Counting the Cost

By CIOinsight  |  Posted 09-23-2002

Redistributing the Workplace

Dr. Charles E. Grantham is the founder and chief scientist of the Institute for the Study of Distributed Work. He has been active in this area for more than 20 years and is recognized as an international expert on the design of information and organizational systems that support these new forms of work. He consults regularly with businesses on how to effectively develop e-commerce strategies. His groundbreaking book, The Future of Work, was published in November 1999. He is currently working on a fifth book, FuturThink.

CIO Insight: What have you been seeing since Sept. 11 in terms of how companies think about geography, about how they distribute their work forces?

Charles E. Grantham: The blip that we saw in interest after Sept. 11 hasn't gone away. I would say that in the past year it's matured, especially among those folks in Washington, D.C., New York and other major cities. Now a year later, I'm finding businesses are seriously looking at how they disperse their work force in the event of a catastrophe. Businesses are also seriously rethinking issues around work-life balance, because a lot of people started asking, what's really important in my life. So those two things are going on.

For the IT world, the message I'd have for the IT professional is that folks now are beginning to better understand how technology can be a tool that connects people and the work that they need to do across large distances and across time zones. We're taking it much more seriously now.

CIO Insight: How does geography fit into a company's strategy?

Grantham: Historically, businesses have assumed that people will come to them to do work. If I'm Caterpillar and I'm in Peoria, Illinois, folks are going to come to Peoria to work for me; that's the traditional industrial model—build the plant, then the workers will come. And in that scenario locations are picked in many cases for low labor costs, low real estate cost and in some cases, like Manhattan businesses, would locate headquarters to cluster around other businesses like them, such as the financial district.

That whole set of assumptions has been turned on its head, and folks are starting to look at it differently and ask, where are the people who we need to employ, and how do we either go there or figure out how to use technology to connect them to us. That's one trend. At the same time there's a trend in the work force, in the 30-something group, the Gen Xers, who are saying, well, maybe I want to live someplace else and raise my family somewhere other than a very expensive, crowded city, and they're starting to move. So you've got two things going on at once.

Counting the Cost

Counting the Cost

CIO Insight: This has hit at, of course, a time when the economy is kind of retrenching. When you talk about distributed work forces, you're talking inevitably either new technology or new facilities or both, and doesn't that cost a lot of money?

Grantham: I'm seeing businesses such as Sun Microsystems, to give you an example, saying wait a second, right now we've got one desk for every 0.8 person. Well, we're going to move to a facility strategy where we've got one desk for every 1.5 people. So what they're basically doing is decreasing their facilities cost by close to 50 percent. That means they're going to have many fewer buildings, they're going to be using the interior space of the buildings they have in a vastly different way, and in maybe some cases, they won't even be providing the physical facility that their employees need to use.

I guess Sun has been the most vocal here in Silicon Valley in doing that, but other companies that I'm working with, such as Intel, Cisco Systems, Agile Software, PeopleSoft, and Cap One, are all starting to think through the same process at the very top level. If anything is new, it is the fact that this issue has gotten into the CEO's office in the past year, where it used to be the concern of a functional department head, the VP of whatever. It's gotten the attention of the chief executives now.

CIO Insight: How is that going to manifest itself in the short term and in the longer term?

Grantham: In the short term, I think during the next year or so we're still going to be in planning mode, because the economy is not that good, and people aren't staffing up work forces. They're still staying level or still going down. And it takes a while to work through the system. I mean, you can't get out of leases overnight. You can't convert your backbone network to wireless overnight. You can't change your hiring practices overnight. It's going to take some time.

The real impact is going to be a couple of years out. Like a snake that just ate a chicken. It takes a while for the chicken to get through the system. But coupled with that, we got whacked with the telecom meltdown at exactly, in my opinion, the wrong time, because this is where we ought to really be thinking about how to use all that capacity out there to stretch the network out to connect places together. But we don't seem to be doing that right.

We've got more capacity than anybody can dream about using all the way out to the last mile. How much extra capacity, I couldn't really give you a number, but it's far more than we could suck up if everybody had videoconferencing and broadband everywhere. But we're missing that last link. The build-out of that last link came to a screeching halt with the meltdown in the telecom sector. There's no financial incentive to complete the job.

CIO Insight: So you're suggesting that this is one way to use this extra capacity?

Grantham: Yes. Collaborative online applications for work groups is one. Online broadband electronic learning, e-learning is another. They're there, there are people that are still banging away in a garage trying to create the killer application, but the pieces haven't quite all come together.

Figuring in Security

Figuring in Security

CIO Insight: What has been the biggest aspect of your discussions with clients, and at what point does security become part of the discussion?

Grantham: The first question people ask is, how do we use these strategies to take out significant costs of operations? Let's face it, the business driver today is how to shave 20, 30, 40 percent off of the cost structure.

Having said that, security comes up as soon as a company realizes that its people need to be collaborating with other folks who are outside their company. Internally, they feel fairly confident about firewalls and network security and business continuity planning and all of those things. Their telecom people and CIOs have got that pretty much under control. But it hits them pretty hard when they realize, we've got to be moving stuff between us and our customers or our suppliers or our partners, and as soon as you start to cut across that corporate boundary, security becomes the issue.

And, frankly, folks are really struggling with it right now. I mean, we've talked to folks who will admit that instead of transmitting large files over the net, they will put it in a removable hard drive, put it in a briefcase and give it to a person, who then gets on a plane and flies it to where it needs to go. Security across collaborative business efforts is the issue right now, and I don't see anybody who's really cracked it.

Cases in Point

: The GAO and Congress">

Cases in Point: The GAO and Congress

CIO Insight: You have written about an interesting example of all this involving the GAO and the Congress. Can you tell us about that?

Grantham: The basic point is that the General Accounting Office, coming out of Y2K, had already started making preparations to distribute data centers, to move a lot of its operations to wireless mode, to have stocks of portable computers that were all preloaded with applications they needed.

So when Sept. 11 came along, and more specifically the anthrax scare, the GAO was saddled with the responsibility of figuring out where to put the U.S. Congress. All of the representatives and their staffs were moved out of their buildings because of the anthrax scare. I think that they got the call on Friday afternoon and by Monday morning they had that entire central part of our government in a totally distributed setup with wireless laptops. Data was moved out. They even had video-over-IP working for a lot of these folks. And they did it in the space of like three days. It was absolutely amazing.

And we never noticed it, we never noticed that the U.S. Congress went from a centralized work place to a totally distributed work force in the space of a weekend, which has made many of them wondering why they need to go back. And they're still wrestling with it. That was a crisis, and everybody was mobilized, and there wasn't a lot of bickering among vendors. People simply just got stuff done quickly.

But to me, another reason we've used it as a case study is that it shows, yes, we can do this. There's really no reason that we can't do this. It just took a time of crisis. And this is a public sector example; we often like to think of the public sector being behind the times in technology. This is a shining example of them being out there in the forefront.

Historical Precedents

Historical Precedents

CIO Insight: Why do some organizations look at a distributed work force and then have second thoughts?

Grantham: The central barrier to this new way of working has been the resistance of middle management to moving to a new management paradigm. It's the old, "If I can't see 'em, how do I know they're working?" That's coming back up underneath all of this. From what we see that's really a red herring. Good management is good management whether or not the person is sitting elbow to elbow with you or they happen to be across the country. We've had distributed work forces all along—we call them salespeople, right?

If you want to go back in history, you got great examples like the Hudson's Bay Company, whose headquarters was in England but most of its operations were in Canada, and it took three weeks to get a letter from one to the other. These are false issues. But in the past six months we've seen a realization on the part of large corporations that they have to step up to that and offer their middle management new types of training and education to get over this issue. Because you've got CEOs saying, hey guys, we're just going to do this. You go figure out how to do it, but we are going to do it. So it takes clear vision and direction from senior leadership, and that's starting to happen now.

CIO Insight: How is the nature of work going to change?

Grantham: It will differ depending on the particular situation. Within five years the number of people in your company who are known as employees will decrease by about 45 percent. That's not to say you're still not going to be connected to that group of people, but you're going to be connected to them as independent contractors, as small companies. The major thing that's going to change is the implied social relationship between employee and employer. If you've got 45 percent fewer bodies, you have to manage their support infrastructure, HR policies, IT provision and facilities. You've got a lot of options to change how you do business. It will be more like the Hollywood model, with the central core being the producers of the business, and everybody else coming in and playing their part and then getting offstage and then coming back when they need to come back.

It's a whole different way of running things, which is going to require new leadership, and I also feel that it's going to be a driver for ubiquitous wireless. You need that wireless broadband as the glue to bring all this together. Look what Starbucks is doing. Starbucks is developing into an alternative work location, where the cost of the facilities and the networking is born by the employee.

It's not just coffee anymore. I think it's just a great idea. It's a stroke of genius on their part. What they've realized is that there's a trend and demand for high-tech workers to have a location to go to conduct business other than a central office or their home. And Starbucks is close to ubiquitous. They're everywhere. So they put in a wireless network, and folks come in, get their Frappuccino and sit down and plug into the Net and do their e-mail.

CIO Insight: What are the implications of this changed work force?

Grantham: You will see an increase from about 7 percent of the work force today who are routinely working out of their homes a couple of days a week. I think that's going to go up to about 25 percent. My numbers tend to be very conservative, by the way.

The first implication is the demand for a business enterprise that provides this infrastructure to that part of the work force—administration of health benefits, management of 401(k) or retirement plans, remote network repair for your computer. Somebody's got to step into the void and provide all of that support. You're talking a quarter, a third, maybe 40 percent of the American work force. That's a large number that is going to need all of that stuff around them, and who's going to provide that? Traditionally, we got it from the company we worked for.

There are public policy implications in terms of what kind of training and education people require and how that's going to be delivered. In my neighborhood the community college is now providing credit courses to train managers how to manage at a distance. That's a pretty significant shift. I think there are real estate implications in terms of housing prices and the construction of housing. A market for the work-at-home residence will emerge, and not just converting the second bedroom to an office.

CIO Insight: If there's another terrorist attack, how will that influence these ideas?

Grantham: It's just going to speed it up, and I think it's a question of when instead of if. People are starting to think about these things, they're starting to plan for them, but they don't see the immediate need right now because the economy is where it is. But another serious terrorist attack in a major metropolitan area would probably pull the time frame of this from five years back into two.