Virtual Teams: The Definitive Outsourcing Guide

virtual teams

Virtual teams, also known as geographically dispersed teams or outsourced teams, refers to a group of individuals collaborating beyond geographical and organizational boundaries. This arrangement involves an organization hiring external experts, typically located offshore, to undertake specialized tasks. Virtual team outsourcing often entails team members situated across different time zones. Leveraging information and communications technology, these team members work interdependently towards a shared objective.

Virtual teams can be formed either on an ad hoc basis or for long-term strategic purposes. They may consist of individuals who work temporarily for the organization or who become permanent extensions of the company’s local workforce. Virtual team members have the flexibility to work from home, on-site in a service provider’s office, or within the organization’s local office. Personal face-to-face meetings among virtual team members are rare, with daily communication primarily taking place online, through telephone calls, or other electronic means.

Virtual teams offer several advantages for organizations, including the ability to easily match talent with specific roles, especially in situations where there is a shortage of skilled labor in the local area. These teams provide a practical solution to challenges associated with cost pressures, market fluctuations, globalization, corporate restructuring, and employee mobility. Consequently, organizations are increasingly utilizing virtual teams to harness the specialized skills necessary for performing complex and mission-critical knowledge work.

Outsourced Teams

Outsourcing has been around for many years, but outsourced services and virtual teams really took off with the rise of the internet and advent of advanced forms of communication. In North America, outsourced software development teams started appearing in the 1990’s, with companies outsourcing work to onsite teams and offshore (mainly to India). Other industries closely followed suit in an effort to access specialized talent and the latest technology while achieving cost efficiencies.

The hiring of offshore virtual teams has become popular in recent years mainly due to cost advantages and better access to hard-to-find skilled labor. Service providers in these offshore locations hire and recruit virtual team members and match them to client needs. The offshore teams often work with an onshore team on similar or completely different tasks.

Virtual Teams Outsourcing: Model and Structure

A virtual team is composed of people who share a common goal and are connected through their interactions. Unlike traditional organizational teams, virtual teams lack hierarchical structures and rely on the shared objective and connections among members to function effectively. The common goal can be subdivided into specific tasks and processes assigned to individual team members. Each member performs diverse tasks that yield varied results, yet all activities contribute to the overall purpose of the virtual team.

According to Powell’s life cycle model, as discussed in the Journal section of Business Perspectives, virtual teams can be categorized into three main components: inputs, processes, and outputs.


Inputs encompass essential attributes such as team design, cultural aspects, technical expertise, and training. These inputs serve as the foundation for the team’s work and significantly influence effective communication and the development of a shared understanding among team members. Team design refers to the structure and dynamics of the team’s interactions, while culture encompasses the individual differences arising from geographical locations and other boundaries. Technical expertise represents the skills and knowledge contributed by each team member, which greatly impact the team’s performance. Lastly, training or education plays a crucial role in enhancing team effectiveness


A virtual team’s design is the structure of its interactions. Interactions encompass all of the team’s exchanges with each other and the expression of the team’s goals, values, norms and activities. Interaction may be face-to-face or through phone, the internet, and other electronic media. A team’s design can have a profound impact on the development of a shared language between members.

The design of a virtual team is composed by the exchanges and expressions of the team’s goals, values, norms, and activities. These interactions can take place through various channels, including face-to-face meetings, phone calls, the internet, and other electronic media. The design of a team plays a crucial role in fostering the development of a shared language among its members, as it establishes the framework for effective communication and collaboration. A well-designed team structure facilitates the establishment of common understanding, enhances cohesion, and promotes a shared language that enables seamless coordination and cooperation within the virtual team.

Cultural Aspects

Cultural differences can hinder team harmony and create communication barriers. This is why some companies prefer to hire virtual team members whose culture is highly compatible with that of the onsite team. However, even slight differences among team members located within the same country can have a negative influence on virtual team collaboration and coordination.

Technical Expertise

Virtual team members are often hired because of their technical domain expertise. Lack of demonstrated expertise and poor handling of technical issues can negatively impact team performance as well as individual satisfaction. 


Similarly, inadequately trained virtual team members may lower the overall performance of the team. On the other hand, different technology skills among members can lead to inconsistency.

Processes of a Remote Team

While inputs are essential to initiate interactions, processes are ongoing actions between virtual team members. These actions are interdependent and transform inputs into outputs. The virtual team process category has two aspects: socio-emotional and task processes.The socio-emotional aspect includes relations, cohesion and trust, while the task aspect includes communication, collaboration and task-technology fit.

Socio-Emotional Process

The socio-emotional process in a virtual team refers to the establishment and nurturing of working relationships by  fostering cohesion and building trust among team members. It is vital for each member to feel a sense of belonging and recognize the value of their contribution in accomplishing the team’s shared purpose. To function as a cohesive and interdependent unit, the team must cultivate friendly relationships, foster a unique micro culture that transcends individual cultural preferences, ideas, locations, or roles, and possess strong leadership qualities within each team member.

Cohesion and trust are closely linked in a team. Cohesion refers to the team’s unity and shared pursuit of a common goal. The level of trust among team members is a key factor in determining the team’s cohesion. Studies suggest that collaborative technologies can initially hinder cohesion in virtual teams, but over time, cohesion tends to strengthen through the exchange of social information. Similarly, a high level of trust ensures proper communication, active participation, and completion of assignments among team members.

Task Process

Task processes include communication, collaboration, and task-technology fit. Communication is essential for the functioning of virtual teams, as it enables geographically dispersed team members to work on their assigned tasks. Collaboration involves the coordinated efforts of team members or different parts of an organization, ensuring logical consistency in individual work activities. Task-technology fit represents the compatibility between the technology used and the specific tasks assigned.

Virtual Team Outputs

The outputs or outcomes of a virtual team include everything created by the work processes. Outputs are measured at the organizational, team and individual level, such as performance, satisfaction, innovation, and decision quality of the team as a single entity.

Performance and Satisfaction

The results of performance studies are mixed.  A study showed that virtual teams performed better than traditional teams. Majority of research work did not find any significant difference between the two types of teams, however. 

Other studies found no difference between the traditional and virtual teams in terms of satisfaction. One study found that a traditional team initially scored higher in satisfaction compared to a virtual team. However, the satisfaction of the virtual team increased over time and exceeded the traditional team’s level of satisfaction. In terms of individual members, those who experienced higher satisfaction with virtual teams were more likely to have had training and access to more means of communication.

Decision Quality and Innovation 

Similarly, the majority of studies did not find a significant difference between the decision quality and number of ideas generated by virtual and traditional teams. One specific study showed that virtual teams produced more ideas compared to traditional teams. This can be attributed to the fact that virtual work requires more time for team members to reach a decision.

In their paper Office Technology and People, Anne Powell of the Southern Illinois University Edwardsville, Gabriele Piccoli of Cornell University and Blake Ives of the University of Houston mentioned several studies that enumerated the attributes of a successful virtual team. These attributes include training, strategy/goal setting, shared language development, communication, collaboration, commitment, cohesiveness and good task-technology fit. It’s easy to see why a virtual team lacking strategic direction, shared language, communication, unity, trust and the right technologies can be outperformed by a highly-effective and functional virtual team.

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