The Virtual Office and The Next Generation of "Work"

Current virtual offices do not fully replace purpose-built team workspaces as productivity platforms despite increasing interoperability. However, they can support an organization’s broader (remote) HR strategy and are useful for social activities such as office parties, off-site meetings, and teambuilding exercises. Onboarding new hires and employee training initiatives are other notable use cases for virtual offices, with their novelty likely improving engagement and learning retention. Their use extends beyond traditional white-collar organizations, with firms like Chipotle exploring virtual learning for front-line employees.

Avatar-based environments have long been part of the videogame industry, with Massive Multiplayer Online (MMO) platforms commonly bringing players together to solve common goals. Second Life was perhaps the most notable attempt at "virtual corporate spaces" in the mid-2000s, garnering significant press but never attaining mass-market adoption. However, supported by improvements in interface design, 3D graphic technology, and growing public awareness of the ‘metaverse’ (digital worlds fostering social connection) driven by Facebook’s re-branding, the pandemic has spurred a resurgence of interest in virtual office solutions.

The underlying premise of new startups like HeadOffice.space (founded in LA in 2019) and WeWork (Boston, 2020) is that 3D spatial environments mimic the benefits of proximity-based spontaneity found in traditional workplaces, providing a sort of "digital water cooler effect." Controlling a personalized avatar, workers navigate between joining company-wide training or engaging in private conversations, with the expectation that such “fun” interactions promote closer bonds with co-workers.

These virtual offices can also integrate with other tools, launching a Zoom call when one avatar walks up to another or sharing a Google Doc when both are at a (virtual) table. In the short term, the extension of established business tools into avatar interactions will more plausibly drive awareness and use of these budding formats. ??Current projects are steppingstones to more ambitious, long-term implementations of augmented and virtual reality technologies that today remain limited by hardware costs and clunky interfaces.

As both graphics capabilities and user demand for photorealistic virtual encounters increase, metaverse-like applications will be bandwidth-intensive and may emerge as a major application in business and the next major driver of internet bandwidth investment.

The Future of Work

Despite many companies going back to work, there remains significant uncertainty about how companies will manage modern work environments. Technology will play an important role in communication and productivity. Employees desire the flexibility and autonomy provided through remote work options, and many seek greater transparency from their employers on the expected permanence of remote work.?Trends related to remote work’s new structure include:?

• ?Employers plan for workers to return in-person at a rate significantly higher than employees would prefer, although this gap narrows as income, education, productivity, and seniority rise.[2]
• Gallup Research finds employees are most comfortable maintaining their current work situation (whatever that may be), having already settled into their preferred routine[3] . This implies that employees forced to return to the office will have decreased satisfaction and may be at risk of leaving.
• Employees implicitly value remote work as a perk worth ~8-9%[4] of total compensation, but feel it’s unfair to reduce salary accordingly or to base it on a specific cost of living.[5] Consultancy PwC is a notable exception in that employees working remotely from lower-cost areas will have their compensation adjusted accordingly.

A remaining critical decision for firms considering hybrid work models is how to allocate workdays across their entire workforce. Assigning specific days as "in-office" for certain teams appeals for its potential to lower real estate costs by reducing office footprint but does not provide workers the same autonomy as allowing them to choose their respective days. A middle-ground can be achieved through technology-enabled systems (hoteling, hot-desking) where teams schedule space as needed, but it’s unclear whether any meaningful impact accrues to company culture, the chief concern in-person work is meant to address.

Under the current labor market for professionals and managers, hybrid work options are “table stakes” in the short term, important as a tool to retain existing employees and attract new talent. It may be wise to consider if full-time remote work is appropriate for select firms and roles. However, with remote work benefiting from network effects, it is unclear the net impact for firms shifting to hybrid or full-time remote models; individual remote worker productivity may decline as remote-based employees begin coordinating with colleagues located on-site. Employees have also raised concerns about "presenteeism" (i.e., their employer will favor those choosing to return in-person), potentially threatening morale.

Easy answers to these issues remain elusive and continued uncertainty presents its own set of risks through inaction. Companies must determine what best suits their workforces and adapt to meet the operational needs of their employees and industry norms.

Hybrid Work Environments Create New Tech Requirements

Remote work and hybrid work options are here to stay. The success achieved by remote work’s “experiment” has left a permanent effect on employee priorities, and a significant percentage of the workforce will continue working remotely, driving investment in supporting connectivity hardware and software solutions.

As chip shortages and other supply chain issues improve, we expect a burst of consumer spending on devices, enhancing remote work productivity. Based on a target audience of ~38 million remote working households and Parks Associates survey data measuring purchase intent, retail expenditure for external webcams and wireless routers could total over $750 million in 2022. Additional spending is also likely to accrue in related office equipment (desks, ergonomic chairs) and electronic accessories (printers, monitors, microphones, docking stations).

?These new work environments and models will take time to mature – a common theme in technology forecasting is Amara’s Law, which states one tends to overestimate the short-term impact of a change and underestimate its effects in the long run, especially for society. It is indeed possible that a recession inflicted by current macroeconomic threats will tip the balance in labor markets back towards firms, correcting employee expectations and bargaining power to historical norms.

Amid such uncertainty for the immediate term, numerous opportunities exist for firms to capitalize on current implementations of remote work:

• ?Internet service providers can test “remote worker” packages combining faster speeds and value-added services like managed Wi-Fi (a key foundation), whole-home cybersecurity, and premium support. Streamlining billing practices to facilitate direct payment by employers will likely drive higher rates of employer reimbursement with benefits for all involved.
• Gateway device manufacturers and cybersecurity vendors can continue forging ISP partnerships to reflect the decreasing importance of DTC retail channel sales. They may consider participating in open-source ecosystems, leveraging other developers to expand their install base and lay a foundation for new business models based on sharing data.
• Videoconferencing providers and manufacturers can expand upon existing HaaS offerings to increase the affordability of prosumer-level solutions; they should also consider targeting upscale MDUs needing to differentiate their properties in crowded urban markets.
• ·Communications and collaboration platforms canleverage data analytics into new solutions optimizing worker/team workflows, especially when distributed across multiple locations. Focus on features that promote company cohesion and enable remote employee training, as these issues remain continued concerns among senior executives.

Organizations and individuals that fully grasp the immensity of this shift and develop new management practices and workflows accordingly will be those that flourish in the years ahead.

?This is an excerpt from Parks Associates research work. We appreciate any comments and feedback. Thank you for your support. For information on engaging with our team, please contact me or Jason Paris.

[1] Hospitality Tech ”Chipotle Builds Virtual Community for Its Remote Workplace ," February 2021

[2] National Bureau of Economic Research, “Why Working from Home Will Stick ," May 2021

[3] Gallup Research ”Remote Work Persisting and Trending Permanent ," October 2021

[4] National Bureau of Economic Research ”Survey of Working Arrangements and Attitudes: December Update ," December 2021

[5] Global Workforce Analytics: “State of Remote Work 2020 ” (registration required)

[6] Reuters, ”PwC Offers US Employees Full-time Remote Work ," September 30, 2021