Cloud Source Blog
In This HP Cloud Source Blog, HP Expert, Christian Verstraete will examine cloud computing challenges, discuss practical approaches to cloud computing and suggest realistic solutions.

Does a company still need a headquarter?

Since a couple years I’ve become used to work from home. Being part of a global team with none of my colleagues local to me, I frankly have little reason to go to the office. By a matter of fact, I go there typically once a month for administrative reasons. I’m even sending my expense reports by post. Yes, we need to submit receipts and those are physical in nature, so cannot be sent over the internet unfortunately.

When I talk about how I work, my friends are always quite astonished. You can’t work like that, they say. Well, I do it, so I don’t see why others couldn’t do the same.


The added value of the enterprise

Years ago, I remember having found an article from 1937 by Ronald H.  Coase, titled “The Nature of the Firm”.  In this article, Coase points out that “production could be carried on without any organization that is, firms at all”. He noted, however, that there are a number of transaction costs to using the market; the cost of obtaining a good or service via the market is actually more than just the price of the good. Other costs, including search and information costs, bargaining costs, keeping trade secrets, and policing and enforcement costs, can all potentially add to the cost of procuring something via the market. This suggests that firms will arise when they can arrange to produce what they need internally and somehow avoid these costs. But he goes on to point out that the “decreasing returns of the entrepreneur function” may result in a disappearance of the enterprise.

That lead me to “Blown to Bits” a book published by Philip Evans and Thomas S. Wurster in 2000 where they argue that the new economy of information will transform strategy fundamentally, using multiple examples of enterprises that disappeared due to the changing nature of information. Aren’t we at that point? Isn’t the corporation as we know it not disappearing to be replaced by an information centric enterprise functioning through the exchange of bits and bytes between its employees?


Collaboration across boundaries

This leads me to the question whether in the current technology environment, a company still requires a physical headquarter. How important is it to have a building representing the corporation and serving as rallying point for the employees? Frankly, I’m not sure. Or it ought to be a very different building than the one we have today. Let’s face it; we have excellent communication and collaboration tools. Yes, the human being is a social animal. Being able to see and interact with colleagues is important, but the video call facilities found in skype, lync and others provide a nearly equivalent interaction capability. Tools such as HP’s virtual room provide collaboration environment at ones fingertips. Access to information sources such as SharePoint sites and jive collaboration environments are easy.


Cloud computing is an ideal tool for collaboration across geographical and company boundaries, and this for multiple reasons. It’s an environment that is managed by one team, either from the company or a service provider. Users can connect to this environment in a variety of ways from a multitude of locations without special equipment. At the most, a token may be required to identify the users and define their access privileges. If set-up properly, security levels are such that information can be exchanged and collaboration can take place without technical restrictions. Obviously, the company policy on data confidentiality remains, but in a cloud environment, information leakage can be traced back to the source. And that may stop people leaking information inappropriately.


But there is more, particularly when collaboration happens across company boundaries. And the latter seems to become the norm as enterprises focus on their core competencies and outsource all other activities. Using cloud based collaboration from a trustworthy third party facilitates the acceptance of the environment as it is not under the jurisdiction of any one of the parties. So, there is not the feeling that one of the players has access to all the information, even the one he does not need to. That’s actually an important issue as partners, that may be competitors in other markets, can cooperate together as part of an integrated eco-system. The other element is the ownership of the data. Through proper logging of activity, the true contributor of a piece of information can be identified in case of dispute. As collaboration often implies sharing of intellectual property, this is a good insurance that it’s possible to demonstrate who contributed what.


A new type of headquarter

So, this brings me back to my original question. As employees increasingly work with an eco-system including other employees, contractors, partners, subcontractors etc., why is there a need for a central building full of cubicles or offices where people work alongside each other…, using electronic tools to collaborate?


I actually believe there is a role for an office, but that role should be different from what it is today. It should be focused on the social interaction rather than on working environments. People come to the office to brainstorm, to exchange information, to ideate or participate in innovation sessions. Yes, you can do that over the phone, or over video links, but frankly, being in the same room is more effective for such intense interactions. Follow-on discussions, collaboration in the documentation of the results, planning next steps etc., are perfectly feasible over phone, e-mail, cloud. But it’s the pulling together of the creative energy of a team that is difficult to share in such way. The office might have that role in the future.


A virtual enterprise

Although the mobile worker may not yet be able to fully rely on cloud and cloud access for all his/her activities, I increasingly believe that cloud is an ideal tool for people to work together across the world. I have seen enterprises started by people located on different continents and working together at the development of a product or service. As, in most such cases, actual manufacturing is done by a subcontractor, the need to be collocated disappears. This is a tremendous opportunity for entrepreneurs around the globe. Cloud is the information foundation, collaboration tools form the communication toolset, and human brains the creative thinking and drive. The only remaining issue is the legal structure of such enterprise as we all depend on the laws of our own countries. But I’m sure that can be overcome.


So, are we seeing a new kind of enterprise appearing, one closer to a web of partners that work together with a common objective in mind? I’m seeing very small organizations using such principles to get started. Are they the enterprises of tomorrow? As Coase said, if the firm no longer adds value, why would it exist? What do you think?

Labels: Cloud| Cloud Source
Terry Pullin | ‎05-14-2012 06:01 PM

you've never been a sales person have you!


There's commoradery that you get from being in a close team in an office that you would never have if you all worked at home.


There's something about the words "up at head office" that sends shivers of fear or excitement when uttered.


And we'll all just turn in to hermets if we do not meet! 

| ‎05-15-2012 10:41 AM

Terry, I actually sepnt my whole life with sales teams all around the world and know the commoradery very well. But I also know how productive I can be when I'm working from home and am not disrupted by collegues. This is why I suggest a very different head office that is focused on social interactions, but I do not see the advantage of keeping hundred of little cubicles where people work one near each other. Often I have seen people in the same building being in the same teleconference, sitting three cubicles of each other. Does that make sense?

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About the Author
Christian is responsible for building services focused on advising clients in their move to cloud, particularly from a business process and ...

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