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irtual organization is linked toa variety of seemingly disparate

phenomena, including virtualmemory, virtual reality, virtual

classrooms, virtual teams, and vir-tual offices. Virtual memory

enables programmers to write codereferring to storage not actually

available in the computer. Virtualreality enables a user to experience

visual, auditory, and tactile sensations that do notexist in the normal human environment. Virtualclassrooms offer students possibilities for learningnot available in a given classroom [5]. Virtual teamsallow managers to assemble groups of employees tomeet transient, unanticipated needs [3]. Virtualoffices allow employees to operate in dynamicallychanging work environments [1, 2].

These phenomena exemplify virtual con-structs, sharing a common organizationalprinciple much like the defining characteris-tics of an algebraic system. A group, forexample, serves as a model for a disparate col-lection of structures, including numbersystems, permutations, linear transfor-mations, some binary codes, the auto-morphisms of a graph, and a host ofother systems consisting ofa set of elements togetherwith a binary operation sat-isfying certain conditions.

The principle common

to virtual constructs is expressed in the notion I callvirtual organization [4, 6, 7] (see the sidebar“Applicable in Social As Well As in Information Sys-tems”).

This introduction has three aims: Show that vir-tual organization captures the essential features ofthe disparate virtual constructs; describe its poten-tial advantages, limitations, and prerequisites inbusiness organizations; and indicate the types andrange of problems that can be solved through virtualorganization.

What It IsTo derive the formal definition, I examine a net-working application—a kiosk—revealing the essen-tial features of virtual organization. This applicationis designed to serve as an access point and gateway toa variety of public (electronic) services.

Public acceptance of kiosk services is highlydependent on the match between the require-ments and offerings that deliver the services andthe abilities and desires of potential users. For thekiosk to be useful, it must be easy to use and act

as the gateway to a mix of products and ser-vices relevant to the needs of its intendedusers. Therefore, the kiosk design mustaccount for the demand side, or the needs

and concerns of the potentialclient, as well as the supplyside, or the services and deliv-ery mechanisms available. Oneway to ensure a balance

Abbe Mowshowitz, Guest Editor

A virtually organized company dynamically links its business goalswith the procedures needed to achieve them.

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Virtual organization integrates and generalizes sev-eral specialized constructs useful in the design of com-puter systems and networks. Virtual memory, virtualmachines, and virtual circuit routing are well-knownexamples; less evident perhaps is that virtual realityalso belongs to this family of constructs. But virtualorganization has an even wider scope, in that it is alsouseful in modeling social systems.

The wide applicability of virtual organizationderives from some basic principles it offers for design-ing and managing systems to improve their efficiencyand effectiveness. Anyone with a role in the design,development, deployment, or management of systemsin organizations can profit from these principles.

However, since it is a relatively new idea, virtualorganization lacks a universally accepted definition,lying as it does at the confluence of several intellectualstreams fed by reflection on computers and theirapplications. Characteristic of each stream is a newway of thinking about the organization of computer-based systems, but the confluence reaches beyondcomputers to embrace a variety of human activities.

The ferment of ideas centering on virtual organiza-tion reminds me of the early days of electronic com-puters, when cybernetics and information theorycaptured the imagination of scientists, philosophers,and managers. Today, as then, a kind of “unified field”theory is being sought, but now it must account fororganization in all its guises and contexts. The notionof virtual organization—touching on computers, oper-ating systems, simulation, networking, management,community, even human personality—has the requisitegenerality. For theorists and practitioners alike, themain challenge is to chart the operative principles andthe “boundary conditions” constraining its application.

This special section captures some of the diversityof thinking about virtual organization, offering a firstattempt at synthesis. Every scientific domain has itsown peculiar conceptual and methodological culturethat inevitably leads specialists to cast ideas in eachdomain’s idiom. So it is not surprising to find scien-tists from different intellectual backgrounds approach-ing virtual organization in different ways, whichexplains much of the difference in their vocabularyand treatment. The four features and the four shorterarticles were selected to provide insight into the ideaof virtual organization and to illustrate its power andlimitations in computer and social systems.

I sketch a theory of virtual organization expressed

as a set of principles for metamanaging goal-orientedactivity based on a categorical split between taskrequirements and their satisfiers. In this formulation,the essence of virtual organization is the systemic abil-ity to switch satisfiers in a decision environment ofbounded rationality.

Turoff introduces and explores “virtuality,” a con-cept generalizing and extending “virtual reality” whileaddressing the transformation of potential or imagin-able computer-based systems into real ones. In termsof my own formulation, inappropriate use of switchingin a computer-based virtual organization can generatea continuous stream of requirement-satisfier pairsthat fail to account for changing organizational goals.Turoff is concerned with the reification of simulatedsystems—a practice that could dictate undesirablesocial choices.

Faucheux examines the social-psychological dimen-sions of virtual organization, viewing metamanagementas a formalization of action-oriented social sciencerequiring interaction and cooperation betweenobserver and observed. Self-consciousness, realized invirtual organization as the systematic exploration ofdecision criteria, requires the observer to be a partici-pant-actor in the management process.

Hiltz and Wellman investigate new forms of com-munity arising from virtual organization. Their focuson the virtual classroom anchors the discussion inempirical research on social issues pertaining to newforms of human community.

These ideas are also illustrated by the four shorterarticles. Hardwick examines the industrial virtualenterprise, describing how the National IndustrialInfrastructure Protocols Project facilitates develop-ment of such enterprises. Chellappa, Barua, andWhinston discuss “virtual universities” and the elec-tronic infrastructure needed for their realization.Mannoni describes a virtual museum on the World-Wide Web created by the French Ministry of Culture.Zajtchuk and Satava review medical applications ofvirtual reality.

This section shows that virtual organization can beused in a variety of settings to enhance the efficiencyand effectiveness of systems and to motivate man-agers and participants to reflect on organizationalgoals. Doing these things in a systemic way is theadvantage virtual organization has over ad hocapproaches to organizational structuring and restructuring.

Applicable in Social As Well As in Information Systems

between supply and demand is to model delivery ofkiosk services as a management problem involvingthe dynamic assignment of available resources torequests.

This problem can be formulated as: Requests forservice (e.g., information, advice, or transactions) viaa kiosk (or multifunctional access point) must be sat-isfied through available services (databases, humanexperts, or expert systems). Note that both therequests and the set of available services vary dynam-ically over time. Requests vary because the publichas rather diverse information needs, and servicevariations occur for organizational or technical rea-sons. For example, on the organizational side, ahuman expert might be serving another client or beunavailable due to illness; on the technical side, asystem may be temporarily out of service or a com-munication link may be nonfunctional. Moreover,requests, taken collectively, may change over time,and the family of services may also change.

To accommodate the dynamic character of theproblem, the process of assigning services to requestsmust itself be dynamic. This condition can be satis-fied by means of virtual organization, an approach tomanagement that explicitly recognizes the concep-tual distinction between functional requirementsand the means for their realization in practice, as wellas providing a framework for accounting for dynamicchanges in both requirements and available services.

The virtual organization approach makes explicitthe need for dedicated management activities thatexplore and track the abstract requirements neededto realize some objective while simultaneously, butindependently, investigating and specifying the con-crete means for satisfying the abstract requirements.

These complementary but distinct activities areessential in a dynamically changing organizationaland technological environment. By logically separat-ing requirements from the means for their satisfac-tion, management—human or machine—creates anenvironment in which the means for reaching a goalare continually and routinely evaluated in relation toexplicit criteria. This management structure ensuresthat requirements are satisfied as appropriately aspossible at all times.

Virtual organization can be characterized in termsof four basic management activities that depend onseparating requirements from satisfiers:

• Formulation of abstract requirements (e.g.,requests for information);

• Tracking and analysis of concrete satisfiers (e.g.,information services);

• Dynamic assignment of concrete satisfiers to

abstract requirements on the basis of explicit cri-teria; and

• Exploration and analysis of the assignment crite-ria (associated with the goals and objectives of theorganization).

The logical separation of requirements from satisfiersallows management to switch the assignment of sat-isfiers to requirements so as to optimize performanceon the basis of explicit criteria.

For example, to a user asking the kiosk for service,it does not matter where the service is located. Theinformation, expertise, and transaction capability canbe nearby or across the country. The user is con-cerned only with having his or her request met effec-tively and efficiently. In some cases this can be doneby retrieving information from a database or obtain-ing answers to questions put to an expert system; inother cases, a human expert may have to be con-sulted—easily accomplished by means of an emailfacility. So the service provider need not be in thesame place at the same time as the client. Moreover,requests made by clients and the services providedcan be decoupled without sacrificing the quality ofservice. Such freedom from the usual spatial andtemporal constraints of service provision makes itpossible to devise a flexible system for meeting thepublic’s information service needs.

The virtual organization approach exploits theadvantages of switching through a dynamic assign-ment procedure. Assignment of available services torequests can be viewed as a many-to-many mappingof requests to services that changes over time. Forexample, a request for information about employ-ment opportunities might be handled by a humanexpert, by an expert system, or by an intelligentdatabase. Having such a capability means that man-agement in the virtual organization may switch arequest, or abstract requirement, for information toany of several different services.

The ability to switch systematically allows for ahigh degree of flexibility in providing cost-effectiveservices. I stress the systematic character of switch-ing because it is an essential feature of virtual orga-nization. Conventional corporate management mayoccasionally switch between options, but it normallydoes so on an ad hoc basis, whereas in virtual organi-zation, switching is standard operating procedure;that is, it is a basic management principle of thisinnovative form of organization.

Virtual ConstructsTuroff in this special section relates virtual constructsto a more general concept he terms “virtuality.” Here

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I show how these constructs can be viewed asinstances of virtual organization.

Virtual memory. Virtual memory is a way of orga-nizing the information storage function in a multi-tasking or timesharing computer system. Thefunction can be characterized as the satisfaction ofdynamically changing requirements for storage inthe machine’s primary memory. The requirementsare satisfied by switching information between pri-mary and secondary memory. Such switching isbased on a conceptual distinction between virtualstorage and the primary physical storage of themachine, where the former refers to the storageneeded by the programs sent to the operating systemfor execution. Secondary storage serves as a physicalapproximation of unlimited virtual storage.

Demand for storage corresponds to the model’sabstract requirements, while the physical storagedesignates concrete satisfiers. Virtual memory worksby dynamically mapping virtual storage, or require-

ments, to primary storage cells, or satisfiers. In per-forming this function, the operating system acts asmetamanagement. Assignments of physical cells tovirtual ones are made according to the explicit crite-rion of using the physical memory as efficiently aspossible; these assignments are then tracked by theoperating system.

Network switching. Like virtual memory, networkswitching addresses the problem of how to makeefficient use of resources, in this case a network’stransmission facilities. Here too a distinction isdrawn between circuit requirements (a logical trans-mission path connecting A and B) and circuit satis-fiers (a set of physical transmission channelsconstituting a physical path between A and B).

Assignment of physical circuits to logical trans-mission paths is subject to shortest-path and quality-of-service criteria (if specified). Operationally, thisprocess differs according to the type of network—local area or wide area or the Internet. But in all ofthese networks, a logical transmission path (abstractrequirement) may be met by several different physi-

cal circuits (concrete satisfiers), and the same require-ment may be met on different occasions by differentsatisfiers. Thus, one can view the operation of a net-work switch as an instance of metamanagement inwhich switching (in the virtual organization sense) isused dynamically to satisfy given criteria.

Virtual team. Whereas virtual memory and net-work switching involve the organization of physicalsystems, the virtual team is an instance of socialorganization. “Virtual team” designates an abstractrequirement for a group of individuals that collec-tively possesses certain skills. In principle, many dif-ferent groups might have the requisite mix of skillsand could play the role of concrete satisfier in a par-ticular (virtually organized) task. Distinguishingbetween requirements and satisfiers makes it possi-ble to switch from one group to another as condi-tions demand.

Virtual organization forces management to makegoals explicit, because of the central role played by

switching. Assignment of satisfiers to requirementsare made according to explicit criteria. Moreover, thecriteria used—like requirements and satisfiers—aresubject to change. In a business, changes in marketconditions may call for altered strategies in R&D,production, distribution, or marketing. Intense mar-ketplace competition makes continual change neces-sary. Virtual teams to meet ever-changing taskrequirements provides the flexibility a businessneeds to compete effectively.

Virtual reality. This construct appears at first glanceto be different from the others, because the manage-ment function is not explicitly defined. But closerinspection reveals that all the ingredients of virtualorganization are present.

In practice, virtual reality offers a simulated worlddefined by computer-mediated sensory input. Suchworlds may offer users, for example, virtual tours ofa museum or shopping mall, replete with visualimages, sounds, smells, and possibly tactile stimula-tion. Calls for virtual experience involving certaincharacteristics constitute the abstract requirements

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Virtual organization is practicable because computers

make it possible to minimize the cost of switching between

alternative requirement satisfiers.

of virtual reality. The satisfiers are the sequences ofsensory input furnished to the user. Metamanage-ment is defined by the system’s responses to userrequests or reactions.

Logical separation of calls for virtual experience(abstract requirements) from sequences of sensoryinput (concrete satisfiers) allows dynamic switchingfrom one sequence to another in the assignment ofsatisfiers to requirements. The duration of a particu-lar assignment in virtual reality applications may bequite short, and two successive assignments may notdiffer much, giving the impression of a seamless arti-ficial world. However, metamanagement is verymuch in evidence, its functions being performed bya computer program.

Advantages, Limitations, Prerequisites Promising greater flexibility and responsiveness, vir-tual organization can be used to improve resourceutilization, achieve better quality products and ser-vices, strengthen managerial control, and lowercosts. These potential advantages derive from twomain sources: systemic use of switching as a man-agement principle and explicit formulation of goals.

Both depend on structuring tasks for handlingrequirements independently of satisfiers. Such a taskstructure ensures that “solutions” are assigneddynamically to “problems” according to criteria of“bounded rationality.”

Consider the shipping function in a company’scatalog sales division. Suppose the company serves aregional market and offers four levels of delivery ser-vice: same day, overnight, three-day, and two-week.Furthermore, suppose the company has a truck anddriver dedicated to same-day delivery and uses sev-eral outside firms, say, United Parcel Service, FederalExpress, and the U.S. Postal Service, for the otherservice levels.

In a conventionally managed company, relationsbetween the shipping department and the deliveryservices (including the company’s own truck anddriver) are driven largely by chance, personal rela-tions, and habit. Manager Bob just happened to hearsomething complimentary about UPS and decidedto try it. After a while he got chummy with the localUPS agent and continues to call the agent because hehas been doing so for years. Positive reports aboutthe delivery service reinforce his attachment; nega-tive reports are rationalized away.

When choices are made this way, there is littleroom for systematic assessment of the matchbetween service requirements and the means for sat-isfying them. Connections are hard-wired, and themanager’s freedom of action is highly circumscribed.

Metamanagement replaces hard with soft connec-tions. Instead of relying on one service for, say,overnight delivery, Bob is always on the lookout formore cost-effective alternatives, continually reexam-ining service requirements, scanning the market-place for new delivery firms, and tracking theperformance record of the firms he is currentlyusing. Moreover, he applies detailed, objective infor-mation about performance to switch from one firmto another to get the “best possible” results, that is,to reduce delivery costs and improve service to hisclients.

Over time, some service levels (requirements) maybe eliminated—for example, same-day service maybe discontinued; and new ones (e.g., one-week deliv-ery) added. Similarly, some delivery services (satis-fiers, like the in-house unit) may be eliminated andnew ones (e.g., Airborne Express) added to the list.Such changes could (and do) occur in conventionallymanaged companies, but they occur more or less bychance, rather than by design.

The categorical separation of requirements andsatisfiers forces the manager to make the assignmentcriteria explicit, unlike the case in conventionallymanaged organizations. When, for example, a par-ticular delivery firm is hard-wired to a service, thereare few occasions for assessing performance in lightof the division’s goals, and managers can avoid criti-cal scrutiny of goals. In metamanagement, the neces-sity of dynamically assigning satisfiers (from atheoretically unbounded list) to requirements makesassessment of performance unavoidable. Under theseconditions, it is necessary, at the very least, to clarifygoals and thus to subject them to scrutiny.

Metamanagement expands the universe of oppor-tunities and promotes reflection by providing aframework for exploring requirements, satisfiers,and assignment methods and criteria.

Like everything else, virtual organization has lim-itations. Excessive switching, for example, canincrease rather than lower costs. Systemic switchingallows for always having the “best” available satisfierfor a given requirement, but switching from one sat-isfier to another is not without cost. Changing from,say, UPS to Airborne Express for overnight deliveryrequires some accounting adjustments (e.g., negoti-ating payment terms and recording a new paymentaddress) and changes in shipment-tracking proce-dures (e.g., noting a new set of telephone numbers).If switching is done too often, the savings from alter-native satisfiers could be offset by the costs incurredin making the necessary adjustments.

Virtual organization is practicable because com-puters make it possible to minimize the cost of

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switching. Consider what has to be done to switchfrom one satisfier to another. Whether the satisfiertakes the form of a person furnishing knowledge andskill, an organization providing a product or service,or a computer system offering expertise or process-ing, it has to interface with the entity whose require-ment is to be satisfied.

In our example, the service provider, whether thecompany’s truck and driver, UPS, FedEx, or thePostal Service, must interact effectively with thecompany’s shipping division. Inquiries must be han-dled; business forms (e.g., price lists, purchaseorders, and invoices) exchanged; and payments sent,received, and processed. Each of these transactionspresupposes agreement (implicit or explicit)between the parties on procedures to be followed. Insome cases, the procedures (e.g., in responding toquestions in a telephone conversation) are embeddedin a shared culture; others (e.g., the exchange ofstructured business forms via computer) call forshared protocols specifying the types of hardwareand software to be used and providing the partieswith detailed instructions.

Computer technology makes it possible to accom-plish these transactions efficiently and thus facili-tates switching. Unstructured information exchangeis supported by email, groupware, conferencing pro-grams, and related software; computer-to-computerexchange of transaction data can be arranged bymeans of electronic data interchange on private net-works and by electronic commerce on the Internet;funds transfer is provided by computer-supportedpayment systems.

These computer-supported facilities accomplishthe organizational equivalent of editing functions.And for switching to be cost-effective, the operationsperformed with the aid of these facilities must be aseffortless as editing functions. Substituting one sat-isfier for another is akin to a cut-and-paste operation.Consider the replacement of, say, UPS by AirborneExpress. UPS is “cut” from the shipping division’sservice provider network, and Airborne Express isthen “pasted” in its place. The interface betweenshipping division and service provider is preservedby the operation. If the service providers are repre-sented as nodes in a graph, the operation would cor-respond to the relabeling of a node. The systemic useof switching in virtual organizations is in its infancy.Further development depends on elaboration andrefinement of such organizational operations as cutand paste.

Computer-based information commodities (prod-ucts and services), organizational standards, andfinancial derivatives are some of the key sociotechni-

cal innovations making cut-and-paste-type opera-tions feasible. Information commodities reducedependence on humans; organizational standardsprovide uniform human-organization and organiza-tion-organization interfaces; and financial deriva-tives provide hedging vehicles in the globalmarketplace. All three of these sociotechnical inno-vations confer greater freedom in the use of switch-ing in the global marketplace [7].

Consistent withAll Forms of OrganizationThe virtual organization paradigm is consistent withall forms of organization because the paradigmapplies at the task level, and metamanagement maybe elaborated in a centralized or decentralized way.

Virtual organization does not presuppose any par-ticular control structure, nor does it require specificspatial or functional arrangements. Control may beexercised by the top echelon of a management hier-archy or by relatively autonomous managers in adecentralized system. Production may be centralizedin one or a small number of large plants, or it maybe distributed over many plants located in differentregions. Similarly, functions (e.g., accounting anddata processing) may be performed in a central officeor dispersed among many offices. All of thesearrangements are possible with virtual organization.

A virtually organized company can have central-ized or decentralized control structures, centralizedor decentralized units, and centralized or decentral-ized functions. The structural position of a virtuallyorganized task should be wherever it can best be exe-cuted. Such a position is typically wherever the req-uisite resources are most readily available.

Virtual organization is also consistent with a vari-ety of decision strategies in the assignment of satis-fiers to requirements. Metamanagement operates ina framework that makes it natural to select the bestavailable method but does not require the use ofquantitative or formal methods.

That there is a role for informal as well as formalmethods needs to be stressed because of a commonmisconception about virtual organization. The sys-temic capacity to switch is based on a logical separa-tion of requirements from satisfiers, a formulationthat may give managers the impression that virtualorganization is a kind of formal system. But thestructure imposes no special constraints on theassignment methods and criteria for switching. Insome cases formal algorithms may be applicable; inothers, informal procedures are appropriate.

Any task can in principle be organized virtually,but not all can necessarily profit from the use of

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switching. If there were only one possible satisfier(e.g., the Postal Service) for a given requirement(e.g., shipping), there would be no opportunity toswitch. However, it might still make sense to orga-nize virtually to anticipate new entrants in the mar-ketplace.

The shift from conventional to virtual organizationrequires a basic reorientation of management philos-ophy. Managers must embrace the idea of logicallyseparating task requirements from potential task sat-isfiers—or of distinguishing between goals and theprocedures for implementing them. This is the onlyway to achieve the freedom needed for switching.

Such a shift is difficult to accomplish in practice.One inhibitor stems from the function in humanexperience of loyalty—to people and places (e.g.,family, friends, and country)—and is deeply rootedin social relations. Loyalty is regarded as a positivevalue in most cultures and is often reinforced in theconduct of business.

However, there is a difference between subjectiveand objective loyalty. The former is based entirely onemotional attachment, the latter on reasoned self-interest. Objective loyalty has a definite place inmetamanagement; the subjective variety does not.

A virtual organization might assist its employeesin ways that have no direct bearing on what theywere hired to do. Providing assistance to employeescould be viewed as objective loyalty, because suchactions might contribute to employee morale andthereby help raise productivity. Subjective loyalty isreflected in the act of retaining an incompetentemployee strictly because the person is a friend of theboss. Such an act would be at variance with the prin-ciples of metamanagement and can be avoided bymaintaining a separation between organizationalrequirements and satisfiers.

Temporary RelationshipsEffective use of switching in virtual organizationinfluences the management of a company’s opera-tions and its relations with employees, external orga-nizations, clients, and the community. Switchinginvolves flexibility, favoring temporary relationshipsbased on explicit rather than implicit agreements.

The trend of the past few years toward outsourc-ing could reflect the growing adoption of metaman-agement principles. Outsourcing is a precursor ofmetamanagement, a natural consequence of viewinginteraction within a firm as exchange of services inan internal marketplace [8].

Gaining management experience identifyingfunctions and contracting with external firms to perform them is a first step in creating the structure

of virtual organization.The need for labor in virtual enterprises is met

through short-term contracts rather than permanentemployment. Infrastructure for teleworking rendersthe short-term employment contract more attractiveto such firms, because the management costs ofadding and deleting short-term employees are lower.It is also conceivable that such infrastructure benefitsemployees by providing them with more contractopportunities.

Relations with external organizations, includingsuppliers, are also increasingly fluid. The ability toachieve greater cost-effectiveness by switching fromone supplier to another militates against long-termarrangements. However, to realize the potential ben-efits of switching, information commodities andorganizational standards have to be used to lower theoverhead costs of switching.

Extensive use of switching of, say, employees orsuppliers may create an image problem for virtualfirms. To maintain the appearance of consistency andreliability for their clients, such firms may have toresort to creating illusions of permanence. Computernetworks may figure as prominently here as inswitching in the form of modes of access to customerservice and how service is provided.

Rapid changes in business activities also affectrelations between companies and the communities inwhich they operate. For reasons of public image,metamanagement may need to take some responsi-bility for the effects of actions (e.g., facility reloca-tions) on the local community.

References

1. Davidow, W.H., and Malone, M.S. The Virtual Corporation. Harper-Collins, New York, 1992.

2. Giuliano, V.E. The mechanization of office work. Sci. Am. 247, 3 (Sept.1982), 149–164.

3. Hammer, M., and Champy, J. Reengineering the Corporation. HarperCollins,New York, 1993.

4. Harrington, J. Organizational Structure and Information Technology. Pren-tice-Hall International, Hertfordshire, U.K., 1991.

5. Hiltz, S.R. The Virtual Classroom: Learning without Limits via Computer Net-works. Ablex, Norwood, N.J., 1994.

6. Mowshowitz, A. Virtual organization: A vision of management in theinformation age. Inf. Soc. 10, 4 (1994), 267–288.

7. Mowshowitz, A. On the theory of virtual organization. Syst. Res. 14, 4 (1997).8. Turoff, M. Information, value, and the internal marketplace. Technol. Fore-

casting Soc. Change 27 (1985), 357–373.

Abbe Mowshowitz (abbe@css3s0.engr.ccny.edu) is a profes-sor of computer science at The City College of New York.

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