Platt Perspective on Business and Technology

Telecommuting and the marketplace transition to the telecompany 2 – defining the business model in a telecompany and virtual business context 1

This is my second posting to a series in which I outline and discuss a new and emerging business approach that is coming to have tremendous impact, and both on marketplaces and economies and on how we do business, and on individual employees as they plan for and carry out careers (see Part 1: defining the term and putting this business model into perspective.)

The telecompany:
I began this series by briefly outlining a few of the defining features of a telecompany, and repeat the core ideas to that here, fleshing them out a bit more in doing so:

1. A telecompany, in brief, is a business in which essentially all employees are free agents and contract workers, and the business itself does not have any in-house staff.
2. And in many cases, the workforce in place for these businesses changes dynamically with people joining in for specific time-limited projects and then moving on to work with other client businesses.
3. And ongoing services needed for maintaining essential business infrastructure would be outsourced to separate functionally expert third party providers, rather than having a core group of in-house employees for ongoing continuity there.
4. And I noted that with a true telecompany, it is likely that most if not all employees including owners and executives would work remotely and telecommute, as the telecompany approach reduces need for fixed, owned or dedicated-rental space and certainly for service-oriented businesses. Though as will be discussed below and later in this series that is not at all a requirement.

My goal in this posting is to at least begin a discussion of the 21st century telecompany business model and of virtual businesses. And to lay a foundation for that I am going to explicitly compare and contrast this emerging business phenomenon to two business models that might at first glance seem similar but that in fact very different:

• The seasonal business model in which large numbers of employees are brought on short-term and for specific time-limited if recurring reasons, and
• The online store (see my series Online Store, Online Market Space at Startups and Early Stage Businesses, postings 67 and loosely following for Parts 1-21.)

Seasonal businesses and businesses with seasonal or otherwise periodic surges of temp or part time hiring:
This is the traditional and still ongoing business context in which headcount at least periodically shifts upward from bringing in full and/or part time temporary contract workers. And farms provide what are perhaps the longest standing and best known examples of this business model, with seasonal hires for harvesting crops coming immediately to mind. But these businesses, whether small and family owned and operated or large and even multinational, all maintain core, ongoing business structures and full-time long-term staff – an ongoing pool of in-house employees. They primarily bring in people for short term contract work who can provide extra hands for crucially important tasks that are labor intensive, but where it would not be feasible to maintain large, permanent in-house staff.

This is also the business context and model that is most likely to be confused with that of the true telecompany and particularly where temp hire headcount periodically exceeds and even vastly exceeds headcount for year-round in-house staff. But while these headcount surges are built into and accounted for in the business model for these organizations, they are not telecompanies per se. They are simply more traditional companies that show periodic if consistent recurring surges in the hiring and letting go of staff, to meet immediate short-term and shifting needs.

Online stores:
For point of comparison purposes I will specifically focus here on the pure-play online business, leaving out bricks and mortar businesses with traditional storefronts that also offer online sales options as business lines within larger business organizations.

• Online stores are built and run with a business model and operational goal of capturing market share in new and wider marketplaces than would be available in any local community. And from a business process and fiscal effectiveness perspective they are also build and maintained with a goal of limiting fixed operating expenses, starting with the reduction or elimination of fixed bricks and mortar physical facilities. An online store still might have and maintain warehouse space that they store and distribute inventory from but they strive to keep the physical plant side to their fixed operating expenses to a minimum.
• But an online store per se is probably going to have in-house full time and in-house employees, and certainly for developing and maintaining expertise on what is offered and for providing and managing customer support and a range of other services.
• An online business might or might not maintain work space for online-facing personnel to work from. That is rapidly becoming an expendable option as more and more online stores allow and encourage and even require distance working and telecommuting – only requiring and helping to maintain secure online connections for risk management purposes.
• And of course services such as web site hosting would in most cases be managed through third party providers, and both to reduce cost from not having to replicate complex 24/7 services and for increased information security.
• But bottom line, a standard and by now traditional online store is simply a bricks and mortar store with a much smaller bricks and mortar footprint if any – always starting with the elimination of the customer-facing storefront but maintaining an in-house staff.

The virtual company:
A telecompany might or might not eliminate physical plant and certainly for a service oriented business, but it starts out by eliminating in-house staff the way the online store eliminates physical plant.

• Can a business pursue both the online store and the telecompany approach? Yes, and then it becomes a virtual business.
• And I add as a special case that I expect to see become a lot more common, one possible form of virtual company would be where a group of business partners come together short-term to assemble a time-limited business enterprise with minimal physical infrastructure or fixed operating expense, to capture perhaps fleetingly short term emerging opportunity, to disband and move on the to the next opportunity, and perhaps with different business partners afterwards.

And with this framework of comparison in place, I turn to explicitly discuss the telecompany business model as a whole and as a unified and organized system and game plan. And with this I acknowledge a crucially important detail that up to now I have simply glossed over. In a fundamental sense there are two very distinct business model approaches that both fit the telecompany pattern:

• The costs constraint telecompany model, with its focus on limiting fixed operating expenses, and
• The shifting opportunities-oriented telecompany model.

I am going to explicitly discuss these two business models in my next series installment. Meanwhile, you can find this at:

Guide to Effective Job Search and Career Development – 2 (as a supplemental posting),
Outsourcing and Globalization and
Macroeconomics and Business.

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