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A few years ago I started noticing a strange trend: I’d become interested in a new high-tech startup, so I’d call the founders and ask if I could interview them. They’d say sure, great — why don’t we meet at our local Starbucks? We’d meet, have a great chat; at some point I’d ask if I could see their offices. And then they’d tell me that they didn’t have one. All their employees work from home or in cafes, or are spread across the globe. And I’m not talking here about freelancers and one-person shops; most of these firms were a year or more old, with tons of revenues, sometimes in the millions.
I got interested in this trend, and after investigating it a bit I realized a very interesting shift was going on. The office — the basic atom of corporate existence — was becoming, for many new entrepreneurs, a huge hassle: Either to be avoided entirely, or at least to be put off for as long as possible. It turns out there are some intriguing demographic and technological trends driving this change.
I wrote the story last June for the small-business magazine published by the The Globe and Mail, but haven’t yet blogged it. Then this week I came across a scientific study that contradicts the thesis of this article (I’ll blog that later today!), so I remembered I should put this one up. Forthwith:
The End of the Office
They’ve got dozens of employees, millions in revenues — and no headquarters. Are we facing the end of the office?
Mob4Hire is a Calgary start-up with a global work force. The company has assembled an army of 43,000 people worldwide who test mobile-phone software. If you’ve written a mobile app you think will be the next bestseller, you give it to Stephen King — Mob4Hire’s CEO — and he sends it out to his testers, who are sprinkled across 150 countries and possess thousands of different handsets. They’ll tell you in days whether it works well on their handsets, or whether it’s riddled with bugs.
Testing phone apps is important, but it’s curiously hard to do, because it’s difficult to tell if an app will work the same on different versions of the same handset. “Software that runs fine on a BlackBerry 9000 might not run well on a BlackBerry 9700 or a Curve or a Pearl,” King says.
Things get even more difficult if you want to release a mobile app globally, because wireless carriers often have quirks in their networks that change how phone software performs. As a result, app developers are now rushing to Mob4Hire to vet their wares. After only two years in business, the start-up is testing 50 apps a month, at rates ranging from a few hundred dollars to nearly $20,000.
“Growth has just been explosive,” King says.
But there’s one thing Mob4Hire doesn’t have: a big headquarters to run the show. King’s dozen full-time employees all work primarily from their homes, in Calgary and Victoria, but also further afield, in London, England. His team stays constantly in touch, using instant-messaging applications and talking on Skype, often leaving channels open for hours at a time as they work, virtually, side by side. “I liken Skype to water-cooler conversations,” King says. “You can get quite distracted by it, but it’s good.”
They also use Dimdim, a Web-based collaboration tool that lets workers share online whiteboards for sketching ideas and brainstorming.
King detests wasting his time in traffic, so he primarily runs the firm from his basement in a suburb of Calgary. Next to the big desk that holds a printer and computer is a rack of electric guitars and a drum kit. He’s recorded several albums in his spare time. (“As soon as we finish talking, I’m going to play a bit,” he told me when I called him up.)
Working from home is nothing new, of course. The self-employed have been doing it for years. But with Mob4Hire, King is engaging in something different. He’s running an entire global firm — a “micromultinational” as he calls it — without any serious real estate. And he is not alone: Today’s start-ups increasingly delay getting an office for months or even years; they’ll have double-digit employees and millions in revenues yet still be surfing from a table at Starbucks.
Going “officeless” — or nearly so — is a sea change in business attitudes. It’s driven by technological and cultural shifts as the Web-literate Generations X and Y become the driving force behind entrepreneurship. The trend is so advanced that architectural experts think it will even alter the way future corporate spaces are designed, as office-free companies vault into the ranks of the Fortune 500.
Are we facing the end of the office?
DECADES AGO, if entrepreneurs started a company with several employees who needed to collaborate daily, they pretty much had to get an office. There was no other way to achieve the level of constant communication that a firm needs, other than sitting in meetings and poking your head in your co-workers’ cubicles and rooms. Collaborating with employees outside the city — or in another country — was even harder, since long-distance calling was a serious expense.
Beginning around the mid-2000s, that reality suddenly inverted. A new generation of tools began to emerge that gave start-ups free (or dirt-cheap) ways to achieve “co-presence:” a constant sense of what co-workers are doing and thinking, even when they’re halfway around the world. “Status updates” — like those on Facebook, Twitter or its corporate cousin Yammer — let team members share insights and describe what they’re doing, for everyone else in the firm to see. Chat tools let team members instantly ping each other with questions, and voice-over-IP software has reduced the cost of long-distance conferencing, even with video, to zero. (The birth of Skype in 2003 might be considered the single biggest driver of the officeless movement.)
Other aspects of running firms that used to require major real estate — like hosting your own servers, or having an accounts-receivable and payable department — can be outsourced online with a credit card. At the same time, the financial environment pushed start-ups to be parsimonious: In the wake of the 2001 dot-com bust, venture capitalists began handing out smaller chunks of money, and the giddy, cash-out-quick IPO market was gone.
That’s why software companies and online services comprised the first big wave of officeless start-ups in Canada. These industries were ripe for virtualization. One example is Aydin Mirzaee, a 25-year-old who, in 2006, founded Boknow, one of Canada’s first “callback” services that let mobile-phone users get ultra-cheap long-distance rates. (Since phone plans at the time often came with unlimited free incoming calls, a user dialling China could text the number to Boknow’s service, hang up and, a few minutes later, Boknow would call back, patching in a connection to the Chinese number. Presto: an international call for only pennies, with Boknow routing the number over the Internet.)
At the time, Mirzaee was working full-time for Nortel, but in his spare time during the day and at night, he collaborated with two friends, who were still students at McGill, to design and program the service. “We’d spend a lot of time in Gchat” — Gmail’s free chat application — hashing out problems and responding to customers and suppliers, he recalls. They closed down Boknow after two years, but a few months after he left Nortel, he started full-time — still working remotely with his Montreal colleagues — on their next firm, Fluidsurveys, a service that lets companies quickly design and deploy surveys. Today, it has 10 employees and clients in all layers of government. Mirzaee won’t reveal revenue figures, but by operating so lean for so long, his firm was able to offer survey services for hundreds of dollars “that you’d normally pay $15,000 for,” he estimates.
Mirzaee argues that operating officeless is a natural extension of the entrepreneur’s urge, which is to move quickly and with as few costs as possible. For him, an office would have been an enormous cost that he couldn’t afford; the company began without any capital financing at all, so work had to be done from dorm rooms. And it isn’t just rent, he points out: Tending an office is like tending a plant, with an endless set of things that suck up time and money.
“When you get an office, you have to get an office printer, they charge you more for your Internet, the phone lines are more expensive because you’re in commercial space,” Mirzaee tells me. “And your employees are going to want parking spaces, and then you have to pay for the parking spaces. There’s a whole bunch of things you don’t expect.”
Scott Annan is another proselytizer. Last fall, in a blog post for Ottawa start-ups, Annan — an Ottawa entrepreneur — urged his audience to avoid getting an office for as long as possible. “It’s just additional costs that aren’t necessary to innovate,” he says. For five years, Annan has run Mercury Grove, a software development firm he founded while living in Kentucky and now runs from his home in the Glebe area. Today, he employs 12 people full-time and 40 part-time worldwide — including partners in Cincinnati, Ohio and Lexington, Kentucky, as well as a few in South Carolina.
He even has a testing team in Pakistan and a development team in India. “We ship over their laptop, we pay their Internet connection fee every month,” Annan says. “For six years, we’ve had a great relationship with them.” He estimates that forgoing an office saved him hundreds of thousands of dollars, which he could plow into hiring more and better talent.
Running a completely unphysical firm isn’t necessarily easier, of course. By his own admission, Annan spends hours each day on the phone in order to keep in contact with his employees and clients. He’s clocked months of travel time visiting his teams in the United States. “All business comes down to relationships,” he adds, “and nothing beats spending time face-to-face and talking. So there’s a lot of work spent making those relationships, and making clear expectations. There’s definitely additional work.”
But other officeless workers argue that working virtually avoids one of the big pitfalls of a physical office: time-wasting idle chat and pointless confabs that people hold just to make it feel like they’re doing work. “In a regular office, you have those meetings and meetings and meetings,” laughs Ivan Paramonau, a 30-year-old entrepreneur in Ottawa.
Two years ago, he and a partner co-founded Itteco Software Corp., a company that provides instant development teams for firms that need software built quickly. Itteco now employs almost 80 programmers worldwide, and Paramonau thinks they work far more efficiently because they’re not physically together. He finds Skype meetings more direct, possibly because the situation is inherently more awkward and less conducive to small talk.
“You drift less, you discount things that aren’t essential,” he says. For his part, Mirzaee thinks face-to-face time is overrated; most of the time when one of his employees needs to do something that is really hard, they prefer to do it at home so they won’t be interrupted.
“I don’t think more than two or three hours of sync time a day is necessary, if the company is structured well.”
SOME OF THE SHIFT away from the office is generational. Many virtual entrepreneurs are from Generation Y, the twentysomething children of the baby boomers. As workplace experts are discovering, Gen Y holds radically different ideas than their parents about what an office ought to look like — and how work ought to be done.
Mike O’Neill has studied this generation of workers closely. O’Neill is senior director of workplace research for Knoll, an office-furniture firm based in Pennsylvania. In recent years, he has polled more than 15,000 current employees across different generations — boomers, Gen Xers (who are currently in their 30s and 40s), Gen Yers, and even the workers who are a generation older than the boomers. When O’Neill asked each to rank the importance of a formal office as the place to get work done, boomers ranked it highest. They were also the strongest proponents of keeping one’s office and home life separate.
This, O’Neill says, is because in the formative early years of the boomers’ careers, an office was the only place they could work: Computers and phones were huge and immobile, so boomers hunkered down the instant they got to the office and cranked away.
“Your office reflected your status, and you had to do everything there,” O’Neill says. “So there’s a lot of heavy lifting that the office had to do for boomers. The unit of work for the baby boomer is the formal meeting — ‘Bring on the coffee, and we’re going to sit here for three hours and have a meeting!’ ”
The quintessential boomer space is a large conference room with a huge table, where a dozen people can gather and do deals.
In contrast, Gen Y ranked the importance of a formal office much lower than did the other demographics — and they ranked big, traditional conference rooms as their least favourite choice. “They see meetings as being vaguely confrontational in nature,” O’Neill notes. “Why? Because Gen Y prefer to have meetings in short bursts, in small gatherings in informal spaces. The boomers are like, ‘Come on, we’re going to have a meeting!’ But Gen Y is like, ‘We already had a pre-meeting. I talked to my guy while we were at the coffee machine.’ ”
What’s more, Gen Y was the most likely to prefer working outside the office. In O’Neill’s surveys, 26 per cent of Gen Y employees telecommute, and 17 per cent of them work at “unassigned spaces” in offices, picking a different spot to plop down with their laptop when they drop by. Gen Y also preferred casual work environments like cafés. It is a neat paradox of their generational upbringing: Having grown up in the era of the MP3 player, they’re accustomed to wearing headphones to screen out the outside world, so Gen Y workers often head for a public space when they want privacy. Gen Y also expressed its dislike of commuting, an activity that boomers had taken for granted, because, back then, there was no way around it.
Some of the entrepreneurs I interviewed argued that the desire to work officeless reflects the changing relationship between firms and their employees. Gen X and Y entered a work force in the late 1980s, 1990s and 2000s, when the social contract between a firm and its employees — the guarantee of lifetime employment, so long as you didn’t screw up — died, and was permanently buried. Nobody expects full employment any more, as Scott Annan told me; indeed, he and his peers began their careers assuming that all jobs were provisional, and the goal was to manage the shape of your career.
“The whole relationship with your employer has changed, so that it’s more of a relationship with contractors, even when you’re an employee,” he argues. “So that changes the culture. People think, ‘How do the objectives of the company fit my objective?’ It’s like, ‘I’m independent anyway, so I want to work where I want to work.’ ”
And perhaps the most interesting shift is in what makes a company feel like, well, a company. Offices used to have totemic import: Entrepreneurs didn’t feel “real” until they’d moved out of their kitchens and into a formal office. Even 15 years ago during the dot-com boom, the young entrepreneurs of the time — who were of Generation X — famously blew millions of their venture-capital money constructing expensive, elaborately detailed workspaces.
In contrast, the new generation of entrepreneurs regard their firms as “real” from the moment they start building a product or service and selling it. (Indeed, many of today’s start-up founders marvel and chuckle at the sums that dot-com firms spent on their offices. “I could do an entire start-up for the amount those guys spent on Aeron chairs,” as one told me recently.) They have decoupled the importance of an office not only as a tactical necessity but as a psychological one.
Other experts argue that officeless firms are following the lead of other just-in-time sectors, like Hollywood. “One of the industries that always worked that way was Hollywood,” says Fabio Rosati, the CEO of Elance, a Web service that helps companies hire and manage professionals online. “Today’s small businesses, the mini-multinationals, are mini-versions of Hollywood. They’re assembling the talent, they’re managing the projects, and they’re disbanding the talent when it’s no longer needed. It’s much more efficient.”
GRANTED, THERE ARE SOME OBVIOUS LIMITS to officeless work. Industries with big capital-intensive stakes — like pharmaceutical labs or aerospace engineering firms — probably aren’t going to be able to shed space or allow virtualization the way that small high-tech start-ups can. And some of those in the high-tech world argue that even they have faced problems — creative limits that come when people aren’t face-to-face enough.
“Any high-level product questions are best done when you’re in the room together,” says Ali Davar, the founder of Zite.com, a search-engine-technology firm based in Vancouver. Davar managed the firm virtually for a year, because he had to; his full-time job moved him from Vancouver to Barbados, so while developing Zite.com in his spare time, he managed a team of programmers and designers around the world, using Skype and Chat. But he found it incredibly difficult to make deep, profound decisions about the shape of their software when they weren’t all in the same place. When — after two years working remotely — he finally got a chance to set up an office with his core team in Vancouver, he jumped.
“You can’t beat a whiteboard,” he says. “The nature of software is that it’s iterative in nature. The product seldom ends up where it starts. So no matter how clear you are at the start, you’re going to revisit and revisit it — probably when you’re all under one roof.”
Another big worry with officeless work is managing discipline. If you can’t see your employees, can you even know when they’re slacking off? Most CEOs of virtual firms say they have to be careful when they hire, to make sure the corporate “fit” is good, and that the employee or contractor has good self-management skills. At Mercury Grove, Annan usually starts new employees on “smaller jobs” to see what their work patterns are like, before entrusting them with “high-level work.” But several other entrepreneurs argued that being officeless usefully pares an employee-employer relationship down to the most crucial element: Is the work getting done?
If that’s all you care about — because you’re not worried, say, about whether they’re arriving at the office on time or not — it becomes easy to measure whether the employee is working out. Annan argues that remote employees enjoy a flexibility that makes them more productive.
“I’ve never had an employee, contractor or partner tell me that they didn’t complete a project because their wife was sick (or they were sick), that they had to go to a doctor’s appointment, or that they would be late for work one day,” Annan tells me. “You have a relationship based on performance.” Though, as he points out, the flexibility cuts both ways: “I regularly receive e-mails from them at 3 a.m. and on weekends.” Mirzaee told me that his firm’s online collaboration software auto-reports what everyone is doing, so it’s essentially impossible for an employee to slack off without him instantly knowing.
“When I worked at Nortel, we’d spend hours filling out these activity reports,” he adds. “Now I just look at the software and I can see what people are doing.”
It’s also true that “official” office space hasn’t entirely vanished, even among the ranks of the new start-ups. Some of them have found that after years in business, they need to get some sort of space to hold meetings with clients or for group staff meetings; in other cases, they can’t fit all their corporate stuff in their bedrooms or basements, and need an overflow spot. At Mob4Hire, King began renting a small Calgary office mostly to hold meetings. Since he and his local staff hate commuting, they still work from home the rest of the time. And even when they’re forced to finally get an official home, many of them avoid the hassle of managing it by turning to the new market in “co-working spaces” — places like the Code Factory in Ottawa, or Station C in Montreal, where entrepreneurs or the self-employed can rent a cubicle or two, often on a limited-time basis, sharing printers and faxes with other people; they can focus on growing their business while letting the managers of the space take care of the scut work like taking out the trash, managing the Internet and paying utility bills. Itteco’s Paramonau rents space on an on-demand basis at the Code Factory, from which he and his partner manage their worldwide network of employees.
And even those who wind up renting space find they don’t use it the way a previous generation would have. In Mirzaee’s case, it took him four years to get to the point where he needed more space than he had at home. Then, he rented a small office in Ottawa South for four of his local employees. But he still finds that employees work from home when they “really need to get work done.”
Indeed, there’s a generational clash emerging between the new regime and their older counterparts — who expect companies to be housed in gleaming office towers. When Mercury Grove’s Annan applied for a federal grant that helps hire technical workers, he discovered not having a physical office hurt his credibility. It incensed him: He’d already done $1 million in business, he’d been asked to present Mercury Grove’s software at the prestigious DEMO conference in California, and he was creating jobs. But to the government, he wasn’t real because he didn’t have an office.
“These grants are based on land, not on how many jobs you create,” he fumed. (Mirzaee has a more humorous version of a similar story: When Boknow applied for a government grant, the federal agent insisted on visiting their office. They spent a frantic weekend trying to make his home look official, cramming all the furniture into the bedroom and printing a corporate banner to string along one wall.)
Yet there’s other evidence that the officeless trend will grow, because it’s percolating up from the grassroots. In recent years, some large, established Fortune 500 firms — particularly management consulting and accounting firms — have begun to dematerialize, shedding real estate as they realize that their cubicles are often empty. Employees are either working from home, travelling or holding meetings outside the office. Why pay for all that expensive real estate if you don’t need it? Using that logic, the management-consulting giant Accenture has significantly reduced the square footage of its global office footprint, says Sharon Klun, the firm’s manager of retaining talent.
Some prominent architects believe the trend will remake the way we construct new office buildings. Frank Duffy, a British architect who founded DEGW and became famous for his pioneering office design in the eighties and nineties, predicts offices of the future will have fewer traditional conference rooms and private offices. Instead, they’ll have plentiful — and smaller and more casual — meeting areas, and unstructured space where employees can drop by to work for a day, on the increasingly rare occasions when they’re not working from home or in the field. More and more meetings will be conducted outside the firm — in airport lounges, bars and cafés. O’Neill, too, predicts offices will become more “residential” in appearance, filled with sofas and chair arrangements that replicate a Starbuckian feel.
“It’s the interstitial spaces between buildings that are more important now,” Duffy tells me. “It’s no accident that Starbucks has flourished in the last decade. It’s providing this interstitial space in between companies, places to meet.” The office may never go away — but in 10 years, will we recognize what it’s turned into?
I'm Clive Thompson, the author of Smarter Than You Think: How Technology is Changing Our Minds for the Better (Penguin Press). You can order the book now at Amazon, Barnes and Noble, Powells, Indiebound, or through your local bookstore! I'm also a contributing writer for the New York Times Magazine and a columnist for Wired magazine. Email is here or ping me via the antiquated form of AOL IM (pomeranian99).
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