Productivity and Remote Work

Remote work is a topic that has been endlessly debated in terms of its impact on productivity. Are teams as effective when they are remote or in the office? For large technology functions within major corporations, this is a significant topic, since everyone went remote in March 2020 and many teams have yet to fully or partially return.

Spoiler - this article isn’t here to solve the in office / hybrid / remote challenge.  The purpose of this article is to put this in context of a broader search for higher productivity in large, global technology functions that has been going on for decades.

Remote Work Impact on Productivity

There are many studies on productivity and remote work but it is difficult to say what the overall impact is on a global enterprise technology team because there are so many different types of workers and roles. You have individual programmers who thrived because they were able to work uninterrupted, support teams using tools to respond to incidents during off-hours from their homes, and researchers who were able to focus independently on innovation. On the other hand, you have product teams trying to engage with executives in the business, automation teams striving to work on projects that span silos, and technology leaders trying to build cohesion across a sprawling global team that has thousands of intermixed employees and consultants.

If I were to guess, the total productivity impact of WFH on labor would be between 20% plus or minus for a global enterprise technology team. The benefits of no commute, focus and ability to source talent outside of your immediate town on one side against the difficulty of partnering with the business, working across silos, and building cohesion across what is in reality a global “city” containing thousands and spread across the world.

It is also difficult to measure because companies for the most part have not “committed” one way or the other on a remote / hybrid / in office model. For instance - if you shut your office space completely and refocused work to be asynchronous and invested heavily in partnering with the business to bridge silos and enable this way of working, you could permanently gain benefits. On the other hand, if you mandated everyone to go back to the office and could staff that model with the required talent, that model could conceivably be back to the Silicon Valley model of yesteryear which historically was credited with great outcomes. Hybrid models, with the heavy expense of office space and with various protocols for coming in person for multiple teams, would be the hardest to measure and understand.

Offshoring and Outsourcing

However, this discussion of the benefits or disadvantages of remote work and associated impact on productivity is only part of the overall efforts that large scale global enterprises (>$100M in annual spend on technology) have long been focused on. Standard levers for optimization include:

1.   Offshoring - Virtually all technology functions have remote offices in India, Eastern Europe, or South America. Enterprises can hire between 3 and 6 programmers overseas for the cost of 1 programmer in the United States. While the total “value” created using offshore labor over an equivalent investment “onshore” is difficult to measure (the general equation was less output due to distance from home office and time change on one side and a much reduced cost of inputs in terms of average hourly cost on the other side), the fact that companies established these offshore facilities and continue to invest in them de-facto proves that they were net positive

2.   Outsourcing - Outsourcing or heavy leverage of consulting resources can be seen in the fact that these major technology companies vary from a moderate (say 10-15% of work force) to a heavy mix (> 50%) of outsourced resources, and in the giant market capitalization of public companies like Accenture (ACN) and Infosys (INFY), as well as the success of the “Partnerships” such as Deloitte and EY.

Move to the Cloud

While the move to the cloud seems inevitable in hindsight, ten years ago the consensus was that major corporations and government entities would never go to the cloud because of perceived high security risk. Many technology organizations were expanding their data center footprints at the time and it took a complete U-turn to defer incremental investment and then finally for many enterprises to become “cloud first” or “cloud only”. The move to the giant cloud companies (like AWS) opened up tremendous opportunities for productivity, because teams could leverage staff and consultants already trained on these tools and methods (such as the suite of tools and capabilities provided by AWS) while any new staff or consultants in the past had to learn the unique, bespoke ways of building environments and releasing and maintaining code tied to each specific enterprise.

The proliferation of SAAS applications which could be purchased and implemented without going through central technology functions, also was a revolution as business units seized the new-found power and leveraged it to buy applications and essentially go around technology controls and processes. These applications could be updated centrally by the vendor without extensive programming teams and without an investment in on-premise infrastructure and became the dominant way to sell and deliver software. From a cost perspective, you could say that SAAS applications were not a productivity play, but brought value to the enterprise in terms of speed of deployment, certainty of deployment (the vendor was focused on making it work and had experience with potentially hundreds of customers), and alignment with the needs of the business since the business was spending their own money on these capabilities rather than working indirectly through central technology functions.

The jury is out as to whether or not going to the cloud “saves” money - but it is here to stay and enterprises and tech organizations alike need to work to manage this fleet of SAAS apps and an ever growing monthly bill to giant cloud companies alongside legacy applications and tools that still require support and investment.

Remote Work In History

Technology teams have been pioneers in remote work. I was a skeptic of remote work prior to my experience with covid in 2020, but that skepticism obviously proved to be unfounded, at least when large portions of the enterprise went remote at the same time.

Technology that was rudimentary or required specific programming skills even ten years ago is available to everyone through consumer grade technology such as Zoom and powerful cameras and wifi included in every laptop and mobile device.

Many friends and peers have worked remotely for years in a variety of roles including sales and technology or for teams based in other cities and they have thrived and find it odd that anyone even questions whether or not “it can work effectively”.

Benefits of Remote Work

The benefits of remote work in direct savings, to the employer, are clear. All else being equal, the cost of facilities and all related support is between 5-10% of a large scale enterprise’s spend. If Technology teams are remote, this spend can be avoided or substantially minimized. This is a very significant amount; many enterprises have thin profit margins after all expenses are taken into account and this sort of savings is substantial. The employees are essentially providing their “own” offices and enterprises can avoid the cost of buildings, leases, heating, cooling, parking spaces, and everything else.

Employers also have ESG ratings, and avoiding new construction, heating and cooling large buildings, and the environmental impact of commuting is a significant benefit. This is one of the easiest ways to reduce a company’s carbon footprint, and telling employees to get in their cars and drive to and from the office each week will just raise the bar on what an enterprise has to do in order to drive down their emissions.

Employers who can hire employees regardless of their location draw from a wider pool of technology talent, which is especially important when looking for programmers with specific skills in high demand. Companies that are not located in areas with large pools of tech talent (outside of Silicon Valley, Boston, NYC, Austin, and a few other locations) will struggle to fill all of their roles with local hires.

Benefits of In Person Work

I have not seen any strong empirical work about the benefits of having all technology employees on premise. I do see anecdotal comments about “culture” and “serendipitous encounters” that occur when people interact in person, and know that many companies have decided to bring technology staff back in the office. For instance, SNAP who pioneered “work anywhere”, recently said that employees need to be in the office 80% of the week. More cynical observers than me might say that this is a calculated move to have employees quit without paying severance (increase attrition). Like the other companies bringing technology employees back to the office, SNAP did not cite any metrics or empirical evidence to support the change in policy.

Calculating Technology Productivity

Like how I earlier said I was not going to solve the remote / WFH productivity conundrum, I am not going to solve the difficult question of how to measure enterprise technology productivity. However, I am going to share a series of questions that I have seen in my years’ in this space that might spark interest or discussion.

-    Given that an enterprises invests $X hundred million / year in technology, are we delivering the technology features needed to delight customers?

-    Have the investments in technology reduced the security risks (hack, ransomware) and enabled us to meet our privacy requirements for customers and global regulators (in-country data, right to delete data)?

-    Did technology investments enable us to eliminate legacy systems and infrastructure (data centers, on premise applications) and reduce our long run cost of service by eliminating technical debt?

-    Has our cost / unit declined in terms of programmer hourly wages across our total work force of employees and contractors?

-    Are teams delivering more output for the same cost as measured in features, story-points or other key metrics when team size and cost are held constant?

-    Are we reducing churn and attrition and increasing engagement of our teams through superior hiring and policies designed to attract and retained talent?

-    If we are building our own platforms and systems in house rather than buying them, is the long term cost of platforms we build superior to the long run cost of buying them from third parties?

-    Are we filling key roles on a timely basis to drive to market faster?

-    Are we consuming cloud resources in an optimal way in terms of application sizing, redundant services, and application optimization?

-    Are we leveraging low code tools for automation across the enterprise to enable speed, effectiveness, efficiency of operations and reduced spend on manual efforts?

-    Is our overall investment in Technology best in class as a percentage of spend measured against revenue or SG&A expenses when compared to peers with similar business models?

Conclusion

The remote work discussion for technology resources is part of the broader long-term effort to increase value and productivity of enterprise technology investments. There are no simple answers or metrics to answer these questions definitively but it is an area of high interest especially as all enterprises scrutinize spend in the light of a more difficult economic environment.

Since technology investments are such a large part of enterprise spend, we will see more insight on this topic as companies take restructuring actions and talk about these specific questions listed above in order to convince investors of the value of the steps they are taking to improve their long term cash flows. As companies take these actions and describe them in publicly available documents like SEC filings, presentations for investors and “investor days”, I intend to write about them as they illuminate this long-term productivity discussion.