Homies

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.

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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.

Running a virtual business, Goggin said, also calls for a collegial style of management based on mutual respect.

“Kicking ass doesn’t work,” he said. “You’re utterly dependent on the commitment of the people working with you. People can walk off very easily if they want to.”

In fact, sometimes the “boss-worker” relationship is reversed; Goggin said he sometimes is hired by one of his freelancers to handle the writing or editing on one of their projects.

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All told, Goggin says he wouldn’t want to work any other way.

“I get to my office in 20 seconds in the morning . . . and I certainly don’t have to wear a suit,” he said.

Given the ephemeral nature of many home-based virtual businesses, along with the fuzziness about what kinds of concerns actually meet the definition, no one knows how many exist. But there is a rough indicator of how many people are involved in these enterprises: Find/SVP estimates that 2.4 million Americans both are engaged in home businesses and use e-mail to keep in touch with professional associates.

The virtual-organization concept isn’t entirely new. Some experts contend that the Avon lady who started her day at home and then sold cosmetics door-to-door was one of the forebears to today’s virtual worker.

Another forerunner was a British computer services company now known as F.I. Group. Founded in 1962, it relied until the mid-1980s on a work force of as many as 200 programmers, largely women, who worked from home. A company spokeswoman said that as the company expanded into more sophisticated computer services in the 1980s, it no longer was practical to maintain a home-based work force.

More recently, many big U.S. companies have prodded their sales forces to work from home or other remote locations. The intent has been to cut real estate costs, along with pushing sales personnel to spend more time serving or pursuing customers.

Yet that’s a far cry from today’s leading-edge home-based virtual organization, where everyone from top to bottom works from home or a remote site. To be sure, it’s a type of business structure that isn’t suited for manufacturing or many kinds of service work, and most home-based virtual organizations are destined to remain small.

All the same, many experts say the spread of home-based virtual organizations could be explosive in information-related fields.

One of the main reasons: the trend among bigger, more conventional companies to cut costs by “outsourcing” work to contractors that can perform certain tasks more cheaply.

On top of that, for many people--particularly independent-minded self-starters--it’s an appealing way to work.

When deadlines approach, “I can just work. No one is going to knock on my door and say, ‘Can you help me with this?’ or say, ‘What did you think about the Lakers last night?’ ” said Warren Bobrow, a partner in a virtual-style management consulting firm called Context Group who works from his home in the Boston area.

How do Bobrow and the firm’s other eight partners, spread from coast to coast, get by without having such amenities as a corporate library? They surf the Internet, especially the World Wide Web.

“It’s a fabulous place for research,” Bobrow said.

The social impact of the home-based virtual-organization trend, however, are mixed. When the line between home life and work life blurs, many people say they put in too many hours on the job.

“You are your own worker and manager, and you have to discipline yourself,” McKee said.

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Virtual workers also commonly have to fend for themselves when it comes to getting health insurance, job training or other traditional employee benefits.

And with their intense focus on productivity, virtual organizations aren’t in a position to lend a helping hand to workers who run into personal or professional problems.

“If you have someone whose equipment is always letting them down, you can only make so much of an allowance,” Rose said.

Reynolds and his partner and vice president, Jack Ng, launched ILAN in 1992, after spending a combined 25 years at Digital Equipment Corp. ILAN provides technical trouble-shooters to corporations that need help in fixing their desktop computers or computer networks.

Sick of Digital Equipment’s staff meetings and corporate bureaucracy in general, Reynolds and Ng decided that basing the business from their homes was the solution.

The only real estate owned or leased by the company is a small “lab” where computers are assembled, on an intermittent basis, for a major client. When the company needs a place to interview a job candidate, it often rents a hotel room.

Even with staff meetings held every month or so to maintain social contact, the virtual life isn’t for everyone. A few years ago, Reynolds said, a new hire quit after three days, saying, “I can’t handle it. I need a water cooler,” and the casual office conversation associated with it.

On the other hand, Reynolds said, the extra productivity that comes from having a virtual organization, rather than a bureaucratic one, is “extraordinary.”

If there is no paper shuffling or politicking at the office, he said, “all you can do is work, and that’s the point.”