It’s an old real estate aphorism that what matters most is “location, location, location.” But does this adage apply to where your company and its employees are located?

Over the years, the computer industry has been adding layers of abstraction to hardware and software that enable things like servers, storage, and perhaps even concepts such as customer service to be separated out and virtualized. In the same way, computers also give us the opportunity to virtualize staff and services. No longer should we assume that a company is made up of a certain number of full-time employees who work 9-5, local time, in one particular building.

Instead, you can have a company that’s entirely virtual, with no central location, no office, and even no employees to speak of — simply an array of service providers who are on call when needed.

There are a number of advantages to this method of operation.

  • Cost. You don’t have to pay salary and benefits — often among the biggest expenses in a company — for people you don’t need all the time. You can also hire cheaper people, perhaps because they live in less expensive areas of the country or the world. Also, for certain functions and services (such as HR, finance, or tech support), outsourcing to a company that specializes in the function brings in economies of scale that can further lower costs.
  • Specialization. Finding employees with the right combination of skills is always a challenge. It’s particularly hard if you’re looking for an “all-around athlete” who can fill a number of different functions — the half-time support person, the half-time programmer. And you make it that much harder on yourself by insisting on someone who lives in a particular location. With a virtualized company, you don’t need to find that one magical person. You just hire the equivalent of two separate half-time people, wherever they might be. Also, instead of hiring someone merely competent at a particular function, or whom you have to train, you can hire the services of the person or company who specializes in that function, which makes them more accurate and efficient.
  • Simplicity. Many an entrepreneur has found that once they start a company, they end up spending all of their time doing the HR tasks of hiring, firing, and managing people rather than developing the product or service they wanted to develop in the first place. By hiring out services, you can focus on the purpose of your company. You can also hire the people or services when you need them, and let them go when you don’t, without the complexities of onboarding and offboarding.
  • Follow the sun. By hiring people around the world, you can make sure the sun never sets on your company and that someone is always available.

On the other hand, a virtualized company is no panacea, and there are a number of disadvantages to it, as well.

  • Availability. Even if you’re not hiring them full-time, you still need to find people with the right skills and vet them to make sure they can actually do what you’re looking for. Plus, if you’ve hired several part-time people, you may find yourself having to juggle more individuals than you would if you just hired them as employees in the first place. Moreover, even when you find the skills you need in a particular person, you have to worry about whether they’ll be available when you want them — either because they have other clients, or because someone else decides to hire them full-time.
  • Communication. Keeping in touch with your employees is complicated enough when you’re all in the same room, but what if you’re scattered around the world? If you’ve got a programmer in New York, one in California, one in China, and one in New Delhi, how do you even schedule meetings? “Follow the sun” is great in theory, but the flip side is that there’s always some poor sucker who has a conference call at 2 am. There’s also the aspect of differing language and cultural issues.
  • Intangibles. There are a number of other issues that also come into play with the virtualized corporation. Is it moral to hire people from a different part of the world simply because you can pay them so much less, or to hire someone part-time because that way you don’t have to pay them benefits such as insurance and vacation? How committed is a “hired gun” to the success of your company, compared with someone who feels like they’re a part of something bigger? There’s a certain esprit de corps that can kick in, a “we’re all in this together” that helps people contribute more, innovate more, and produce more — the reasoning behind Yahoo! CEO Marissa Mayer’s move to bring remote employees in-house.

No one’s saying that your company has to go all-virtual. But increasingly, there may be particular functions, or particular projects, where virtualizing at least part of your workforce makes sense.

 

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