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Corporate Cost-Cutting and Advances in Technology Have Given Rise to Home-Based Virtual Companies


Nobody just hangs around the water cooler in the corporate office at Tom Reynolds' bustling computer services company.

In fact, even though the 5-year-old business has more than 50 employees and annual sales approaching $6 million, there is no corporate office--at least, not in the usual sense of the term.

For Reynolds, the president of ILAN Systems Inc., headquarters is a couple of cramped rooms in his 1,500-square-foot house in South Pasadena. His partner and the business' other administrators work from their own homes, too, keeping in touch mainly via phone, electronic mail and the company's internal computer network.

Welcome to the home-based virtual organization. It's a little-known but emerging mode of business organization inspired by such forces as corporate cost-cutting and the spread of telecommuting.

The key catalyst is office technology: Better and less expensive computers, faxes and Internet and telephone services have made it easier to do professional work from home. Those developments also have helped networks of home-based professionals and technical specialists work together without meeting face-to-face at an office or plant.

On top of that, many workers have responded to the downsizing wave and corporate tumult of the 1980s and 1990s by turning to self-employment.

All told, when cost-minded business customers need "knowledge workers" who can perform such tasks as market research, software development or management consulting, they increasingly can call on a growing army of home-based entrepreneurial ventures.

Probably more common here than in any other country, this type of low-overhead virtual organization "has already established itself as part of our global competitiveness," said Thomas E. Miller, an analyst of social trends for the New York-based research firm Find/SVP.

"It's very flexible, very responsive, and it helps [client] companies react quickly to change."

Some of these home-based concerns operate in many respects as conventional businesses, the way ILAN does, with employees who receive regular paychecks, paid vacations and health insurance. Many ILAN staffers earn in the neighborhood of $60,000 to $80,000 a year, Reynolds said.

The one thing the company's employees don't have is a permanent ILAN facility where they can report to work; the staffers who don't do their jobs from home instead usually work at their customers' facilities.


Other home-based organizations take the "virtual corporation" approach to another level and don't even keep any permanent work force. They hire freelance workers, typically home-based themselves, on a project-by-project basis. It's done much the way Hollywood producers put together a new cast and crew every time they make a movie.

Miller said business contacts made over the Internet are instrumental in pulling together these fluid home-based worker networks. They often put in touch people with complementary skills who otherwise wouldn't know of each other.

"In the old days, if you were home-based or self-employed, you networked with people at the Chamber of Commerce, the health club or at Kiwanis, something nearby. Today, with news groups and other Internet resources, you can network with people half-way around the globe."

That's much the way things have worked out for Brian J. Goggin. From his home in a village in southwestern Ireland, Goggin has run a small business since 1991 that develops job-training and distance-education courses and instructional materials.

Although he has no regular employees, Goggin regularly draws from a pool of about two dozen freelance writers and technical specialists in Ireland, England and the United States.

For instance, when a job calls for the technical expertise to produce software, videos or CD-ROMs, Goggin turns to a friend and frequent partner in Derby, England, named Larry Rose to coordinate the work.

Rose, in turn, farms out much of the computer programming to Bill McKee. He got acquainted with McKee, who lives and works in a remotely located home on Lopez Island, Wash., through e-mail exchanges on a CompuServe software "forum."

Although Goggin and Rose have collaborated with McKee for more than a year, they've never met him or even spoken to him over the telephone; instead, they chat by e-mail.

Although the transatlantic relationship by all accounts has worked out well, at first it was awkward.

"I'm sure they were as unsure of me as I was of them. How did I know that I was going to get paid?" said McKee, 27.

Even after six years of operating this way, the business's free-floating structure poses challenges. Brainstorming in the early stages of a project by e-mail, for instance, often doesn't work as fluidly or productively as meeting face-to-face.

And keeping track of who is doing what on, say, a software project can be troublesome; Goggin and his virtual staff pass an electronic "control sheet" up and back by e-mail so that everyone knows who is working on the "live version" of a project.

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