However this integration impacts several aspects of the organization, this essay will examine the implications of information technology on organizational structure. The classical notion of organizational structure has been challenged by information technology which has enabled several new methods by which organizations can structure themselves.

Divisions of labor and coordination have largely shaped the classical organizational structure. It has been necessary to physically cluster people and resources which need coordinate their activities at specified geographical locations. Along with coordination, the need for supervision has also necessitated this physical grouping. The design of an organization’s structure has traditionally depended on design variables like the number of management levels, level of delegation, staffing, control and report mechanisms and on design strategies like centralized or decentralized management. The organizational structure is also inextricably linked to the technology used, human resources and the goals of the organization. Changes in any one factor will affect the rest in varying degrees. We will focus on the changes in the organizational structure due to information technology.

Information Technology has impacted most of the design variables of the classical organizational structure. The organizational subunits need not be physically grouped together they can achieve coordination across different geographical locations. The reporting mechanisms, linking and control mechanisms, workflows are all automated. Consequently we come across a new set of factors which impact organizational structure. An organization which does not manufacture a tangible product can now consist of several virtual components that coordinate their activities with the help of groupware and communication mechanisms.

Another important aspect of information technology is its impact on the interaction between the various levels within an organization and between an organization and its suppliers on one hand and its customers on the other.