asing implementation of information technology, the issue has taken on greater significance. Boundaries can no longer be so easily identified. Modern technological systems directly link organizations into other organizations, thus merging in part, their established boundaries Future organizations would be "networks" (Keen, 1991) characterized by adhocracies with flexible systems of projects and teams (Drucker, 1988; Malone and Rockart, 1993; Mintzberg, 1979) brought together quickly to accomplish specific tasks (Ramstrom, 1974; Rockart & Short, 1989; Toffler, 1985) . Fig1 below illustrates this shift from the old form of Hierarchy to the new Network formFig. 1. Transformation from the M-form to the IT enabled Network OrganizationIT & ORGANIZATIONAL SIZEThe Relationship between IT and firm size In this section, we are concerned with how firms adapt to the availability of increasingly powerful and inexpensive IT. A theoretical question, then, is why the increasing use of IT might change the structure of firms. We answer this question in three basic categories: (a) Labor Substitution, (b) Outsourcing (c) Reduction of Layers of ManagementLabor substitutionPerhaps the simplest explanation for why firm size might be related to IT is that firms can sometimes use IT to produce the same output with fewer people. It is affecting workers at all levels of organizations from the executives to assembly hands and clerks. “To align a firm’s structure for carrying out work so that the information technology can be leveraged, a firm must be prepared to downsize forcibly and painfully “ By substituting automated processing for human labor, these firms can increase productivity and reduce costs.To lower productivity gains realized at lower levels of the hierarchy into bottom-line profitability, management needed to identify and eliminate assets, employees, and divisions that automation had rendered either obsolete or underutilized....
