o Introduction

o Brief synopsis of the case

o Defining the Virtual Organization
o Knowledge Management through IT
o Alternatives and their pros and cons
o Class Vote
o Our Action Plan
o Class Exercise
o Q&A
 Small, specialized, global
consulting group
 Provides information systems
and management solutions
› Exploration
› Production
 Consultants and software
developers around the world
 Pay Zone is a virtual
organization
 The principals are considering growth options but
are intent on preserving the quality of life
benefits provided by their virtual business model.
The case examines the communication
technologies employed by the principals in
support of their virtual teamwork and describes
the administrative information
 IT infrastructure enables the firm to operate with
no administrative staff or office
 organizational and personal lifestyle drivers
underlying the company’s ability to operate
successfully in a virtual world
 Worldwide market for increasingly scarce
commodity [oil and gas]
 Changing employment patterns: contracting vs
permanent employees
 Businesses increasingly transcending
international boundaries
 Remote sites for oil and gas exploration
necessitated new information and communication
technologies.
 1. Expand company by:
› 1.1 Adding young partners
› 1.2 Contracting to consultants

 2. Sell the company

 3. Sell the software division

 Time and space no longer define the organization
 Exists whenever and wherever the participants want
 Visionary in its design and management
 Information Systems in its purest form
 Communications
 Software
 Simply could not exist without www and
telecommunications (3.7M hits on Google)
 Significance of Business Model to the case:
› IS design and development
 Internal systems
› IS management
 Visionary
› IS usage
 Creates efficiencies and decreases costs through tools
 Dynamics of social and cultural factors
› Trust and accountability
› Collaboration and co-operation
› Self governance
› Knowledge of other’s core competencies
 Leadership may be fragmented
 VO’s defy traditional org behaviour and structure
› Mgmt theory does not always apply
 Consider HR policies, Org theory group norms
 Brokerage (buy and sell)
 Software Developers and IT
 Consulting Services
 Essentially Knowledge Management is the prime
candidate and the mainstay in the Pay Zone case
 Customer Capital

Human Capital

Structural Capital
 1. Expand company by:
› 1.1 Adding young partners
› 1.2 Contracting to consultants

 2. Sell the company

 3. Sell the software division

1.1. Add new partners
 Pros:
› Continue current lifestyle
› Significant increase in income
› Fend off competition by reinforcing competitiveness
› Expand software development and consulting services
› Increased capacity for new clients
› Expand knowledge base
1.1. Add new partners cont…:
 Cons:
› Need to buy in and cultural & social integration
› Management collaboration
› Corporate governance
› Partnership agreements
› Potential debt
1.2. Contract consultants
 Pros:
› Expand knowledge base

› Corporate control still resides with principals

› Not fully required to find a partner who fits with PZ

culture and business mode.
1.2. Contract consultants
 Cons:
› Less stability for long-term growth – low commitment

› Costs to find and hire consultants – higher than an

equally qualified permanent partner
 Pros:
› Large payout – extract full value of firm while
company is unique and no competition

› Don’t have to worry about future (competition and

other risks)

› Can continue to offer consultant services with no

ownership rights
 Cons:
› Relinquish control of company, lifestyle

› Loss of future perpetual revenue stream (clients,

contracts, potential partnerships, agreements,
licensing)
 Pros:
› Payout from sale

› Linking consulting services from software which

would contribute to permanent earnings
 Cons:
› Loss of control

› Loss of growth

› Loss of revenue from services provided for sale of

software
What do you think?
 Expand the firm via recruitment of new partners?
 Expand the firm via contracting full-time
consultants?
 Sell the firm outright?
 Sell the software side of the business and remain
active in consulting?
 Group chose option #1, via adding new partners.
 Feel as though the new blood may bring increased capacity to
draw clients and revenues going forward.
 Allows the group to maintain the firm under it’s control
which is a big factor of contention and consideration.
 Addresses the goals of increasing the income of the partners
as well as a stronger ability to compete in the future.
 Ultimately the strategy allows the partners to continue with
their current lifestyle, a very important factor to their group.
 It allows them to keep their business, as opposed to selling it
outright and still achieve a higher income.
 They now have the choice of retiring at an early age with the
new partners coming on board. However they have the
option of remaining in some form of control by becoming
silent partners.
 By remaining in the business they are able to continue to take
advantage of their niche market and high demand services.
 The business of Pay Zone will only continue to increase in
demand since the industry is clearly leaning towards
consulting firms rather than permanent, in-house specialists.
 The Pay Zone model addresses the future now by creating a
viable system of doing business globally and by taking
advantage of technologies. By staying in the business they
have the potential to increase income exponentially.
 No solution was without some negative connotation. First
off the group runs the risk of compromising their
organizational culture. The new partners may not be
completely on-board with the style of life, and business, that
the current group supports.
 Secondly, future issues in the vision of how the firm should
be led and what the values should be may be argued by those
not in the original group. There is the potential for
dissention with new partners and this may be a cause of
political problems.
 Third, the group will need to come to a consensus as to how it
plans to move forward and claim more of their desired market
share. This will not be an easy decision to make as there are
new opinions that will hold sway.
 Finally, the current partners may need to be reimbursed for
their initial investment in the knowledge capital that make up
most of the assets of Pay Zone.
 The only way that Pay Zone was able to be successful in its
model, we believe, is that they began with these values and
never fell back, they only strengthened them. If they had
attempted to implement this business and IS model post-hoc
they may not have had the success they were able to achieve.
 We see that the opposite is true also though, in that going
from a virtual organization model like PayZone to more
standard model would be just as difficult to undertake.
100 100 100

200 200 200

 These type of business models are not
defined by time and space and can exist
whenever and wherever the participants
want. It’s design is visionary and at the
forefront of innovation.

A100
 What are virtual organizations?

A100
 This type of Knowledge Management
resource includes Knowledge distribution and
access, and Knowledge organization and
categorization.

A200
 What is structural capital?

A200
 This software allowed Pay Zone to use multi-
point video conferencing and voice over IP
(VoIP).

B100
 What is NetMeeting?

B100
 DAILY
Win two prizes for the

DOUBLE
correct response

B200
 This hardware provided Pay Zone with auto-
replication and 128-bit encryption abilities to
guarantee reliability, integrity, and to prevent
possible data loss.

B200
 What is a “mirrored” server?

B200
 Worldwide competition for these scarce
commodities are increasing and new discoveries
are occurring at a rate less than that of global
consumption.

C100
 What are oil and natural gas?

C100
 These staff are highly qualified in-house experts.
Many oil companies are shifting away from
hiring and keeping these type of human capital.

C200
 What are long-term or permanent employees?

C200