BERKELEY, Calif. (MarketWatch) -- The trigger for this column was this week's announcement that Dell Inc. was going to slash 8,800 jobs. Its earnings were relatively flat, and that gave the company the excuse to make cuts, but were these people necessary in the first place?
I bet they were.
I suspect that they will be replaced, as Dell may be exiting the conventional ways of doing business and heading toward becoming a virtual company.
I've been fascinated by the concept of a virtual company for years, and was particularly intrigued by a friend of mine starting a virtual computer-laptop business.
He is setting up shop with almost nobody working for him directly. Via a Web site, customers will order machines online; the orders will be sent directly to a factory in China, where the laptops would be shipped from there to the buyers.
A lot of machines from big vendors are sent directly from China to U.S. customers nowadays. Apparently, there is enough margin, once you set up shop in China, to send gear through Federal Express or other carriers and still make money.
There are all sorts of potholes in this sort of scheme. Shutting down the air-transport system for two or three days could break a company, for example.
But in a global economy, this sort of virtual-company concept is very appealing and explains a lot of today's business orientation. If you knew all the necessary systems that made up a business within an industry, there is no reason today that you could not "virtualize" it by outsourcing everything -- from order taking, Web-site development and manufacturing to delivery and customer service.
To fully understand how this concept is taking over modern business thinking, you need to look into the science of business-ontology development. Google it.
There is a lot of academic work being done in this field, and once you get into it you begin to understand how the market and the system is adjusting to the idea.
Let me explain business ontology. The whole science of this is to break down each and every aspect of a company, and its operations, so thoroughly that you could take an ontological schema and use it to simulate the business with a computer program -- as if the entire company was a microprocessor being tested before going into production. It's like a complete formula for the inner workings of a business.
Once the model works, you could then hand it over to an offshoring company in India, which specializes in back-room work, to plug into the specific back-room mechanism of the company as defined by the schema. Each element of the ontologically defined virtual company could be outsourced here and there, the way Boeing Co. now outsources manufacturing of various jet parts.
Anyway, once the ontology and schema of a company's operations is developed, it becomes extremely valuable, since it can be duplicated by anyone who gets hold of the breakdown.
To protect this, the patent office has allowed these virtual mechanisms to be patented, and this explains the emergence of business-process patents.
I suspect the Dell layoffs have to do with the fact that a well-defined mechanism within the company, defined by a carefully constructed ontological schema -- with 8,800 people in it -- will be turned over to some company that can do it cheaper.
Let's face it: The functions demanded of the 8,800 still need to be fulfilled somehow.
I'd advise investors to look into these fundamental changes in the structure of business and the whole business-ontology culture, only so that they better understand these cutbacks in today's world.
In other words, a cutback may not actually be a cutback anymore. As companies become virtual, it becomes harder to figure out what they are actually doing. 
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