The Virtual Organization and Information Technology (Part 5/5)

Author: Eric Torkia, MASc/Sunday, March 6, 2011/Categories: Monte-Carlo Modeling, Analytics Articles

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Collaboration and TechnologyOrganizations seeking to develop a virtual business model must also be in a position to effectively implement it on a business level and on a technological level. (Venkatraman, 1994; Venkatraman & Henderson, 1993,1998).
One of today’s hottest IT topics is how to cheaply and effectively inter-connect processes. Collaboration emerged out of the relative cheapness and ubiquity of Internet technologies. Champy (2002) states ”E-business is a natural reaction to today’s competitive environment[i]. But e-business means a lot of things to a lot of people. In current literature, e-business has taken on several definitions over time i.e.:
·         Strategic approach
·         A set of enabling technologies (Porter, 2001),
Since technology is a critical success factor to any virtual organizing strategy, the analysis of e-business is interesting due to its business focus and its ability to flexibly and rapidly support changing business needs and requirements. In essence, e-business is a composite of the above-mentioned perspectives and whose definition can be used inter-changeably with virtual organizing because of its open technologies and collaborative strategies.


Inmon et al. (2001) formally define e-business as IT and Internet enabled projects that develop inexpensive, reliable and highly dynamic supply chain relationships, which ultimately improve quality and reduce inventory levels[ii]. In our definition of e-business we would like to interchange supply chain for value chain, thus taking into account all the activities that are performed by the firm to design, produce, market, deliver and support a product or service including knowledge and outsourced business processes (Porter, 1985,2001). (See Figure 14: Prominent applications of the Internet in the Value Chain, M.E. Porter, Harvard Business Review, March 2001 in Appendix A: Models and Frameworks)

The fundamental business rationale is not new. Before the Internet and e-business, there was EDI (Electronic Data Interchange). EDI was the solution to integrate with other organizations IT systems and was generally perceived as a technical means of connectivity rather than an approach to doing business. Given that EDI was usually proprietary and required hefty investments in IT & process integration, it had the potential of creating partner or supplier lock-in issues (Shapiro & Varian,1999; Porter, 2001). Davenport (2000) adds “EDI is sometimes described as an expensive technology, but its costs pale in comparison to the human costs of agreeing on information and process standards”. Thus suggesting significant adoption barriers and potentially why EDI was never really widely adopted within the IT community as a primary means of business and process inter-connectivity.
Venkatraman (1994), suggests that an organization seeking to achieve greater levels of flexibility should look at their business in terms of relationships and processes in order to refocus IT on business capability or cost reduction/quality issues. In the same article, he defines a business-oriented version of EDI called BNR - Business Network Redesign (cited below). What is interesting is that he defines BNR in the same way most organizations now define e-business. His comparison of EDI and BNR yield most of the same differences as between EDI and common e-business strategies[1] à The former is technology driven and proprietary and the latter is business driven and uses an open platform that is the Internet[2]. Given the strong business focus and cross-organizational context of BNR, we have adopted it as part of our operating definition of e-business.
“Articulating the strategic logic to leverage related participants in the business network to provide products and services in the marketplace; exploiting IT functionality for learning from the extended network as well as for coordination and control.” Venkatraman (1994)
Distinctive Characteristics
Electronic Data Interchange
E-business (BNR)
Dominant Objective
Data interchange
Interdependencies across independent organizations
Primary Domain
Technical domain; data elements
Business domain; business partners
IT (and IS) managers
Business managers
Management Focus
Operational; tangible
Strategic; intangible
Collaborative advantage
Competitive advantage
Performance Assessment
Efficiency and technical standards
Effectiveness of business arrangements
Action Steps
Unique (firm specific)
Figure 7: EDI vs e-business[3]
Of course, organizations’ ability to implement these strategies has been greatly facilitated by the emergence of the Internet and integrated solutions (Venkatraman & Henderson, 1998). More specifically, the Internet provided solutions to telecommunication and compatibility issues spanning heterogeneous systems through new standards like SOAP[4] , XML[5], Java, HTML, ASP, etc. which have translated in applications and solutions (a.k.a. e-business technologies) such as:
·         Web services,
·         EAI-Enterprise Application Integration,
·         ERP – Enterprise Ressource Planning and
·         Intranets/Extranets
·         Data Warehousing[6].
We constructed the model below to highlight the various areas where technology and enterprise relationships intersect (we will cover this model in greater detail in future posts). However, collaboration is not strictly a technological proposition. Nor is it a choice of one set of technologies versus another. It is a set of tools and systems to support organizational processes. For the purposes of this study, we define e-business initiatives as those who enable an organization to operationalize one of the vectors cited, more specifically those at an inter-organizational level requiring ERM – Enterprise Relationship Management.
The Technology Partnerz ERM Technology Framework
Source: Technology Partnerz Ltd., 2007
Again, many researchers [Champy, 2002; Inmon et al 2001; Hagel, 2003; Ash & Burn, 2001] agree that one of the key factors in ensuring e-business project success within a virtual organizing environment is to effectively identify, select and integrate the right partners – all reminiscent of the old adage “A chain is only as strong as its weakest link”. Given the increasing complexity of business offerings and the partner networks to support them, effective management of the technology  component becomes a pillar of any collaborative strategy

[1] E-business strategies are use interchangeably with virtual organizing strategies
[2] Also includes Virtual Private Networks and Private IP Networks
[3] Adapted from EDI vs Business Network Redesign in IT-Enabled Business Transformation: From Automation To Business Scope Redefinition, N. Venkatraman, Sloan Management Review, Winter 1994
[4] Simple Object Access Protocol
[5] Extended Markup Language
[6] For the purposes of this study, these technologies will be collectively referred to as e-business technologies.

[i] X-engineering the corporation – James Champy, Warner Books 2002
[ii] Data Warehousing for E-business – W.H. Inmon, R.H. Terdeman, Joyce Norris-Montanari and Dan Meers, Wiley 2001



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