Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.forbes From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: COMPUTERS/COMMUNICATIONS Date: Wed, 18 Nov 92 14:52:03 EST Message-ID: "Copyright 1992 Forbes, Inc. Any further reproduction or redistribution without the express written permission of Forbes and ACC is prohibited." COMPUTERS/COMMUNICATIONS The virtual workplace Sell your urban real estate, buy land on the exurban fringes, invest in telecom companies, learn Lotus Notes. Why? Not because the Democrats are back in the White House but because electronics is changing our world faster than anyone thought possible. By David C. Churbuck and Jeffrey S. Young SEA-LAND SERVICE, an ocean shipper owned by CSX Corp., is headquartered in Edison, in New Jersey's heavily settled eastern corridor. Come win- tertime this $3.2 billion company is going to pick up stakes and resettle 25 miles up the road in Liberty Corner, N.J., in search of lower rents and greener surroundings. And why not? As a Sea-Land executive says, ''All I need is a personal computer to track any of the 1.2 million containers we have in our computer system. I can do that just as well from my house, or a hotel suite in Hong Kong, as I can from a high-rise office overlooking the docks. Who needs to be near the ships?'' Lusk, Wyo., population 1,504, is a small town in the least populated county of the least populated state in the country. In the 19th century a western outpost like that would have lived or died on whether the railroad tracks came to it. It's a little late for Lusk to turn itself into a transporta- tion hub, therefore Mayor Donald Whiteaker has come up with the next best economic development scheme. He has persuaded US West to install fiber-optic cables and advanced digi- tal switches in Lusk by picking up some of the cost. ''We have plenty of land and I could find you 2,000 acres real fast,'' said Mayor Whiteaker. ''All I need to do is connect you to the outside world.'' Not long ago such ambitions would have been dismissed as pretty fanciful. But they are plausible now. If Citicorp can install its credit card op- erations in South Dakota, if clothing vendor Patagonia can put its custom- er service staff in Montana, if Utah can turn into a software development cen- ter, then even Lusk has a chance at the next job influx. The explosive ad- vances in telecommunications and computing make the hinterlands ever closer. Little more than a decade ago fax machines were expensive rarities; to- day you can get one for your home office for $320. In 1950 a cross- country business call cost 15 times as much as a local call. Today, Fidelity Investments can connect its Boston office with a branch in Covington, Ky. at a cost of less than a cent per minute per voice-grade line. That's less than Fidelity spends for local connections. So why keep jobs in Boston, where housing is expensive and taxes forbid- ding? Fidelity is moving a bunch of them to Covington next year. Bad news for cities; good news for owners of real estate in pleasant-look- ing towns on the exurban fringes, or maybe even in the sparsely settled expanses of Wyoming. Employers have, of course, been trickling out of cities for a long time. In the first wave of urban emigration, manufacturers took their factories out of settled areas and away from water- power and put them wherever electric power lines and railroads reached. The Interstate highway system was the driving force in the second wave. It chased still more assembly lines, printing presses and textile mills into rural areas; it also smoothed the way for a 1960s and 1970s exodus of corporate headquarters from down- town to more congenial sites near executives' suburban homes. The third wave--call it the fiber- optic wave--is on a par with the other two in magnitude, but its suddenness is likely to make it much more severe in its side effects. Electrifying the country took almost half a century, but crisscrossing it with glass fibers has taken scarcely 15 years. Only 11 years after IBM started sell- ing its personal computer in mostly urban retail chains like Businessland, Dell Computer is putting both IBM employees and retail clerks out of business with a retail store that has no location anywhere: It consists of toll- free telephone lines and a chain of United Parcel Service trucks linked by their own radio-equipped computers. It is taking Intel just four years from the 1989 birth of its fourth-genera- tion microprocessor, the 486, to bring out the fifth-generation Pen- tium, with double the power. In the last four years the number of telecom- muters in the U.S. has doubled to more than 6 million. This rapid flowering of technology has coincided with a disintegration of the classic, hierarchical megacorpora- tion. No doubt many of the 3 million- plus white-collar workers whose jobs were eliminated since 1980 would have been doomed anyway, by inter- national competition. But technol- ogy helped in a big way to make them redundant. Peter Drucker, in his 1989 book, The New Realities, argues that middle management's role in a corporation traditionally has been that of an infor- mation conduit, passing information down from executives and up from workers. The information, once guarded in mainframe computers at headquarters, has been dispersed to a network of cheap desktop machines, and not as many middle managers are needed to pass information back and forth. IBM has a mass of managers at various sites in Westchester County, N.Y., just north of New York City. Dell, in contrast, has 25 corporate sales executives, working out of their homes in suburbs of Manhattan and Seattle. As companies decentralize and re- form themselves around their infor- mation networks--tying branch of- fices, telecommuting employees and customers together with private net- works, satellites, laptop computers and fax machines--the result is some- times the end of entire middle layers of management. That's what happened at Asea Brown Boveri, the electrical equip- ment manufacturer that is often de- scribed as Swiss-based but is more accurately described as a stateless multinational. At ABB, they call decen- tralization the ''30-30-30-10'' plan. One of the executives implementing the model was Gregory Buoncontri, former chief information officer for the company. He explains: ''Ten per- cent are put into a regional staff head- quarters; 30% go out the door; 30% stay in a regional service company where they charge for their services; and 30% move into the business units themselves.'' And what happened to Buoncontri? ''I eliminated my own position and am now looking for an- other job.'' Headquarters firings, network soft- ware, contracting out of white-collar work and telecommuting are all dif- ferent aspects of the same phenome- non. ''About 20% of people working at home in 1992 call themselves con- tract employees,'' says Thomas Miller, vice president of home office research at the New York telecom- munications consulting firm Link Re- sources. ''This is up significantly from two years ago. We're in the midst of a sea change in the nature of the em- ployer-employee relationship--espe- cially in the professional and white- collar arena. This is the birth of the contingent work force.'' The flattening of organizations can provide for serendipity that might never have happened in a hierarchic organization. Bradford Power, a con- sultant for CSC Index, a Cambridge, Mass. firm that tells corporations how to restructure, tells how this occurred at Phillips Petroleum, which reorga- nized after being threatened with a takeover raid. ''A lack of middle-man- agement filters and the coincidental installation of a computerized deci- sion support system [gave] an execu- tive information about a plant being taken off-line that he otherwise would not have received. This executive knew that a big order was coming through and by waiting a month he could capture several million dollars of revenues that otherwise would have been lost.'' The large corporation has been both a victim and a willing participant in the dismantling of urban power centers. Sears, Roebuck is threatened by the less hierarchical, less urban Wal-Mart; for its own part Sears is deserting 37 of the 40 floors it occu- pies in its Chicago tower, effective Dec. 1, and sending 5,000 jobs 35 miles west to Hoffman Estates, a bed- room community on the exurban fringe. Says Christopher Leinberger, a real estate consultant with Robert Charles Lesser & Co.: ''Geography is irrele- vant.'' Irrelevant to the corporation, that is, but very relevant to the em- ployees. Companies move their of- fices out to the suburbs and beyond to accommodate the preferences of ei- ther their current employees or the kinds of employees they would like to hire in the future. Thus, downtown Atlanta, Dallas, Baltimore, Phoenix and Chicago are now shrinking, Lein- berger says, while their wealthier sub- urbs expand. A big-city bank can have a national credit card operation wher- ever wages, taxes, and usury laws are congenial; thus the First Chicago Corp. card business in Wilmington, Del. Chicago's Duff & Phelps em- ploys 12 junk bond analysts in Mont- pelier, Vt. because that's where they want to live. John Garden is an ophthalmologist in Lexington, Ky. For years he has been examining federal prisoners with eye troubles at his office. This costs the Bureau of Prisons the services of two guards, transportation, and the price of a full eye exam--about $220 all told. Now Garden does the same thing in his office with a PC linked by modem and videocamera to an exami- nation room in the federal penitentia- ry 5 miles away at a cost of $40. If doctors can do it, sales managers and art directors and environmental consultants can do it--put their of- fices anywhere. Lucasfilm and Dolby Laboratories have a digital sound stu- dio link that allows them to engineer recordings over digital T-1 (high- capacity) phone links. The actor can be in Bora Bora, the producer in Los Angeles, and the recording done in Marin County. The ability of a New York City fashion designer to transmit specifications for a new line of cloth- ing by fax to one of many Asian manufacturers has accelerated the drift of apparel manufacturing abroad. Levi Strauss & Co. is going one better: It connects San Francisco and Singapore with videoconferenc- ing equipment. Motorola's government electron- ics group in Scottsdale, Ariz. has built a supplier network that allows the firm to pass computerized design drawings directly into suppliers' systems. Once a bid is accepted electronically, the part drawings directly drive machine tools and generate the piece at the supplier firm. ''And here's the car- rot,'' says Theo Edward Woods, the group's director of operations. ''We'll pay them electronically immedi- ately, too.'' The Integrated Services Digital Network long promised by the tele- phone industry is finally arriving (FORBES, Oct. 12). It will make video- phone connections very affordable re- placements for corporate face-to-face meetings. Seven years ago business videoconferencing equipment cost $250,000 at each end and ran up $1,000 an hour in connection charges. Now, cheaper chips and cleverer compression algorithms bring these costs down to $40,000 and $15 per hour. PC Connection, a 400-plus-em- ployee computer software and pe- ripherals mail-order house, makes a home in the southwestern New Hampshire hamlet of Marlow, popu- lation 604. Housed in an old mill and a restored Victorian country inn sepa- rated by a mill pond where otters swim, PC Connection is able to guar- antee that an order made by 3 a.m. will be delivered that same day any- where in the country. How? A leased T-1 phone line runs from Marlow to Wilmington, Ohio. Wilmington is the site of Airborne Express' national op- erational hub and a computer ware- house PC Connection leases from Air- borne Express. The Australian Securities Commis- sion (the equivalent of our Securities & Exchange Commission) consoli- dated its eight regional document management operations, once situat- ed in cities like Melbourne and Syd- ney, in a single center in rural Mor- well. The commission put 350 new employees from the economically de- pressed Gippsland region into a run- down, vacant clothing factory. Then it installed a Kodak document imag- ing system that is converting 125,000 documents a day to digital form. Walk into a regional securities office in Perth, 1,800 miles away, request the facsimile of a document, and back it comes from Morwell. All manner of service-sector com- panies are becoming ''virtual em- ployers'' with no one centralized home. Where is Journal Graphics? This vendor of transcripts of televi- sion shows has Grant Street, Denver as its mailing address. But the compa- ny's guts are elsewhere, in employees' homes. Shows are taped on personal VCRs, transcripts are made there, and the material is directly uploaded to satellite channels, digital FM sideband networks and on-line databanks for access by subscribers within hours of a show's original transmission. For some companies, the future is management by E-mail. Borland In- ternational, the software enterprise with 2,090 employees worldwide, av- erages 11,000 E-mail messages daily. The next stage of this management evolution is a new technology known as groupware: software, typified by Lotus Notes, that coordinates the collaboration among people (see re- lated column, page 192). Harmon Contract W.S.A., a Minneapolis building facade contractor, uses Lo- tus Notes to connect 50 field execu- tives with laptops to 200 headquarters employees. ''The trend in corporations to re- duce overhead will drive telecom- muting,'' says Stewart Personick, as- sistant vice president of information networking research at Bellcore in Morristown, N.J. ''Soon companies will begin to question expenses once considered sacred, like office space, and the best way to avoid unnecessary office space is to have your workers go home.'' Explains Franklin Becker, a professor at Cornell's facilities man- agement program: ''Consultants, salesmen and auditors typically spend less than 30% of their time in the office--so why dedicate big blocks of expensive real estate to them?'' The idea has produced ''hotel offi- ces.'' Ernst & Young and Andersen Consulting are adopting the concept: Employees book space in a set of offices and stay only as long as they need. The night before an employee's arrival, Ernst & Young retrieves per- sonal pictures and mementos from private lockers, installs them in the office, and adds a nameplate on the door. Says Laurie Palmer, San Fran- cisco director of administration for Andersen: ''These guys are only mak- ing money when they're out with the client. This is a subtle way to make sure they do that.'' ''More and more people have the ability to negotiate with their compa- ny to live wherever they want and define their relationship to the organ- ization,'' says Philip Burgess, presi- dent and senior fellow of the Denver think tank, Center for the New West. ''The increasing demand for highly talented professionals is requiring corporations to cut unconventional deals that will become more and more conventional over time.'' Two years ago Dan Anbar, senior director of biostatisics and data management for Schering-Plough Research Institute, was faced with a dilemma. ''It takes several years to train a biostatistician in the clinical details of our pharma- ceuticals business,'' he explained. ''Then one of our senior statisticians told me that she was resigning be- cause she couldn't face the 35-mile commute from her home in Prince- ton to Kenilworth, N.J.'' So Anbar equipped her with an IBM computer, a printer, a modem and a fax/copier, and has her come to Kenilworth only ten days a month. As the jobs disperse to the corners of the earth, the biggest losers will be the tax collectors and landlords in the old centers of employment. In the past 30 years, New York City's popu- lation has remained about the same while the number of full-time, pri- vate-sector jobs in the city has fallen by 19%. On that dwindling popula- tion of workers lies the economic burden of paying government em- ployees, maintaining the infrastruc- ture and supporting a growing case- load of welfare families. The trend, morever, has been obscured by move- ment of women into the workplace; the number of men employed in New York City has fallen by nearly a third since 1960. At some point, when the absorption of women workers is com- plete, the city will be waging an ever more desperate battle to hold on to workers whose flight is made ever easier by technology. The winners in the telemigration will, of course, include states with the smaller tax burdens and owners of property in fringe suburbs and scenic rural areas. The other winners will be the suppliers of the migration paths: E-mail providers like MCI; vendors of telecommuting software like Lotus and Microsoft; developers of video- conferencing and data compression systems like PictureTel and Compres- sion Labs; manufacturers of home- office electronic equipment like Dell, Matsushita and Hewlett-Packard; and delivery firms like UPS and Federal Express. A new generation of entrepreneurs is arising to supply the virtual employ- er. Unifi Communications Corp., a small Billerica, Mass. company, sells a system that automatically routes in- coming calls to a customer service line to multiple locations, allowing com- panies to staff their 800 numbers with operators in different places or time zones. For instance, if you call an appliance service center in Sacramen- to, Calif. to ask when your washer/ dryer will be delivered, a part-time worker in Salt Lake City, working the swing shift from her living room while the kids are at school, may pick up the phone. And she can pull up your record on her terminal and tell you the time it was placed on the truck 200 miles away and when the estimat- ed time of delivery will be. A startup in Los Banos, Calif. called National Telecenters is building a for- profit telecommuting center in this central California town 80 miles southeast of Silicon Valley. ''We're leasing space to a number of the biggest companies in the high-tech community,'' says Anthony White- hurst, one of the firm's founders. Another firm in California has al- ready updated the office suite busi- ness for the high-tech age by partner- ing with real estate developers saddled with unleasable space. Office Tech- nology Group of Richmond, Calif. has opened a string of office suites in southern California. Each includes a sophisticated office phone system that can patch users into their home of- fices, or anywhere else. ''We had an attorney who used us while he worked from his home on Catalina Island,'' says Frank Cottle, Office Technolo- gy's executive vice president and co- founder. ''None of his clients knew that he was 30 miles away on his deck.''  "This information is the property of Forbes, Inc., ACC takes no responsibility for its content, or the actions of any individual or institution, predicated on the information herin. 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