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This article from
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Rise of the virtual office
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CHRIS EVANS
Managing director, Foreshore
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Local financial services companies are only too aware of the market perception that Jersey is an expensive place from which to conduct business. The ever-present need to trim operating expenses coupled with easier electronic communications has led to a number of initiatives that are rapidly breaking up traditional centralised businesses.
While the concept of outsourcing is well understood the oddly named (but self-explanatory) ‘homesourcing’ and ‘offshoring’ are modern business concepts that are all contributing to the establishment of the ‘virtual office’. This can best be described as traditional business activity being undertaken from multiple alternative locations, either for reasons of cost or access to appropriate skills and resources that are linked electronically to operate as a single entity.
Largely as a result of the falling price of telecommunications and the increased sophistication of relevant technology, all businesses, regardless of size, are now able to take advantage of global efficiencies that were once available only to large corporations and multi-nationals. We have seen some local banks start the process of consolidating corporate data closer to their centres of operations, which for foreign owned organisations has often resulted in the relocation of IT infrastructure off the Island. India has become a favourite destination for offshoring customer response facilities for the larger companies. By contrast, internet e-businesses are moving their IT infrastructure into the Island as web servers often constitute the only nexus of their commercial activity, and therefore reinforce their business establishment offshore.
Trust companies have discovered that back office processing can be accomplished with considerable cost savings from locations such as Mauritius and that certain client activities are more appropriately run from Switzerland. Broadband internet in Jersey has made homesourcing viable where staff for example can successfully balance the often conflicting requirements of work and raising a family.
There are a number of implications of decentralisation. The integrity of corporate data can be compromised in the absence of strong data management and storage policies. The inevitable proliferation of duplicated data sent over public networks to individuals or offices in remote locations also presents significant security risks. The management of outsourced services (with well defined service level agreements) requires a different approach to those supplied from in-house, and is likely to be even more challenging when services are undertaken in a different country. Differences in culture, time zone, standards, legislation and language are the obvious ones. Deficiencies in any of these areas can lead to reputation risks as well as increasing the costs of compliance.
The human interaction that eases processes in a real office is lost and in the absence of any facilities designed to replace this, barriers to successful collaboration become a threat; with decentralisation risking becoming disintegration.
However, the rewards for companies who have approached the management of the risks with diligence can be significant. One of the most important developments in this area has been the growth of systems designed to address the loss of valuable discussions in offices, passageways and at the coffee machine. Loosely termed ‘collaboration services’, they typically employ a range of technologies designed to allow people who may be separated by thousands of miles to engage in short exchanges of information that are more flexible than e-mail, fax or phone. Collaborative communications for example often combine instant messaging (chat) technology with voice over internet services (VOIP) and video conferencing over the internet. All of these technologies have evolved from hobbyist beginnings to business quality services designed to improve efficiency and reduce costs.
Interesting and potentially difficult to manage compliance issues emerge from operating a virtual office from multiple jurisdictions. Legislation and regulations concerning data protection and the length of time that business records and documentation need to be maintained for example will differ. For example, data permanently residing in location A, temporarily residing in location B and C, and processed by equipment and personnel in any or all of the locations, has the potential to create a compliance minefield.
This particular issue emphasises the pivotal role of outsourced data storage to network connected decentralised businesses. Data that is always available and is seen to permanently reside in a single central location will be subject to the legislation predominantly in the home jurisdiction, which simplifies both compliance and potential data recovery issues. Centralising data also improves its inherent integrity by reducing or eliminating unnecessary duplication, while encryption techniques for the transmission and storage of information by members of the virtual office will guarantee its security.
Outsourcing, offshoring, homesourcing and the innovative use of new internet based technologies are changing the nature of business forever. Decentralised businesses that have well implemented systems, which address the obvious pitfalls, are in an excellent position to save costs, increase efficiency from the use of systems-imposed processes, exploit business development opportunities in the new locations from which they operate, and have a more flexible business infrastructure into which they can plug in or remove outsource services' providers with ease.
Those businesses that put their faith in luck rather than design may achieve disintegration rather than decentralisation.
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