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Virtual Organization The New Feudalism

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					      THE PROFESSION



                                                                                                    organization places a special burden on


      Virtual Organization:                                                                         the computer professional. Everyone has
                                                                                                    a stake in the new order being erected on
                                                                                                    the foundation of virtual organization, but
                                                                                                    the computer professional, as midwife to


      The New Feudalism                                                                             this future, can influence these develop-
                                                                                                    ments directly.

                                                                                                    A NEW POLITICAL ORDER ARISES
      Abbe Mowshowitz, City College of the City University of New York                                 With communism and socialism in “the
                                                                                                    dustbin of history,” the free market sys-
                                                                                                    tem has been elevated to the status of god-
                                                                                                    head. Multinational companies have




      P
               olitical systems co-evolve with       aration facilitates dynamic reassignment       become the geese that lay the golden
               economic systems. The two can         of satisfiers to requirements, just as vir-     eggs—as have, by extension, all businesses
               be out of step for a while, but,      tual memory allows a computer to reas-         with the capacity to compete in world
               sooner or later, the former must      sign physical storage cells.                   markets. By reducing the proportion of
               accommodate the latter. In the           Making dynamic reassignment a part          national income allocated to the public
      coming decades, the political system           of standard operating procedure gives          sector and thus compensating for reduced
      forged in the nineteenth century will give     management a powerful tool for opti-           taxes on business, governments hope to
      way, under pressure of basic economic          mizing business functions. This innova-        encourage economic expansion and stim-
      change, to a new order.                        tion creates a double-edged sword, how-        ulate the creation of jobs. Individual busi-
                                                     ever. While it can strengthen the compet-      nesses benefit from this government
      THE OLD ORDER EXPIRES                          itive position of business and improve         largesse, but the general public may not.
         The market economy that grew out of
      medieval feudalism created new forms of
      wealth and power. Wealthy traders and                                   Computing professionals are
      manufacturers came to share power with                                  uniquely positioned to play a
      aristocratic landowners. The market’s
      stunning success in improving the mate-                                 pivotal role in shaping the
      rial conditions of life enabled it to extend
      its reach and grow. To permit this growth,                              engine that will drive the move
      governance had to change. Barriers to                                   to a new feudalism.
      trade and commerce within and between
      regions fell as people adopted common
      currencies and uniform legal codes. These      government administration, it can also         Changes in governance
      political changes culminated in the nation     enable business to avoid or substantially         Virtual organization calls for funda-
      state, a political entity dedicated to pro-    reduce the taxes it pays to governments        mental changes in governance. A global
      viding favorable conditions for trade and      by, for example, shifting obligations from     infrastructure for trade and commerce
      commerce within regions sharing a com-         high to low tax-rate venues.                   makes it feasible to exploit switching on
      mon language and culture.                         Satisfier switching generates transaction    a worldwide scale. The weakening of
         In turn, the market stimulated codifi-       and management costs that, like thrash-        subjective, regional loyalties allows orga-
      cation in law of the artificial individual,     ing in virtual memory systems, can nullify     nizations to redefine themselves as global
      thereby creating the basis for limited part-   potential benefits. Thus, virtual organiza-     actors, with strictly limited obligations
      nerships and joint stock companies. From       tion could not be realized in business prac-   to local and national governments. For
      its humble beginnings in the Middle Ages,      tice without computer technology. For          many multinational or transnational
      this legal fiction has evolved as the basis     example, computer networks make it pos-        enterprises, the notion of regional or
      for the virtual organization now proving       sible for the parties engaged in a business    national loyalty has become an anachro-
      so inimical to the modern nation state.        transaction to exchange information effi-       nism. Only the bottom line matters.
      Such organization is distinguished by its      ciently and effectively. This facility for        Whether by default or design, the shift
      ability to exploit comparative economic        information exchange reduces the man-          in public functions to private organiza-
      advantage in a systematic way by mak-          agement and transaction costs associated       tions signals the rise of neo- or virtual feu-
      ing a logical distinction between the          with switching—exchanging one supplier         dalism. This system has all the earmarks
      abstract requirements of a task and the        for another to satisfy a production            of classical feudalism except that it is
      concrete satisfiers, or particular ways and     requirement, for example. The critical role    based on globally distributed resources
      means needed to realize a task. This sep-      that computer technology plays in virtual                         Continued on page 110

112                Computer
      The Profession
      Continued from page 112




      rather than land. Those adept at satisfier              will depend on production units bound        Privatization ascendant
      switching will wield power in virtual feu-             to global firms operating as virtual orga-       Presently constituted governments will
      dalism. Giant multinational companies                  nizations. De facto political authority      survive in virtual feudalism because
      have been the first organizations to use                will shift to the virtual fief because gov-   social institutions rarely disappear com-
      this principle effectively. However, enter-            ernment, as we know it, will lack the        pletely; but their role will diminish and
      prises of varying size—regional as well as             money to maintain many of the judicial       probably be confined to providing local
      international—will gradually become                    and social services currently provided       protection of infrastructure components
      political as well as economic units.                   outside fiefdom.                              such as transportation and communica-
                                                                                                          tion facilities. Virtual organization con-
      Digital technology’s key role                                         Power in virtual              fers a decided advantage on private
         The first organizations to make effec-                                                            enterprise, letting large corporations
      tive use of switching are also digital-tech-
                                                                             feudalism will               achieve efficiencies that government can-
      nology leaders. Companies that have a                                center in regional             not match. Public workers’ strong asso-
      digital infrastructure in place and the cor-                         and global virtual             ciations and the political liabilities of
      responding expertise available can bene-                               organizations.               layoffs and other radical changes in
      fit from the potential of virtual organi-                                                            work organization hinder government’s
      zation and implement the systems needed                                                             ability to treat labor and facilities as
      to support the management practices                       Opposition to virtual organization        abstract production elements.
      associated with it. The high positive cor-             may come from social movements—at               As in medieval feudalism, private par-
      relation between locus of innovation and               both ends of the political spectrum—         ties will exercise the basic functions of
      intensity of computer use reinforces the               and from the nation states’ institutions.    government. This change will extend
      importance of the computer profession in               The political right may feel threatened      beyond renaming the providers of pub-
      the evolution of the new political econ-               by the weakening of personal and             lic services. With the shift in function will
      omy.                                                   regional loyalties that result from vir-     come a shift in power and legitimacy as
         Classical feudalism based economic                  tual organization because this weaken-       private parties exercise authority in their
      and political power on territorial con-                ing undermines traditional sources of        own names, not in the name of law.
      trol. Virtual feudalism bases power on                 power and modes of economic prefer-             The only effective guarantee of respon-
      abstract forms of wealth for which the                 ment. Opposition may develop at the          sible action is countervailing power, but
      actual location is insignificant. Multi-               political spectrum’s other end because       who knows from what corner it will arise
      national companies will likely become                  virtual organization gives multinational     or what it will demand? Perhaps the loose
      the fiefs—the social entities enforcing                firms the means to escape social             coalition of workers, environmentalists,
      homage and service—of virtual feudal-                  accountability via their mastery of the      and consumers who gathered in Seattle
      ism. Instead of depending on tenant                    global marketplace. Consumer groups          in December 1999 to protest and disrupt
      farmers bound to the land for the cre-                 may play more of a role in this regard       the World Trade Association’s meeting
      ation of real wealth, the emerging order               than will labor unions.                      will coalesce into a new movement.
                                                                                                          However, beyond a strong belief in the
                                                                                                          need to demonstrate against alleged
                                                                                                          abuses by global business, it is unclear
                                                                                                          what their platform might be.
                                         Innovative technology for computer professionals
                                                                                                          A NEW SOCIAL ORDER ARISES
      Circulation: Computer (ISSN 0018-9162) is published monthly by the IEEE Computer
      Society. IEEE Headquarters, Three Park Avenue, 17th Floor, New York, NY 10016-                         Power in virtual feudalism will center
      5997; IEEE Computer Society Publications Office, 10662 Los Vaqueros Circle, PO                       in regional and global virtual organiza-
      Box 3014, Los Alamitos, CA 90720-1314; voice +1 714 821 8380; fax +1 714 821 4010;                  tions, giving rise to a social system in
      IEEE Computer Society Headquarters,1730 Massachusetts Ave. NW, Washington, DC
      20036-1903. IEEE Computer Society membership includes $14 for subscription of
                                                                                                          which contracts define relations. The
      Computer magazine ($14 for students). Nonmember subscription rate available upon                    political entities—virtual fiefs—in this
      request. Single-copy prices: members $10.00; nonmembers $20.00. This magazine is                    system will consist of ever-changing col-
      also available in microfiche form.                                                                   lections of lands and facilities distributed
      Postmaster: Send undelivered copies and address changes to Computer, IEEE Service                   over space. A small group of high-level
      Center, 445 Hoes Lane, Piscataway, NJ 08855. Periodicals Postage Paid at New York,
      New York, and at additional mailing offices. Canadian GST #125634188. Canada Post                    managers, professionals, and technical
      Publications Mail (Canadian Distribution) Agreement Number 0487910. Printed in                      personnel will form a virtual nobility
      USA.                                                                                                with vassals tied to them by employment
      Editorial: Unless otherwise stated, bylined articles, as well as product and service                and other contract types. Nobles and
      descriptions, reflect the author’s or firm’s opinion. Inclusion in Computer does not                  vassals alike will fill logical slots in the
      necessarily constitute endorsement by the IEEE or the Computer Society. All
      submissions are subject to editing for style, clarity, and space.                                   corporate hierarchy and will shift from
                                                                                                          place to place and enterprise to enter-

110                Computer
prise according to the market’s dictates.         autonomous powers. As governments
The nobility will own substantial but             prove increasingly unable to provide
readily movable wealth.                           basic security for their citizens, individu-
                                                  als will seek the protection of private
Virtual serfs                                     organizations. This will yield a de facto
  The virtual serfs will include wage-            shift of public functions to private actors
laborers, most salaried employees, and            and give rise to a new form of govern-
the unemployed. At least three classes of         ment that resembles classical feudalism.
such serfs may emerge:                               The nation state may not “go gentle
                                                  into that good night” of virtual feudal-
  • production, maintenance, and some             ism and may, at some point, “rage
    service workers;                              against” the new order—in all likelihood           Microsoft Rising
  • low-skilled service workers and               to no avail. This outcome looks certain in
                                                                                                          ... and other tales
    some of the unemployed; and                   part because these reactive actions will
  • the chronically and permanently               be too late, but, more importantly,                       of Silicon Valley
    unemployed—by far the largest                 because basic changes in the economy                        by Ted G. Lewis
    class.                                        dictate correspondingly basic changes in
                                                                                                 This is the story of Microsoft® and how it
                                                  the political system.
                                                                                                 rose to become the first monopoly of the
   Independents—artists and the propri-                                                          Information Age. It is assembled from Ted
etors of small, local businesses, for exam-                                                      Lewis’s columns published in Computer,
ple—will fall into virtual feudalism’s                  he indispensable supporting role
interstices. A class corresponding to the
medieval clergy will likely arise as well,
providing a check on the virtual nobles’
                                                  T     that computer professionals play in
                                                        the unfolding drama of virtual feu-
                                                  dalism carries with it challenges and
                                                                                                 Internet Computing, and Scientific Ameri-
                                                                                                 can. Microsoft Rising is a tale of greed,
                                                                                                 emotion, and marketing hype in one of
                                                                                                 the fastest-growing industries of the
power by adjudicating disputes between            opportunities. First comes awareness,          world. It is an eyewitness account of the
them and offering guidance to all.                then the opportunity to anticipate and         changing computer industry and the
Membership in this class will be based            act. By providing the systems and appli-       story of Silicon Valley and how it works.
on possession of the special skills and           cations needed for switching in virtual        This book reports the author’s personal his-
knowledge needed to keep virtual feu-             organization, computer professionals are       tory through the early 1990s to the end of
dalism in balance. Candidates will be             positioned to counsel management on            the decade. These stories often try to pre-
drawn from the ranks of lawyers, teach-           their appropriate use.                         dict or explain the chaos of Silicon Valley.
ers, scientists, engineers, and other highly         As with other great innovations, it         It analyzes the industry and shows how
trained individuals.                              may be possible to envision the bold out-      hi-tech industry is constantly changing in
                                                  lines of change, but the devil truly does      turmoil and upheaval. The book does not
Nobles or vassals?                                lie in the details. It behooves every one      promise any answers, but rather con-
   Some entrepreneurial computer profes-          of us to ponder these details at each          cludes this short journey into the recent
sionals will surely be counted among the          opportunity, to resist applications that       past with a number of provoking ideas
new nobility. Most such professionals,            have undesirable consequences, and to          about the future of hi-tech.
however, will likely find themselves as vas-       lobby for those systems that have posi-                350 pages 6" x 9" Softcover
sals of the great entrepreneurs or as mem-        tive implications for society. ✸                            0-7695-0200-8
bers of the neoclergy. In all three capacities,                                                              Catalog # BP00200
                                                                                                        $24.95 Members / $29.95 List
these professionals will play a formative
role in the emerging social system.               Abbe Mowshowitz is a professor of com-
   Virtual organization is reshaping the          puter science at the City College of the                Order Today!
economic landscape. Switching confers             City University of New York. He is com-                      Online Catalog
an irresistible power to managers. Just as        pleting Virtual Organization: Comput-                http://computer.org/cspress
factory production replaced handicraft            ers as Mediators and Brokers in Business,
                                                                                                         In the U.S. & Canada call
because it offered geometric increases in         forthcoming from Quorom Books. Con-
productivity, the management practices            tact him at abbe@cs.ccny.cuny.edu.                        +1 800.CS.BOOKS
of virtual organization will inevitably
replace conventional models.
   Presiding over globally distributed            Editor: Neville Holmes, School of Computing,
resources, virtual organizations will share       University of Tasmania, Locked Bag 1-359,
less and less of their wealth with govern-        Launceston 7250; neville.holmes@utas.
ments and, having no sense of loyalty to          edu.au
person, place, or country, will become

                                                                                                                       April 2001               111

				
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