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One of the magazines I work for went virtual recently. They downsized from a couple of floors to a shoebox office with a PC and some storage. The MD splits her time between HQ and home. Everyone else works from home full-time, and they stay in touch over Skype.
They've all saved a few hundred pounds a month in travel costs, and they have an extra couple of hours a day free. They're not being any less efficient or productive than they used to be, and they're still working normal office hours - but they're doing it in different locations, from home.
If anything they're working more smoothly because meetings don't waste as much time as they used to, and there's an automatic record of all conversations.
I'm amazed how few tech companies support telecommuting. There's Skype, there's Facetime, there's email, there are Wikis and blogs, but companies still seem to believe the only way to get things done is to haul everyone into a single building at the same time every morning, keep them there all day whether they're busy or not, and send them off home again at the end of the day - five times a week.
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