acm - an acm publication


Running a virtual enterprise

Ubiquity, Volume 2003 Issue April, April 01- April 30, 2003 | BY K. V. K. K. Prasad 


Full citation in the ACM Digital Library

The story of a software division that managed to survive in spite of the downturn in the industry.

The story of a software division that managed to survive in spite of the downturn in the industry.

December 2001: The software division of a flagship IT organization felt the impact of the meltdown of the software industry as a result of the burst of the dotcom bubble and the terrible incidents of 9/11 that shook the world. The future of nearly 50 software engineers suddenly became uncertain. The top management had several alternatives: Close the division, lay off a large percentage of the employees and keep only a skeleton staff, or sell the division at a low price. Remarkably, none of these options was selected. Instead, management decided to run the division as a "virtual enterprise" wherein the division had to sustain on its own. Employees' remuneration was dependent on the business generated and no employee was asked to leave the organization.

April 2003: The software division is vibrant and profitable with high employee morale and high productivity.

Of course, there were many hurdles on this path to success. The process has been a great learning experience for both management and employees.

The first meeting, which introduced the concept of the virtual enterprise, was received with a lot of skepticism and opposition. But the rules were made very clear:

-- Employees would not be paid regular salaries.

-- After execution of a project the returns would be shared by the employees as follows: 50 percent to the development team, 10 percent to the marketing team and the remaining 40 percent for the management to meet the infrastructure costs including profit.

-- The employees should look at themselves as entrepreneurs and put effort toward getting projects, executing them with highest efficiency and sharing the rewards.

-- The development team was responsible for the warranty and maintenance of the software.

The psychology of most of the employees was revealed when they voiced their objections; many of them were more interested in a "safe" path. They wanted to get their salaries every month even if the organization was not doing well. Most of them could not digest the idea of taking the total responsibility for execution of the projects -- they wanted to do their bit without concern for the overall project execution. Very few had the entrepreneurial spirit.

As a result, some employees decided to quit on their own as they wanted a safe job. No problem, that is better than asking them to go!

Those who remained worked surprisingly efficiently and the hidden talents of many of the employees came out. Some, who had never met with a customer before, became successful in marketing. Many engineers who used to fight amongst themselves over silly matters while testing the software started working as a cohesive team and executed projects quickly. All the engineers started rediscovering themselves by identifying their ideas of core competency. They themselves created high performance teams.

As a project manager, I realized that my role had become that of facilitator and there was no need for my day-to-day monitoring. Many of my colleagues in the industry were envious of me because I started having more leisure time!

For nearly two years before the virtual enterprise was started, much effort was put in for introducing quality process management based on CMM. In most organizations, which have CMM or ISO 9000 certification, the management drives the employees hard to follow the processes. Invariably, the employees resist it due to many reasons. The virtual enterprise automatically drove the employees to be systematic in their approach and they realized that the quality processes are of paramount importance. They started following the processes without the insistence of the management.

If you are a CEO who is thinking of handing out "pink slips" to a software division, you may instead want to consider the option of virtual enterprise.

About the Author
Dr. K.V.K.K. Prasad is Director (Technology) of Innovation Communications Systems Ltd., Hyderabad, India. He also consults for small and medium scale enterprises in software project management and process management.


Leave this field empty