Meet Anywhere in the World Without an Office... Will 'Virtual Companies' Rise? [Juhyung Lim's Tech Talk]

Post-COVID-19 Remote Work Expansion
Work Environments Enabled by Video Streaming Technology
Possibility of 'Virtual Companies' Operating Entirely Remotely
Advantages Include Cost Reduction and Rapid Talent Acquisition
Concerns Over Tax Revenue Loss for Government and Local Authorities
Advanced Countries Like the US and UK Discuss 'Digital Services Tax'

Operating video conferencing service software. / Photo by Yonhap News

[Asia Economy Reporter Lim Juhyung] Last year, due to the COVID-19 pandemic, the trend of untact (non-face-to-face) communication was activated not only in daily life but also within companies. In particular, the key technology enabling companies to operate untact work was video streaming technology, which allowed employees to hold meetings and exchange opinions via video chats from home without the need to physically commute to the office, thereby creating an environment similar to that of an office.

As a result, the possibility of companies operating solely through streaming technology without any physical office is now being anticipated. In other words, a so-called 'virtual company' could emerge, where all employees work exclusively from home and no actual headquarters building exists.

The virtual company model is already being experimented with in several countries. The most representative example is 'Hopin,' an online event hosting company founded in London, UK, in 2019.

Hopin is a company that helps organize large-scale online events through its proprietary software. The company supports up to 100,000 simultaneous attendees, who can be divided into multiple groups within the event space to communicate via video chat.

According to the US IT media outlet TechCrunch, Hopin has achieved a unicorn status (a startup valued over $1 billion) by surpassing a corporate valuation of $2 billion (2.266 trillion KRW) from its founding year in 2019 through last year. Furthermore, from last year to early this year, its valuation exceeded $5.6 billion (6.3448 trillion KRW), making it the fastest-growing IT company worldwide.

Hopin's most distinctive feature lies in its 'virtual company' model. The company introduced its proprietary video conferencing and chat software internally and successfully transitioned all 400 employees to remote work. To facilitate smooth communication among employees working exclusively from home, Hopin even created and operates the position of 'Chief Remote Work Officer,' demonstrating its commitment to this model.

Job listing of the virtual event hosting company 'Hopin'. All employees work in a remote work format. / Photo by Hopin website capture

According to the job listings on Hopin's official website, all employees are expected to work remotely. Especially for software developers and engineers, whose nationality is not a concern, as long as they can speak English, they can be hired immediately from anywhere in the world.

Hopin is not the only company attempting the virtual company model. The Korean company 'Zigbang' also announced on the 9th of last month that it would implement a remote work system for all 200 employees. Other major global companies such as Google, Amazon, HSBC, and Goldman Sachs are also gradually expanding their remote work proportions.

Why are companies focusing on becoming virtual companies? The biggest advantage of virtual companies is cost reduction. If all employees work remotely from home, there is no need to invest heavily in purchasing office space or constructing headquarters buildings. Additionally, expenses related to building maintenance, taxes, and administrative labor costs can be saved, making it a very cost-effective business operation method.

Virtual companies also have a significant advantage in talent recruitment competition. In Hopin's case, it was able to rapidly grow because it could hire skilled engineers from anywhere in the world without spatial constraints.

Johnny Boufarhat, founder and CEO of Hopin, emphasized in an interview with the European IT media outlet Shifted last month, "The biggest advantage of remote work is that it allows the company to grow very quickly," adding, "Instead of spending time building new buildings and considering workers' accessibility, we can focus on consumers."

While virtual companies are attractive due to reduced operating costs and rapid talent acquisition, there are also side effects. In particular, concerns have been raised that local governments could suffer significant losses.

If companies do not invest in or move into new buildings, national and local governments may see a gradual decrease in tax revenues.

More importantly, the job creation effect of companies significantly diminishes. Although Hopin's headquarters is located in London, UK, it can hire employees instantly from anywhere in the world. This raises concerns that instead of hiring in London, where developer wages are very high, companies might expand their workforce in other developing countries.

Hoppin's video conferencing and chat software in operation. / Photo by Hoppin homepage capture

If more companies adopt the virtual company model in the future, their ability to create jobs in the countries where their headquarters are located may decrease.

Consequently, there have been calls in advanced countries such as the US, UK, and France to introduce a 'digital services tax' that can comprehensively apply to virtual companies. The digital services tax aims to impose taxes on revenues rather than net profits for digital businesses, ensuring that IT companies, which do not rely on physical real estate or industrial facilities, bear an appropriate tax burden.

In this regard, Liz Truss, UK Chancellor of the Exchequer, co-signed a letter last year with ministers from European countries including France, Italy, and Spain, addressed to the US government, stating, "The COVID-19 crisis has confirmed that all companies must bear a fair share of the burden," and emphasized, "IT companies that operate globally without a physical tax base should also return a portion of their net profits."

She added, "Post-pandemic, consumer habits will increasingly rely on digital services. These companies enjoy benefits by freely accessing other countries' markets, but they are not paying fair taxes proportional to the profits they generate."