Disadvantages of E-Partnerships and Virtual Organizations

Like e-business and e-commerce, e-partnership is also facing a range of issues related to the use of the Internet as well as the reliance on inter-organizational interfaces. The key issues identified are:

  • Challenges and risks of e-partnerships and virtual organizations;
  • Productivity and revenue-sharing in e-partnerships and virtual organizations;
  • Transferring and sharing core competencies between participating organizations;
  • Sharing power and empowering amongst participating organizations; and
  • Quality and effectiveness of communications.

Addressing each of these issues has posed a formidable task in front of e-managers of various kinds of inter-organizational collaboration through electronic technologies and e-network. The following discussion explores each of these issues in detail.

Challenges and Risks

On the technological side, e-partnership and virtual organization take the lead in the current Internet-driven business environment that assimilates the most advanced electronic technologies and the knowledge-based economy. Companies involved in e-partnerships must participate in external business relationships by using computer interactions. This is a great challenge confronting e-partners to re-engineer their IT strategies and resources and re-think their ways of communication and doing business with e-partners. The main issues to be considered are IT infrastructure and managers’ and operatives’ knowledge and skills associated with e-business and e-commerce.

On the human resource’s side, while e-partnerships and virtual organizations in whatever form may entail optimization of organizational resources and attainment of competitive advantages of parties involved, e-managers are surely confronting management complexities of making cooperation work. The biggest challenges to management in this regard are conflict in different organizational and country cultures, taxation, financial and commercial risks, legal risks concerning online intellectual property, national and international online trade and law, etc.

Culture is about shared assumption, beliefs, values and norms. Each organization has its own culture developed from its own particular experience, its own role and the way its owners or managers get things done. In addition to the cultural differences at the organizational level, multinational e-partnerships inevitably encounter barriers caused by cultural differences between nations. Legal, political and economic differences among countries are also obvious. For instance, EU member states must enact legislation to ensure that transfers of data outside their boundaries are allowed only to jurisdictions that can offer adequate protection of the data. The US believes that minimal domestic regulation would foster cross-border Internet trade. Managing the cultural and system differences across organizations and across nations is one of the high agendas that challenge managers of e-partnerships and virtual organizations.

Compounded with the challenges are particular risks facing e-partnerships and virtual organizations such as information technology risks and financial and commercial risks. While the Internet and network organizations facilitate improved communication of data, information, and knowledge, they give rise to issues and problems of privacy, data security and intellectual property protection on the Internet. The information database created through Internet transactions may lead to legal disputes among e-partnerships over ownership of the IP and possible loss of the potential profit generated from the IP. Moreover, electronic research projects usually involve new technologies and innovative development, which creates a high level of technological and commercial risk for every organization involved. However, it is the motivation of sharing and minimizing the risks that entails e-partnering and e-alliance.

Productivity and Revenue Sharing

Productivity, including volume of sales and services, and profit are no doubt central issues to tackle for all organizations, no matter whatever forms they take. The primary aim of building e-partnerships and virtual organizations is to generate more profit and achieve the best business results through taking advantage of on-line resources and extensive e-network. Revenue sharing becomes the most important issue in e-partnerships and virtual organizations when productivity increases and revenue goes up. The nature, timing, and amount of compensation (in the form of referral fees, royalty and commission) together with the financial stability and honesty of commission reporting are core considerations of e-partners and crucial factors of success in sustaining e-partnerships.

Transferring and Sharing Core Competencies

Core competencies comprise a company’s specific and special knowledge, skills and capabilities to stand out amongst competitors. They are intangible and an integrated part of a company’s intellectual capital and un-tradable assets rather than legally protected intellectual property. Inter-organizational collaboration provides an opportunity for participating organizations to acquire and absorb the core competencies from each other. This opportunity is particularly valuable for innovative business such as e-business. However, transferring and sharing core competencies will not just happen – participants have to work, and work hard, to overcome barriers to transferring and sharing. The greatest barrier is competitive concerns over information leakage. This is an unavoidable dilemma facing e-partnerships, which makes it difficult for e-partners to achieve the potential that IT technology can offer.

Sharing Power and Empowering

It is normal that a decision-making body of inter-organizational collaboration is proportionately represented by participating organizations in terms of equity holdings in an on-line joint venture. It should be noted that due to differences in equity holdings, power disparity occurs and is likely to affect performance of inter-organizational collaboration, although division of power and responsibility has been clearly defined in legally binding agreements between e-partners. This author holds that a total quality partnership approach (see the Recommendations section of this paper for a detailed discussion) helps to solve the problem through offering each individual and/or organization an opportunity to participate, contribute and develop a sense of ownership in the virtual organization.

Quality and Effectiveness of Communications

Networking and communications play a key role, particularly in coordinating and liaising inter-organizational collaboration. Expanding e-networks and achieving effective communications amongst e-partners are a top priority. Like culture and commitment, communications are soft outcomes of a total quality partnership approach and the foundation for inter-organizational collaboration. Effective networking and communications help to eliminate barriers to collaboration. Therefore, continuous improvement of the quality and medium of communications is another key issue in the agenda of e-partnerships and virtual organizations.

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