Interview: Marcus Moufarrige, COO Servcorp, on Pioneering Virtual Offices

Alliance Virtual Offices recently wrote about the challenges in defining a virtual office over the years, and trying to establish the definitive history of the virtual office. Sources mention several different pioneers, so Officing Today decided to track down some of these legends and separate myth from fact. We started with Marcus Moufarrige, COO of global office giant Servcorp, to find out about his role in pioneering virtual offices.

Servcorp’s history says it pioneered the virtual office in 1980, which is a decade before other VO pioneers. How did you come up with the idea? What was the driver or inspiration behind it?

What happened to make the idea possible was the advent of PABX. It was probably around 1983 or 1984, when PABX technology was starting to evolve. At the time you could only buy a PABX for an enterprise, but it had capacity for a lot more telephone numbers, more than we had office clients. It was about using that extra capacity, and trying to create more than the real estate arbitrage that existed with the serviced offices. So it wasn’t necessarily market driven, but driven by the fact that there was excess capacity there to use.

Having 10 or 20 virtual customers would add the same sort of value as selling an extra office. So a floor with 30 offices would effectively have 31. A virtual office costs about 1/10th of a permanent office, but here’s no rent behind it so its margins are quite high.

At that time, what was possible with a virtual office (given it was pre-Internet)? What services did it involve (address, call answering, etc)?

In those days no one knew what the concept was, but it was essentially a glorified paging service paired with an address, so we could use the address for more than the people actually in there. Meeting rooms became a natural evolution of that, and as PABX became more sophisticated it turned into a full virtual receptionist service. It was great for small businesses as that whole working from home trend was starting.

What was it called? Was it called a virtual office or something else?

We originally called it “Networking” then “Company Headquarters” as a brand, this was in the late 1980s. By the mid nineties we started branding it “Servcorp Virtual Offices”.

What was early market reaction like and who were the first kinds of customers? Was it hard to sell in the beginning?

It was definitely professional services focused. Our first customer was most likely an accountant working from home, coming in because they wanted a decent boardroom to meet clients. The profile of the average virtual office customer hasn’t changed immensely, though obviously there are a lot more startups now who should be using virtual offices to keep their costs low as well.

Two things really restrained it in the early days: first, a lot of education had to go on to explain what it was. Secondly there was a lot of administration in setting customers up, knowing who they were, managing them and collecting subscriptions.

When I was in high school in 1989, in my school holidays I came up with the idea of going through the Yellow Pages and calling up businesses to find ones that didn’t have their phones answered professionally. I worked with a couple of teleworkers, and if the numbers rang out, or they didn’t return calls, we would do a letterbox drop and warn them that they were losing sales leads. This greatly increased take up. By 1991 our Sydney office had 90 virtual office customers in it. So I got a very early introduction to virtual offices, and when I joined Servcorp years later, I was interested in developing that business.

How have virtual offices evolved? I’m guessing the internet made a massive difference, but what was that like?  And where do you see them going?

One issue is that virtual offices involve a lot of admin for not much money. So we decided to invest in technology to build an automated platform to set up new customers. Today we have from 1,500 to 2,000 virtual offices in a single location in some of our bigger markets, such as Tokyo and Hong Kong. It’s a pretty amazing adjunct to the original business.

But it took a lot of investment in R&D to get to the point where we had the automation to support that number of clients. Today if you want a virtual office in Singapore, you can sign up with your iPhone and your receipt number will be your new phone number, and there’s someone in Singapore who’s already picking up calls. 30 to 40% of our customers sign up online with no assistance.

From there we’ve increasingly pushed into premium space, so today you can get an address in the World Trade Centre for $300/month, answered with a 212 New York telephone number.

The internet did transform the business, but there was a lot of work that needed to go on top of that to get a global network to work. For example if you joined Servcorp in one location, you can walk into a Servcorp location anywhere in the world and use that space, and the charge appears back in your home location.

In my view, virtual offices haven’t hit their straps yet. The whole co-working trend is an interesting progression into more flexible space. I think virtual offices will be the next step because people still need technical services to support them.

It’s not about a place to work, it’s about a presence for your business. In our latest study, 80% of people trusted a business more if it had a local address. Around 70% of people will call a landline before they call someone who only lists a mobile as their business number. And 40% of people calling up to buy something won’t leave a voicemail, they hang up. Therefore those businesses are losing 40% of their leads.

Even if people become more aware of the “secret” of virtual offices, it won’t matter. It’s a really smart business decision to have a great presence.

It’s the ultimate on-demand economy. Hardly anyone used to take a hire car, now it’s part of the sharing economy. We’re basically the sharing economy for office space: it’s great for landlords, it’s great for us and great for the customers, and win-win-win makes a really successful business case.

So we are the earliest version of the sharing economy from a serviced office point of view, and people are now realising that shared services are environmentally friendly and good business decision.