I have worked on a "virtual team" project. I am physically loated in "A". I VPN in to my server in "B" to do my work. My companies head office is in "C" where my pay cheque is approved. My client's site is in "D". There were other groups that worked not only in "B", "C" and "D", but also "E" and "F".

We communicate using the phone, email and teleconference (my suggestion is to buy a big LCD screen), and once in a while, in person (long flights). For the most part, we did our work in separate locations, but it may as well have been in the same building with different floors. The project went well, the client paid us, and we got the next phase of the project as well.

Of course, for construction, start-up and commissioning, we all went to "D". For many, that was the first time we actually met face to face as it were.

For us, it was all good. No real downside.

"Do not worry about your problems with mathematics, I assure you mine are far greater."   
Albert Einstein
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I have read a lot of papers and articles on the subject and you very well proof our thinking right. However if you are on the client side do you think this approach is justified considering the following constraints inter alia:

1 High cost of telecommunication
2 Risk associated with unfamiliarity with terrain, statutory regulations, high economic uncertainties etc.
3 Loss of human face in influencing stakeholders

Greg Akhibi
Clearwaters Consulting Ltd

It depends on your particular case, and your client. What I think is immaterial.

1) What is the price of telecomummunication vs. the right person with the right skills?
2) Familiarity with terrain - get one local person to deal with land owners, and such. Your OP asked about project management. Statutory regulations - everyone reads the same documents, whether here or there. High economic uncertainty - not sure what you mean.
3) Loss of human fact in influencing stakeholders - get one local person to be the "talking head" in dealing with stake holders. Do they need to meet all the management team? On a daily basis?

Like I said, if you client doesn't believe in virtual teams, then they don't believe in vitual teams, and a virtual team won't work. And, you won't convince them otherwise.

"Do not worry about your problems with mathematics, I assure you mine are far greater."   
Albert Einstein
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The only caution I would add is that it is imperative to have people on the ground who understand the real time situations and can make the day to day decisions that are required.  As long as the virtual management has complete confidence in the on site personnel, there should not be a problem.

One can only reduce on-site management personnel, but it is impossible to properly manage an oil & gas installation project from a distance.

The caveat here is I have no exposure to virtual teams, but I do have allot of experience in managing projects, including construction management and in fact am doing just that at the moment in the Niger Delta.

Greg Lamberson, BS, MBA
Consultant - Upstream Energy

Website: www.oil-gas-consulting.com

From a cultural standpoint, it seems to me that ensuring that sensitivities are appeased or addressed would be doubly challenging through telecommunications.  You must be accounting not just for technical miscommunication, but also for cultural misunderstanding.

Designing land development projects, I once worked with a group of designers and draftsmen in the Philippines from my office in SoCal.  Having never been there, experienced the culture, or met any of them personally, it was very difficult to build a team and complete projects within the allocated budget, but with practice it did get easier, so long as the same people were around from project kick-off to completion.

Greg
In my experience this will only work if your projects are well documented and defined and do not change very frequently. Also the offsite personnel do not require access to the site on urgent bases. If all of your staffs are located locally and in close vicinity, then the project definition can be more malleable but you lose this if you are working on projects with people in deferent time zones due to delays in response times (this could be both good and bad).
The cost of telecommunication is relatively low compared to having to set up site offices for the extra staff, provided there offsite staff can work form their homes.
However as Ashereng mentioned, if your client does not like virtual teams then don’t waist your time selling it to him/her it will be quicker if you organise the people to go on site.