Boundary and virtual organisation theory were used to study the implications of organisation level virtualisation for work units. A single case study in a geographically dispersed public sector organisation revealed multiple implications of the coexistence of traditional and virtual work units. Different quality ICT access for traditional and virtual work units was found to result in conflicting expectations about the speed of information sharing. Exclusive reliance on time-based performance measures to control the allocation of staff to virtual work units compromised knowledge sharing, whilst virtual team arrangements and poor formal knowledge capture simultaneously increased workers’ dependence on informal exchanges. Although the fragmentation of knowledge that resulted from the virtual work arrangements threatened operational performance, there was no evidence of mitigating initiatives. The research contributes to the currently limited understanding of the virtualisation process by proposing an empirically derived framework for analysing the challenges emerging from the coexistence of traditional and virtual work units. The proposed framework correlates the networking, restructuring and organisational learning aspects of the virtualisation process with their implications for interfaces, permeability and boundedness of work units. The findings are also of interest to practitioners in traditional organisations seeking to exploit the potential of virtual organisation.