Innovation: Real savings from the virtual office: A computer group aims to slash costs with home working

THE computer company Digital Equipment Corporation is making strides towards creating a 'virtual' company, in which staff work from home but are brought together by a computing and communications network.

This will enable them to share the working environment despite being physically apart, and allow Digital to slash its fixed costs.

Earlier this year, the company closed its office in Newmarket and set up 80 staff as home-based workers.

Each has a computer, a modem for transmitting work files and a business telephone line. Other equipment - printers, fax machines - is installed at the discretion of local managers. Staff are advised on setting up the home office, and Digital provides extra home insurance cover. They remain Digital staff, unlike most home workers, who are usually self- employed.

The home workers are supported by a team of secretaries based at a new type of office called a telecentre. The communications technology allows the secretaries to handle phone calls, correspondence and the printing of reports as if the person they are working for is in the next-door office rather than at home. This also ensures that the company presents a consistent image to customers.

The telecentre is also a place for staff to meet and socialise. It occupies about 1,200 square feet - about a tenth the space of the previous office - saving pounds 400,000 a year. The total cost base for 100 staff has fallen by 40 per cent, while productivity has increased.

Digital is using independent consultants to assess the Newmarket strategy against a control office, where there has been no change. The consultants carried out an initial survey after six weeks and will conduct a follow-up study in December.

In the first survey, managers said the change had increased productivity, work quality, reliability and staff loyalty, , while time lost through sickness had fallen.

Staff said they made better use of their time. Switching to home-based working has improved the quality of their home lives and reduced work-versus-family conflicts.

Some staff did express concern about loss of contact with fellow workers and the effectiveness of teams. They also reported more personal stress.

Neil Harris, who leads the company's Flexible Work Practices programme, said these uncertainties were partly a reflection of Digital's poor financial position. Losses have totalled dollars 4bn (pounds 2.6bn) in the past four years, and the company announced plans to cut 20,000 jobs worldwide in July.

Digital began its flexible working programme four years ago, introducing flexitime and the use of contractors, and encouraging informal home-working arrangements. Mr Harris said although the job cuts and restructuring might be forcing the pace, the changes were based on four years of experience.

At a number of locations, including Bristol, Birmingham, Warrington, Reading and Basingstoke, two sites have been amalgamated into one office - bringing annual cost savings of pounds 10m. The remaining sites have been turned into flexible offices, based on the principle that more and more work involves time away from the desk, in meetings and with customers.

New working environments have been created with shared facilities, such as 'hot-desking' - one desk for two members of staff. Status barriers, such as managers' offices, have been removed to encourage interaction.

Digital has defined five classes of flexible worker and rewritten its contracts of employment accordingly. Employees may be office-based; location-based (this involves having a home office but also spending time in a Digital office); home workers; mobile workers (based at home but travelling to work at different locations); and site workers (based at home but travelling to work at customers' sites).

'These are formal options, and individuals can choose any one, depending on the work they do and at the discretion of their manager,' said Mr Harris. Following the Newmarket project, Digital is switching most of its 600-plus consultants to flexible working.

The consultants will no longer be based at a Digital office but - like their Newmarket colleagues - they will be supported by a telecentre.

'We are moving to the kind of model where we no longer have traditional offices,' said Mr Harris.

Over the past few months, a pilot group of consultants has been set up with a seamless communications environment to test the approach. Digital now aims to adopt flexible working across each of its business units.

It will set up telecentres, which may be run by third parties, as hubs to provide support to a network of flexible workers based in a range of low-cost locations. Other services will be contracted out. Services will be available at any time or place but will be paid for only when used.

'The outcome will be a very small, fixed-cost core infrastructure, supporting an extensive and variable-cost virtual company,' Mr Harris said.

(Photograph omitted)