Inside business: It's out there, somewhere

The "virtual organisation" is undoubtedly one of the buzz phrases of the 1990s. Closely linked with other concepts that were unheard of just a few years ago - such as "outsourcing", "teleworking" and "partnering" - it is widely seen as a key means of maintaining competitive advantage in a business world that seems to get tougher and tougher.

Although the widely admired chairman of Intel, Andrew Grove, is dismissive of a "business buzz phrase" that is appetising but provides nothing new, many other business people are embracing it.

With typical panache, the management guru Tom Peters describes it as "corporation as Rolodex" and claims it enables the creation of an organisational network in a flash by gathering the best talent to exploit an opportunity. Meanwhile Paul Allaire, chairman of Xerox Corporation, which has agreed a 10-year $3.2bn (pounds 2bn) outsourcing deal with EDS, hopes it will help to create a company that combines the speed, creativity and flexibility of a small firm with the economies of scale, access to resources and strategic vision of a large one.

But although British Airways has apparently stated its intention of focusing on the transportation of passengers and cargo, chief executive Robert Ayling - perhaps mindful of the negative connotations - insists that he is not set on building a "virtual airline".

The truth is, as management consultants from Price Waterhouse point out in a just-published report, that the virtual organisation has many facets. On the one hand it can be a start-up like the hugely successful Internet books retailer Amazon, that serves customers all over the world with just a handful of employees. And on the other it can be former rivals in an industry such as personal computers forming an alliance so that each provides its specialist strength in the interests of creating a better product.

For example, many small companies are able to operate out of more prestigious premises than they might otherwise be able to afford as a result of the "services office" concept, whereby they get as much or as little space as they require plus the use of a receptionist, cleaner and telephone.

The PW report's authors, Tim Potter, Colin Price and David Schneider, do not pretend to know where all this will lead. While pointing out that there are certain drawbacks to the trend - notably the potential for losing organisational control and the management challenges it poses for executives more used to tighter command-and-control organisations - they insist that it is being driven by business need rather than fashion.

"Businesses have begun an unprecedented transformation - one that, in the world of physics, saw hot dense raw matter cool and evolve into today's galaxies and our own planet. The virtual organisation is with us: where it takes us we shall have to wait to see," they conclude.