Create a virtual company

You may not have the resources to start an e-commerce operation, but you can access them online. Danny Bradbury finds out what...

You may not have the resources to start an e-commerce operation, but you can access them online. Danny Bradbury finds out what virtual companies will look like

As Web technology develops, we are likely to see the emergence of companies that not only have no physical storefront, but that do not have normal levels of staff, or even their own back-end services and products. Such virtual companies will exist as little more than a set of sophisticated links to outside service providers...


The idea of the virtual company is not new, but until recently it has been very difficult to realise it in practice. A virtual company will outsource most or all of its services to third-party providers. The company itself will be a skeleton operation that provides a front-end interface to the customer base. The rise of the Internet and e-commerce has made it easier to implement such models, because much of the back-end processing and communications can be automated.

One major advantage of setting up a virtual company over one that runs everything in-house is that it can be done much more quickly. Outsourcing payment services, accounting, marketing and technical support, for example, leaves less to do at the outset and therefore enables the company to get to market earlier.

But the most exciting and unexplored area of virtual organisations is the possibility for different companies with different products to band together and offer them through a virtual e-commerce operation.

Let's say, for example, that your company specialises in making wedding dresses. You may want to expand your business into organising all aspects of weddings, but are discouraged by a lack of experience and resources. Imagine being able to set up a Web site with back-end links into many different service providers. You could have online partnerships with caterers, car rental companies, venue booking agents, printing services and even a travel agency for booking the honeymoon.

The thing that makes this different from conventional portals with simple hyperlinks to different companies is that the back-end links are transparent to the end-user. The Web site for the virtual company would have a distinct brand, and would offer the services as its own, giving the end-user the chance to specify different criteria for each of them. The site could then call on its partners' software components over the Internet, which would check their databases and return the best match based on the selection criteria. Once returned, the data could be presented to the customer, who could then book the whole thing with a single keystroke.

However, this approach depends on all the companies involved offering Internet services developed using technologies which are currently in an embryonic stage. The Simple Object Access Protocol (Soap), for example, created by companies including Microsoft, IBM and DevelopMentor, will enable software components to access each other across the Internet. This protocol will also form part of Microsoft's .net initiative.

Hewlett-Packard has its own technology, called eSpeak, which provides a similar facility. The idea is that by using technology standards, companies will be able to hook into back-end services quickly and flexibly, changing partners at will.

HP refers to the software components as e-services, and it is easy to see why when you consider how much functionality they can hold. For example, if details about the wedding have to be changed, the virtual front-end can accept the changes and inform the third-party software components. They could then find alternative offerings to fit the new criteria, rebooking them on the end-users' behalf and feeding the data back to the front-end.

Although such services represent little more than the bundling of previously complex objects and component technologies into more business-friendly "services" online, the fact that they can be accessed across the Internet is new, and makes the concept of the virtual company more realistic. Watch out - the concept of Internet time is about to undergo another dramatic change.

Six steps to forming a virtual e-commerce operation

  • Develop a collaborative business model. The one discussed in this article is one of many possible models that have yet to be explored. You may want to offer only your own products but use external services to support other aspects of your business such as accounting. This is where the application service provider (ASP) market can contribute to a virtual company

  • Wait a while - the technology is still at an early stage of development

  • Think about using the Extensible Markup Language (XML) as a means of exchanging basic information between companies, possibly as a stepping stone to more sophisticated component calling languages. Soap is based on XML, but is designed to issue commands to software components directly rather than just pass data to them

  • Make sure that you have formal partnerships with your third party service providers. Sort out the legal and financial issues before getting involved in the technical nitty gritty

  • Find a consultancy or an employee who can program systems using Soap (which has yet to be ratified by the World-Wide Web consortium). ESpeak is another option, but Soap has stolen the show in terms of media coverage and potential market take-up

  • Make sure that software testing and service level agreements with your partners' services are up to scratch. Dealing with third-party Internet services and getting results in real time for Web delivery is no mean feat

  • Read more on Business applications