Some businesses have it all. They’re productive, making huge profits, developing ingenious innovations, and paying their workers better. What is the secret to their success? Information technology could be a big part of it.

Across many sectors, there has been a rise in industry concentration as top firms capture their shares of revenue. While businesses are complex, and it’s not always clear how the competition works, there’s some evidence IT plays a role in top firms’ success in areas such as mergers and acquisitions, lobbying, and with other explanations for industry concentration. Here’s more on those findings and possible explanations, which could be useful for virtual offices to know.

What the Data Says

The adoption of IT is helping firms succeed. Those industries that had higher shares of IT workers held more industry concentration between 2002 and 2007, even after controlling for other variables, including merger and acquisition activities. Adopting IT was linked with higher worker output and profit margins in some analyses. Many studies found links between firms with high success, profitability, and wage equality, and those who had adopted IT. Why is that possible?

Some Possible Explanations

While there’s a link between IT and succeeding as a business, it’s not always easy to explain this success. There are multiple factors that go into making a business successful, especially as you get into bigger firms. It’s hard to know the impact of a single variable when so much changes. However, there are some fairly solid theories for why virtual offices do well.

Upfront Fixed Costs

Like anything else, software development costs money. With IT in particular, there’s a lot that needs to be adopted in terms of development and training, and costs can add up. It could be those companies that adopt IT had resources to earn their shares of industry concentration beforehand; for bigger companies, it’s easier to spread out costs.

Knowledge

It could just be a matter of really understanding what you have and how to use it. Simply adopting IT isn’t the same thing as truly understanding it, and companies with an edge might know something their competitors don’t know.

Physical and Intangible Investments

When it comes to IT adoption, physical investments declined when compared to intangible investments. While virtual offices still need equipment and machines, they also require software, data, employee training and management. The latter are more intangible investments, and while they cost money upfront, they become cheaper to scale than machines, and complement each other.

Finding the Right Combinations

Adopting IT doesn’t automatically mean success. Virtual offices have to be smart about how they use their technology and intangible resources. You need good processes in place to use the technology, good management to make sure those processes take place, and a well-established brand. It’s an investment larger companies are in better positions to take advantage of because of their resources. This doesn’t mean smaller virtual offices can’t benefit from IT adoption. As long as you combine it with good management and other intangible processes executed well, your virtual office can stay ahead of the competition.

Set Up Your Virtual Office at executivehub

Technology has changed the way we work, and embracing it helps businesses succeed. For entrepreneurs looking for ways to make their offices more digital, consider renting through executivehub. We can give you the virtual office you need to succeed, and provide tech support to help make sure everything runs smoothly. Talk to us to see what we can do to improve your telecommunications and your bottom line. Call 480.945.8500 or contact us online for more information.

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