With advances in cloud services and video conferencing technologies, it’s becoming more and more common for virtual companies professional services to be virtual, meaning the majority or entirety of their team telecommutes 100% of the time. A Virtual Business conducts all or most of its business via the internet and does not have physical premises to interact with customers face-to-face. A purely virtual company may outsource nearly all of their business functions such as product development, marketing, sales, shipping, etc. However, most virtual businesses retain some of these activities in-house and may still require a physical presence in the form of headquarters, warehouses, shipping and delivery hubs, etc.
Virtual retailing is the most common form of virtual business. It began in the early 1980’s (before the widespread adoption of the internet and world-wide-web) as companies such as AOL and CompuServe began offering subscription-based, dial-up services such as email, chat, electronic bulletin boards, and forums, all delivered through primitive text-based interfaces on various computer platforms. Available services eventually expanded to include newswire, stock quotes, and online shopping.
The Largest Virtual Business in the World
Amazon is the most famous virtual retailer and the largest in the world, with over 150,000 employees and over $90 billion in annual revenue. Founded by Jeff Bezos in 1994, it began as a virtual bookstore and with the advent of digital books (ebooks) and e-readers has turned the publishing industry on its head. Traditional “bricks and mortar” booksellers such as Borders (who at its peak had over 600 retail stores) were unable to compete with Amazon’s huge selection, low prices, and free shipping.
Borders filed for bankruptcy in 2011. In addition to ebook sales, Amazon markets its own line of Kindle ebook readers. On average, 12 new books are added to Amazon’s catalog every hour of the day.
Amazon quickly expanded their online offerings to include sales of CDs/DVDs, video games, electronics, and a huge variety of dry goods in almost every retail category including apparel, home, and garden, automotive, hardware, etc. In 2002 Amazon began selling cloud computing services and is now the world’s largest cloud computing provider.
Virtual Business Advantages
Virtualizing business activities has many potential advantages, including:
- “Bricks and mortar” cost savings – reducing the need for employee workspace saves money on overhead (expenses such as commercial building leases, utilities, insurance, etc.)
- Flexibility – a less rigid organization can react faster to changes in the marketplace.
- Happier employees – working from home creates a better work/life balance for staff.
- Since employees can work anywhere, organizations can provide employment in rural locations or areas of high unemployment.
Virtual Business Disadvantages
The possible disadvantages of business virtualization include:
- Lack of cohesiveness in the organization due to employees being located in diverse regions, with possible language and cultural differences.
- Lack of face-to-face interaction between employees and teams resulting in communications-related issues.
- Reduced productivity from work-from-home employees who lack self-discipline.