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. Last Updated: 07/27/2016

Prepare for the Outsourcing Era




NEW YORK -- We might be forgiven for concluding that everything in the corporate world is getting bigger and bigger. Global couplings in autos, oil and gas, financial services, telecommunications and now pharmaceuticals sometimes give the impression that the business world is driving toward an acquisition apocalypse. When the dust settles, we will all draw a paycheck from the same employer.


Now comes Thomas Malone to file a minority report. Malone is a professor of information systems at the Sloan School of Management at Massachusetts Institute of Technology and an alumnus of Xerox's creative Palo Alto Research Center. For five years, he has been co-director of a major-league effort to think about what shape the company and the workplace will take in the new century.


In his view, the century will bring a new golden age for small enterprise and a new springtime for individual creativity in business. Communications in the Internet era will be so powerful, so rich, so cheap that even the smallest enterprises, already nimble, will be armed with the information they need to compete with corporate giants. He expects an economy in which companies with as small a staff as one to 10 talented people can thrive.


Newborn web businesses are already swirling like snowflakes. How long before they carpet the ground?


Malone's term is "the e-lance economy," a play on the word "freelance." He expects a business landscape in which much work that large corporations now do will be done by "temporary companies" - ad hoc combinations of small, specialist firms that come together to tackle a single project and disband upon its completion.


At the heart of that economy will be a vast electronic marketplace in business services, already taking shape. Small companies will be able to rent the design, manufacturing and marketing muscle now available only to big businesses. Small talent pools will be free to focus on what they do best.


Malone likes to talk about TopsyTail, a tiny Dallas-based producer of hair and fashion accessories. Relying on a score of vendors, from demand forecasting through manufacturing and order fulfillment, it has produced more than $100 million in sales at retail with three employees.


"I am not good with employees, I am good with vendors," said TopsyTail's energetic founder, Tomina Edmark. Outsourcing to the limit not only fits her managerial personality, she said, it also provides instant, inexpensive expertise in a consumer business where the race is always to the swift. Her next step is a web store, herroom.com, to sell women's underwear online, starting in February.


Almost everyone believes the next century will see much greater decentralization of business decision-making. There the debate begins. Will the Internet foster an economy of small enterprises, or will it make it possible to build a global empire far more extensive than anything known today? Is the prototype Edward Jones, the investment firm, with more than 5,000 local offices united by cutting-edge communications and an ingrained culture of serving the careful long-term investor? Or is it the cottage industry of thousands of independent financial advisers who rely on Charles Schwab for their transaction needs and tap the Internet for endless sources of financial analysis?


Many experts, including some at the MIT conference, say that economies of scale and new efficiencies in harnessing corporate learning favor the larger-and-larger structure. They say only the largest will be able to assemble and manage the costly information engines needed to power a global empire. Huge companies like BP Amoco are devising new systems to organize and index the vast business savvy that exists within their ranks but today is tacit and untapped.


Malone contends that it is easier to think about flattening the corporate hierarchy by chopping away at middle management and empowering underlings - all half-measures in his view - than it is to grasp the workings of a vast network of many, many small players under no central direction or control. (Some people call that a market.) But his model of creativity and efficiency is not merely a leaner, flatter company.


Instead, he said, consider the celebrated Linux operating system, which was developed and perfected by thousands of volunteers after Linus Torvalds posted his early efforts on the Internet and invited all and sundry to have a go at them. Or consider the Internet itself. Malone draws smiles when he asks if the Internet could have been developed by AT&T, with the normal panoply of corporate procedures and clearances.


"There's literally no one in charge of the Internet," he said at the conference, "no one who can shut it down, no one who can keep you from connecting with it."