VC Viewpoint. Nature Biotechnology 27(10), 886-888 (2009).
• 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.