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Offices Go Virtual

By: Steve Johnson

11/6/2008 - 16 Comments

As companies look for ways to cut costs, one strategy that is gaining popularity very quickly is the virtualization of office space. 

The economy decline is accelerating the trend for more employees to work from home, while providing companies a quick reduction in building expenses. 

Yesterday, my company decided to follow the trend with the closure of two of our branch offices, in Florida and Ohio.  Both locations have about 20 employees and were currently leasing their office space.  For several months, my company has been promoting a new ‘work-from-home’ program to encourage more people to work from home.  

When I got the email, I called our director to discuss the decision.  Apparently, the executive team is still working on next year’s budget, which is usually complete by June or July.  But, because of the extra ordinary market reaction in October, they are projecting lower revenue for 2009 and are still looking for a few more expenses to cut.  Cutting the office leases of these two locations was a first step.  Most of the employees are already capable of working from home with the Internet and computer technologies that are now available.  Therefore, they were able to close these offices with very little impact to the business.  No projects were delayed and only one employee was let go, the secretary.

The housing boom has also contributed to this trend, because today many people have homes that are large enough to have an extra room for a home office. That was not the case a few decades ago.

The Risks

This trend is not without its risks, but when faced with the alternative of cutting jobs it seems like a good solution.

The primary risk that I see with people working from home is if they create an alternative network of associates, which could lead to other employment opportunities.  When a company has everyone working within an office, they are more likely to network with each other and build relationships with one another which can be very beneficial to the company because those relationships produce trust and support for each other.  A virtual office will be much harder to build these critical relationships.  The employees at the two offices that my company just virtualized were not upset about the change because they have been working together for a long time and already have strong relationships, but how is a new person going to fit into this model?

The other risk I see is that it will be easier for employees to spend time looking for other jobs, which could increase the turn-over rate for a business. The turn-over rate is a closely watched number because it has high direct costs to a business.  Training new employees is already costly, and the training budget is likely to get further reduced in an economic hardship. Therefore, the risk of increasing the turn-over rate could cost a business more then it will save them from closing an office.  Of course, this risk will be greater for skills that remain in high demand and it will be minimized during the economy slowdown. 

The Trend is Likely to Grow

As the economy continues to decline, I expect this trend to continue to accelerate for years to come. If your job can be done from home, then it will probably be moved home.  

Startups in the Clouds

Working from home to create and deliver solutions to the business world via the Internet, is also a growing trend within the startup world.  In fact the most popular blogging software Wordpress.org was developed by a virtual company called Automattic.  The employees in the company work from home and are scattered around the world. 

Last week I was at a Microsoft conference where I learn about Microsoft’s new cloud computing initiative called Microsoft Azure.  The idea is that Microsoft Azure is an Internet platform capable of managing an online application on a global scale, with all the features and support services of a local IT department.  With Microsoft Azure, a virtual startup company could launch a new online application capable of handling an infinite amount of growth without the startup having to do anything to deal with bandwidth, load balancing, backups, OS updates, etc.  The idea is quit profound and will take time for the business world to realize how to use it.  But, I see this as a game changing technology that is capable of giving the small business industry an opportunity to create new products and services - a glimpse of hope in a dark economy.

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