42 STRATEGIC INFORMATION SYSTEM

(SIS) OF VIRTUAL ORGANIZATION (VO)

Brane Semolic1, Jure Kovac2
1
Project & Technology Management Institute, Faculty of Logistics,
University of Maribor, Slovenia, [email protected]
2
Faculty of Organizational Sciences, University of Maribor, SLOVENIA
[email protected]

In the modern business world, the networked organizational connections tend

to become prevailing organizational form. However, virtual organizations
represent a special form of network organization. The backbone of virtual
organization is its information system. To obtain successful and efficient
operating of virtual organization, its strategic information system is of key
importance. Strategic Information System (SIS) is a type of Information System
that is aligned with business strategy and structure. SIS is designed to support
and increase the competitive strength of a VO. We have upgraded Anthony's
paradigm, and taken into consideration the changes in the field of organization
and management of modern network companies. This includes also the aspect
of assuring the suitable information support to corporate management, which
has to provide, at different levels and areas of operation, successful and
effective management of corporate business processes in virtual environment.
In the paper the aspect of defining possible fields of application of the SIS and
the study of their characteristics are discussed. The theory is supported and
illustrated by the LENS (Laser Engineered Net Shaping) Living Laboratory
case study.

1. INTRODUCTION
If we want to develop a competitive strength of our company, it often turns up that
despite using our knowledge, capacities and other resources we are still not able to
reach the desired goal. In modern business environment, the companies will
establish and maintain their competitiveness not solely by optimizing their own
potentials, but more often by being able to use also the resources of the others and
by interconnecting them into an overall process of creating a new value. The need to
connect organizations and to unite the resources has its origins in the demand posed
by the global market to remain competitive concerning prices, time and quality. This
is why the companies tend to be increasingly specialized and develop only those key
areas that enable them to remain competitive on the global market (Milberg, Schuh,
2002, p. 21; Prahalad, Ramaswamy, 2004, p. 96). The networked organizational
design is becoming the prevailing organizational form of the 21st century.
The virtual organization’s information system represents one of the key success
factors. In developing an efficient virtual organization’s information system, a
special place belongs to the strategic information system. In this contribution, a
dimension of the virtual organization’s strategic information system on the example
of the Living Lab case study is presented.

Please use the following format when citing this chapter:

Semolic, B. and Kovac, J., 2008, in IFIP International Federation for Information Processing, Volume 283; Pervasive Collaborative
Networks; Luis M. Camarinha-Matos, Willy Picard; (Boston: Springer), pp. 407–414.
408 PERVASIVE COLLABORATIVE NETWORKS

2. DEFINITION OF VIRTUAL ORGANIZATION

One of the first contributions in dealing with the topic of virtual companies was a
book by title “The Virtual Corporation” by William H. Davidow and Michael S.
Malone, published in 1992. Yet, the dematerialization of the products, processes and
workplaces in the organization was brought into focus of the field experts already in
1985 (and in 1987, 1994) by Abbe Mowshowitz. On the basis of established
frameworks, the authors Venkatraman and Henderson in 1998 developed three
gradual models of business virtuality. According to their views, virtual organizations
differ from other organizations by specific abilities and by their “virtual attitude of
thinking”. The mentioned abilities and virtual attitude of thinking are expressed by:
- products and services that are presented to the customers “virtually”, or are
“virtually” consumed (“virtual encounter”);
- supply processes among the organizations and by the processes inside the
organizations, where the continuous processes of searching the synergistic links
are carried on (“leverage-effects” and “virtual sourcing”);
- knowledge in possession of the organization or among the organizations who, at
different levels, connect in a flexible and non-bureaucratic way (“virtual
expertise”) (Venkatraman, Henderson, 1998).
Virtual organizations represent co-operation between formally disconnected
organizations or persons who establish vertical or horizontal links and present
themselves to the customers of their products or services as a single association.
Besides this, in professional literature concerning virtual organizations there is also
an obvious emphasis given to the information and communication technology as
well as to the absence of the central control functions. Added to this, the time
limitation of the concerned association and the geographical dispersion of the virtual
organization’s members are also stressed (Moldaschl, 1998, p. 19; Mohrman,
Galbraith and Lawler III., 1998, p.77; Dessler, 2001, p. 230; Pettigrew and others,
2003, p. 8; Vahs, 2005, p. 507).
As indispensable precondition for the functioning of the above mentioned
organizational connectedness the authors quote timely adjusted co-operative
processes, organizational development, space dispersion and use of modern
communication technology to master the processes of co-operation (Rohde,
Rittenbruch, Wulf, 2001, p. 2).
In the literature, the companies are often described as network of companies (i. e.
organizations – boundary-less firms or boundless organizations) and by this it’s
frequently meant a considerable number of dynamic organizations, connected in a
network - i. e. virtual companies – that are linked together on a basis of
interorganizational information system and guided by the aim to be successful in the
area of the given projects.

3. STRATEGIC INFORMATION SYSTEM (SIS)

3.1 Definition of SIS
In theory as well as in practice, different definitions of information systems in a
company are at disposal. By information systems we understand primarily the IT
supported systems in companies. The most frequently used designation in the
Anglo-Saxon world is "Management Information System" which is based on the
Strategic information system of virtual organization 409

business operations model developed in 1965 by R. Anthony ("Planning and Control

Systems: A Framework for Analysis"), known also as "Anthony's Paradigm".
Anthony's Paradigm could be represented in the form of a pyramid indicating the
correlation and interdependence between the processes of strategic planning and
managerial and operative control. By notion of managerial control are meant the
procedures by which company assures successful and efficient use of its resources,
whereas the operative control refers to a follow-up of the planned work execution.
Five years after the publication of Anthony's Paradigm, W. Zani ("Blueprint in
MIS") presented his concept of MIS, based on the latter's starting points, which
should support the process of strategic planning and that of the managerial and
operative control. In accordance with the nature of work and the needs of MIS users
finding themselves at different levels of Anthony's pyramid, Zani speaks of two
types of information system. The first one refers to the automation of business
procedures, and the second one to providing information to managers for the needs
of their decision making. On the basis of this original definition of MIS many
different interpretations have appeared.
The next big step in development of the IT supported management information
systems offering assistance to the management of a company was made in the early
seventies of the previous century, when A. Gorry and M. Scott-Morton ("A
Framework for Management Information Systems") presented their idea of Decision
Support Systems (DSS). They defined DSS as an information system intended to
support inadequately structured decision making, strategic planning, and managerial
and operative controls. On these starting points later developed the concept of
Executive Information System (EIS) that superstructures DSS.
In this paper, we have dealt with the concept of "Strategic Information System"
(SIS), which is based on the above described findings. Its starting points were set by
C. Wiseman ("Strategy and Computers - Information Systems as Competitive
Weapons"), according to whom the SIS is an information system designed to
support and increase the competitive strength of a company. We extended and
adopted his concept to the needs of a virtual dynamic organization, where we have
alliances of organizations that come together to share skills, core competences and
resources in order to better respond to business opportunities. We have a set of
temporary business activities which are initiated, organized and led by partners of
such an organization. The VO’s SIS should cover information needs of participating
organizations, projects consortia, VO organizers, involved PVCs etc.
The findings of the authors dealing with the SIS, and the results of our research
concerning the characteristics of contemporary corporate management have led us to
the conclusion that the SIS should be considered from two aspects, i.e.:
- the aspect of defining possible fields of application of the SIS,
- his characteristics and interrelations, and
- the aspect of searching the fields of application which would, in a real case, help
involved organizations to increase their competitive strength.
In our paper, we have limited ourselves to the aspect of defining possible fields
of application of the SIS related to virtual dynamic organizations.
To Anthony's paradigm, which served as the starting point for the definition of
the field of application of classical managerial information systems, we have added
the paradigm of networked organizations that should be present in successfully
operating contemporary companies. In this way we have got a modified Anthony's
paradigm, shown in Figure 1.
410 PERVASIVE COLLABORATIVE NETWORKS

INTERNET

Independent
R&D
Universities Companies -
Organizations
Development
Education Partners

Suppliers
Technological
Domain INTRANET
Centers Organization –
integrator
(organizer) Free
Competence Lansers
Centers
Service Providers
Regional Development Centers

Figure 1: Modified Anthony's paradigm.

Anthony's definition of administration levels we extended on the needs of virtual

dynamic organization. Through an analysis of the modified Anthony's paradigm we
have reached the definition of the basic fields of application of the SIS which should
provide data, information and the corresponding IT tools for the:
- implementation needs of VO’s business processes,
- needs of management of VO’s business activities, and
- needs of VO’s executives.
According to Anthony's paradigm, it is possible, in a company, to identify three
characteristic levels of decision making - the executive (top management) level,
which is responsible for strategic management of a company, the medium
management level, which is responsible for individual SBUs, and the business
functions, projects and operations management level, which is responsible for the
performance of business activities. Individual levels are interrelated, yet relatively
independent in their decisions and planning.
As the business processes on the operations’ level are determined, the decision
processes can be structured in advance, too, and they are in this way easy to manage.
There is quite a different situation on the remaining two management levels. The
more we approach to the top management, whose task is strategic management of a
company, the more the decision processes grow stochastic, or they can be only
partly structured or not structured at all. Manager "plays" several roles. In the role of
"liaison" and "leader," manager collects information which is relevant to him or her.
In the role of "liaison," manager contacts people apart from his or her field of
activity, and in different other ways collects information relevant to him or her. As
"leader", manager collects information from his subordinates (and superiors). In the
role of "monitor," manager systematically searches the environment in order to
identify problems and sense opportunities. The information collected in this way is
by rule communicated to the superiors - the manager plays the role of "spokesman" -
to the subordinates - the manager plays the role of "disseminator" - or he or she uses
Strategic information system of virtual organization 411

this information alone, in one of the following four managerial roles of decision
maker: as "disturbance handler", "entrepreneur", "resource allocator" and
"negotiator". Information technology influences all these roles; however, its
influence on the role of manager as decision maker is the strongest. The versatility
of decision situations, which managers or those preparing expert ground for
decisions have to face, dictates different modes and scopes of application of
information technology. Contemporary manager or operations analyst has at his
disposal a range of information technologies which form a Decision Support
Systems Group (DSSG). These are:
- Decision Systems (DS),
- Decision Support Systems (DSS),
- Expert Systems (ES),
- Group Decision Support Systems (GDSS).
The central part of DSSG represent Decision Support Systems (DSS). In
practice, the notions of DSS and EIS (Executive Information Systems) are often
confused. Thus, sometimes, the first or the second notion is interchangeably used
for the same system. Nevertheless, the DSS and the EIS are two different systems,
and they should be treated separately, as each of them is intended for different users,
and they also have different purposes and modes of application.
The DSS are primarily intended for managers and experts who prepare the
grounds for executive management's decisions. They help solve problems to which
the solutions are not structured in advance. Usually there are several different ways
to the solution of these problems. The user of such systems sets different possible
scenarios of solution by using the logic "What if..." and the method of "Goal
Seeking Analysis". The basis of DSS is a "model-data" combination by means of
which relations between the data of the operations field in question are described.
Systems should be simple and provide access to various data that make possible to
form models which are basis for the performance of the said analyses.
VOs’ managers need in the first place the following information:
- key (actual) problems and possible reasons,
- the most important indicators of success and effectiveness of temporary
consortia in the form of planned and real values and deviations,
- financial situation in VO’s operations and projects,
- key indicators of operations by areas of responsibility (e.g. by projects,
activities, etc.), and
- various (consolidated) reports produced by the criteria and in the way dictated by
the actual situation.
All these information refer to the success and effectiveness of the operations,
adaptation and development business processes.

4. CASE STUDY – LENS LIVING LAB

4.1 What is LENS Living Lab
Lens Living Lab is a real-life research and operational laboratory with the focus on a
Lens new technology applications development and operational use. The LENS
Living Lab creates a base for inventing, testing, prototyping and marketing of new
LENS technology applications. The major advantage of virtual organization’s
LENS Living Lab is creation of pools of innovative organizations and experts from
412 PERVASIVE COLLABORATIVE NETWORKS

different research and end user areas who are collaborating and cooperating in this
virtual environment.
The areas of LENS Living Lab application research and operations are: Tool
making and niche machines production, Automotive, Aeronautics and Medicine.
The participating organizations are divided in following groups: Material
science, Mechanical Engineering, Laser and Electronics, End Users, IT and
Networking Technologies.
They have been involved in three operational and research frameworks as follow
(Table 2): Technological and Innovative Centre (TiC LENS), LENS Living Lab and
Laser Collaboration Platform (AA LaseR).

Table 2: Co-operation and Collaboration Frameworks

Framework Role Partners
TiC LENS LENS Operations LENS Consortia
LENS Living Lab LENS Application Membership
Research and Use
Laser Collaboration Wider laser community Open
Platform collaboration

The Figure 2 is illustration of LENS Living Lab business model. The LENS Living
Lab members are business partners who have long term interest for such a co-
operation. Those organizations and individuals are from research and industrial
sector.

Figure 2: Draft illustration of LENS Living Lab business model

4.2 Organization and Co-Ordination of LENS Living Lab

The LENS Living Lab is an open network organization having three levels of inter-
organizational co-operation and coordination (see Figure 3). The first level deals
with the strategic business issues. At this level, the participating partners sign the
long-term co-operation agreement. This agreement defines the areas of cooperation
and management of LENS Living Lab. The second level deals with the inter-
Strategic information system of virtual organization 413

organizational issues (joint and support operation and project management). This
level is related to the coordination of agreed business activities and connected
organizational processes. The third level of co-ordination is related to the definition
of IT and telecommunication platform of co-operation.

SIS

Strategic level of co-ordination

Organizational level of co-ordination

IT & telecommunitaion level of co -ordination

Figure 3: Levels of co-ordination in LENS Living Lab

4.3 The Third Level of Co-Ordination ICT Tools

The basic collaboration is usually based on phone, fax, and email communication.
Although much work has been done to improve the collaborative ability among
SMEs and research organizations, most of them still require suitable instruments
supporting collaboration of the organizational as well as on data flow level. The lack
of suitable instruments lies in the complex nature of collaboration. On the one hand,
it is a question of having the right ICT tools. On the other hand, it is a question of
organizational structure to allow seamless information processing as well as correct
internal competencies to execute the collaborative processes typical of dynamic
electronic marketplaces.
In the LENS Living Lab we are recognizing five groups of ICT tools:
- CRM (TCS portal, Tool East Solution, Video-cluster, etc),
- e-collaboration platform (Share Point, Skype, etc.),
- e-project management & project office (Open Sourced SW),
- LENS Living Lab specific functional ICT tools (Tool East Solution, etc.) and
- LENS Living Lab Executive SW Tools (not developed yet)
The LENS Living Lab project is in progress and all decisions about the ICT tools
are not finalized yet. We are using the Slovenian Toolmakers Cluster portal as the
basic e-platform to build up the LENS Living Lab SIS. We are planning to use the
open sourced Tool East solution to support CRM, as well as development and
production processes within the network of LENS Living Lab. The Tool East
solution will be operational this year. This SW has been developed by the EU
consortia (partners form Slovenia, Germany, Italy, Slovakia, Bulgaria).

5. CONCLUSIONS
Virtual organizations are a special form of network organizations based on the
modern information and communication technology and having various
414 PERVASIVE COLLABORATIVE NETWORKS

configurations. This is why we can hardly imagine a successful and efficient virtual
organization’s operating without a modern information and communication
technology. A Living Lab is an environment in which researchers, developers and
users cooperate with the common objective of delivering a tested product, solution
or service respecting the users’ requirements and in a shortest time possible. We
used the case study of LENS Living lab to present described concept in praxis. The
LENS Living Lab is an open network organization having three levels of inter-
organizational co-operation and coordination.
The key success factor in operating virtual organizations, as well as Living labs
is their information system. One of the most important parts of it is SIS. In our
concept we are using upgraded Anthony’s paradigm, shown as SIS application from
point of view of networked virtual organizations. For introduction of such a system
into reality, the use of proper ICT tools is needed. We have grouped the tools in five
specific groups.

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