Very interesting article. It suggests that ability to organize outside firms is directly correlated with effectiveness of outsourcing. So if computers increase the ability to organize outside firms, then they must increase outsourcing.
So the question becomes, will computers ever increase the ability to organize outsiders to the point where the firm disappears altogether? (This kind of scenario was suggested in http://paulgraham.com/opensource.html)
My answer would be eventually yes, but not in the near future. Computer communication tools are still startlingly primitive. Based on experiments in office microgeography,(http://www.nytimes.com/2008/01/07/technology/07link.html) being closer to people still makes it far easier to exchange information.
In addition to that PG article, you might also be interested in this video lecture by MIT Sloan professor Thomas Malone, where he discusses his book The Future of Work, which is right up that alley. http://mitworld.mit.edu/video/229/
Apparently he's kind of the guy behind "e-lancing"
"In Thomas Malone's optimistic view of the future, the human values of creativity and freedom ultimately triumph, and business leads the way. This explosion of possibilities in work, and everyday life, will flow from the increasing ease and decreasing expense of communicating. Malone sees parallels between the emergence of democracies in political and business worlds, and technological advances in communications. He notes that in the age of the Internet, businesses are growing decentralized, markedly departing from "command and control" organizational models to newer environments where "workers seek advice instead of approval.""
And not to make this the longest comment in N.YC history, but to your microgeography point, you'd like this video with Sandy Pentland of MIT: http://mitworld.mit.edu/video/494/
"Alex (Sandy) Pentland performed a unique experiment in a large German bank, tagging its employees with special badges that tracked individuals' interactions, down to head nodding, body language, and tone of voice. His research, conducted over a month, looked at how face to face interactions played into the overall organizational flow. The patterns he uncovered in the data collected from his name badges and from email and more traditional documentation, demonstrated the significance of social dynamics in workplace productivity. Certain individuals acted as information bottlenecks; others as polarizers, group thinkers, or gossip mongers. Pentland shared information about these patterns of communication with individuals."
"My answer would be eventually yes, but not in the near future. Computer communication tools are still startlingly primitive. Based on experiments in office microgeography,(http://www.nytimes.com/2008/01/07/technology/07link.html) being closer to people still makes it far easier to exchange information."
And interrupt people in the zone.
Any information exchange between people in an office (especially programmers) works much better when the people involved are at equal talent levels. Otherwise, the lesser-talented people bug the crap out of the more-talented people with questions that could have been answered with a simple Google search.
Yes, I would agree that is one of the many costs associated with a firm.
However, I would say that the point of the article is that the increased coordination and communication of firms outweighs the associated costs of the office environment at present.
One could argue that the internet makes the office/firm model of doing business obsolete by reducing the costs of outsourcing. To some extent this has already happened in the open source community as well as in user generated content websites such as wikipedia. In these cases, sophisticated projects are designed and built by individuals working at many locations.
The crucial (and seemingly odd) distinction is that these projects are undertaken by individuals for no pay. I would argue that this allows some flexibility in the projects. Jobs, money, and lives rely far less on the success of an open-source project than on the success of a profit driven firm.
It remains to be seen whether the contribution model of wikipedia could be translated to a bid model that would replace the traditional for-profit firm. In some industries, such as programming, the bid model has lower costs of decreased cooperation, and thus has occurred more quickly. However, I cannot see it taking root in "heavier" industries (engineering, manufacturing, consumer services) without a significant improvement in computer communication tools.
The firm is an abstraction that lets many people (employees, managers, etc) appear as a single actor in market. As with all good abstractions, the market doesn't care how it's composed, only how it functions. The abstraction would leak in the case of horrible labor conditions causing strikes or causing labor as a whole to organize and affect all firms, or other cases like that.
There are imperfectly organized firms because the market doesn't provide perfect answers, it helps us to gradually create knowledge. As people here may know, firms are gradually coming to play a less dominant role in the world, and small, agile startups a larger one. And this change is happening not because someone decided it should, or anything like that: it's part of the free market.
So the question becomes, will computers ever increase the ability to organize outsiders to the point where the firm disappears altogether? (This kind of scenario was suggested in http://paulgraham.com/opensource.html)
My answer would be eventually yes, but not in the near future. Computer communication tools are still startlingly primitive. Based on experiments in office microgeography,(http://www.nytimes.com/2008/01/07/technology/07link.html) being closer to people still makes it far easier to exchange information.