SCALING DOWN:
Japan Sees Boom in Small/Home Offices

May 8, 1997

The increasing prevalence of computers and electronic networks has made small offices and home offices a viable alternative to the traditional corporate workplace. Small offices and home offices (or "SOHO," as they have come to be known) have generated a lot of interest in the United States. And now they're catching on in Japan too. Some Japanese small/home offices are similar to those seen overseas, such as companies setting things up so employees can telecommute, or individuals or groups of people starting their own businesses. Some uniquely Japanese approaches to SOHO are beginning to appear as well.

SOHO a Hit in Information Industries
As the name suggests, a small office/home office is a small-scale workplace in the home or elsewhere. SOHO operations typically rely on personal computers and the Internet or other electronic networks. The number of small and home offices in the United States has risen sharply in recent years, fueled by the popularization of personal computers since the 1980s and the more recent growth of the Internet. According to some estimates, over 50 million people in the United States are now working out of small or home offices.

In the 1990s, Japan has also seen a sharp rise in the number of small and home offices. As yet, very little data on SOHO operations in Japan is available. But some sources in the computer industry here estimate the number of small/home office workers in the information industry alone at about 5 million. Generally speaking, small and home offices in Japan can be divided into two categories: satellites established by companies for their employees or contractors; and independent operations set up by individuals or small groups who want to start a business. These entrepreneurs may be former company employees, students, or small groups of people.

At least one large manufacturer of computer equipment has jumped on the SOHO bandwagon. Since October of last year, the company has set up small offices for about 100 of its electronic-components salespeople. These employees now only need to show up at headquarters once a week for a meeting. The salespeople have the company's portable computer terminals and cellular phones with them when they're out on call so they can send reports to their superiors and receive messages and corporate data from headquarters. When they need to produce a document such as a report, they can work from their satellite offices or from "mini-bases" set up for their use at the company's plants, branch offices, or branch stores.

The company says it adopted this system because many of the electrical-machinery manufacturers that are its customers are located in the outer suburbs, far from the company's Tokyo headquarters. If a salesperson has to show up at headquarters every day, that only leaves time to call on one customer. The company estimates that the SOHO approach has increased from 30% to 50% the proportion of work time that salespeople spend actually visiting customers. Furthermore, because the bosses at headquarters now receive the salespeople's reports faster, the pace of work at the company has picked up.

SOHO, Japanese-style
Independent companies operated from small or home offices are often businesses that draw on specialized skills or knowledge; for example, World Wide Web page design services, software developers, consultants, and designers. Other typical SOHO businesses include real-estate, travel, and insurance agents. All of these businesses are based on the exchange of information. As long as these companies can communicate with their clients--be it by phone, fax, or modem--it doesn't matter whether they're located downtown or in the suburbs, in a residence or a commercial office.

Recently, arrangements that might be termed "Japanese-style" SOHO have begun to emerge. One example is group offices. In Japan, where space is at a premium, individual entrepreneurs may not have the room in their homes or offices or the funds needed for the business equipment they require. Sharing office space with others in the same situation is the ideal solution. Shared offices are multiplying in trendy Tokyo districts like Harajuku and Aoyama.

As another example of SOHO arrangements with a Japanese twist, independent businesspeople are forming business alliances over the Internet with entrepreneurs in similar industries. Some groups join forces in order to take on jobs that would be beyond the scope of a single small business. Last fall, a nationwide SOHO network was formed by over 20 event planners, publishers, and Internet cafe owners. The group set up a Web page to solicit membership, and about 100 companies have joined so far. This "virtual SOHO alliance" uses the Internet to provide its members with governmental information on multimedia operations, which is ordinarily available only to large companies and government-affiliated organizations. Several members operating as a team recently used the information to bid on a contract, which they won.

The SOHO alliance also plans to offer its members benefits, including insurance that will provide them with paid sick days. Ultimately, the organization hopes to gain official approval as a cooperative association of freelancers.

With computers and Internet access widely available and reasonably priced, it has become possible to work just about anywhere. This has been a major factor in the growth of small and home offices in Japan. SOHO arrangements are also attractive for large companies that are competing fiercely for market share in a low-growth economy. By cutting the time wasted on commuting and other travel, the companies hope to give employees more time to focus on their work, and thus to boost productivity. Finally, the rise of SOHO in Japan has been spurred in part by the growth of electronic media, which has opened up a wealth of new business opportunities for entrepreneurs.