Home Sweet Home: Solactive Flexible Office Index
Major technological developments are changing global societies on previously unthinkable ways. Some of these new technologies have enabled companies to offer telecommuting alternatives without having to experience losses in productivity. In the meanwhile, societal shifts have made employees more eager to work remotely. Given this trend, we created the Solactive Flexible Office Index Concept. The index is composed of companies offering key technological infrastructure and services in the fields of Cloud Technologies, Cybersecurity, Online Project and Document Management, and Remote Communications. This set of companies are possibly set to be among the one that profit the most from the transition towards the flexible workplace.
From Isaac Newton to the War for Talent
In 1665, the Great Plague of London hit Britain. Even though the available knowledge when it comes to virology and pandemics back then lacked in comparison to today’s one, many institutions decided to implement contingency measures in order to contain the disease. One of these institutions was Cambridge University, which sent its students home in order for them to continue with their studies. Among the students that were sent back home was Isaac Newton – then in his early twenties. 1
The period he spent home self-studying was subsequently named as the “year of wonders”. During this period, he greatly developed his theories on calculus and optics. Right outside of his window there was also a particular apple tree: the one that inspired him to formulate his theory on gravitation. 1 Working from home has also generated great spurts of creativity. Victor Hugo allegedly wrote one of his masterpieces, “The Hunchback of Notre Dame”, in less than six months after he locked all of his formal clothes away in order to avoid getting distracted by him leaving his house or entertaining guests. 2
Ever since, global societies have continued to evolve and change rapidly due to cultural and technological advancements. By the 1990s, employers started to embrace the idea of offering remote work alternatives to their employees – partially in order to retain mothers who wanted more flexibility when it came to commuting or their working schedule. From then on, an increasing number of companies started to realize the benefits that remote work could convey for them and started implementing more flexible work arrangements accordingly. 3
An Evolving Society, An Evolving Workplace
Fast-forward to the modern workplace, and working remotely has become ever-more embraced within the corporate sphere. This fact can be reflected by the 159% increase in the number of people telecommuting in the United States between 2005 and 2017, or by the fact that in 2017 about 43% of employed Americans had spent at least some time working remotely. 4, 5 Furthermore, in 2018, about 5.2% of US workers – or over 8 million people – worked entirely from home. 6
Nevertheless, even though employers worldwide have recently been more and more open to offer telecommuting alternatives, current levels of flexibility may not yet be the ones desired by some of their employees. A Deloitte survey regarding Millennial employees found that just in South Korea, Indonesia, India, The Netherlands, and Belgium, a majority of employees could work remotely if desired. Additionally, they observed that only 43% of millennials were allowed to work from home or other locations where they felt most productive – a distant number from the 75% that would prefer to work remotely either completely or partially. 7
This desire to work remotely by younger generations could, in part, be a reflection of how societies have evolved during the past couple of decades – such as the rising level of student debt in some countries, or the increasing number of people moving to densely populated urban areas. For example, a highly indebted graduate from an American university could prefer to live in a city like Boulder – in which the monthly rent for a one-bedroom apartment hovers at around USD 2.000 – rather than in San Francisco – where a comparable apartment could be twice as expensive to rent. A more flexible workplace may also allow for the catering of younger employees’ desires – which are tilted more towards experiences relative to older generations – as they could live in places that better suit their lifestyles outside of work.
It should therefore come as no surprise that, given the choice, job-seekers would rather choose an employer that offers a greater degree of office flexibility. This fact can be observed by 80% of the International Workplace Group’s (IWG) survey respondents claiming that when faced with two similar employment offers, they would turn down the one that didn’t offer flexible working. 8
In an environment in which the war for talent is becoming more cutthroat by the day, some companies are stepping up to the remote work challenge. For instance, GitLab (a software-development startup) has managed to grow to over 1.000 employees spread across 65 countries around the world without even having a physical office or headquarters. However, allowing employees to work from anywhere (WFA) has not only been confined to startups. Some established companies, such as Akamai and SAP, have already developed WFA programs within their ranks as well. 9
Not only do employees benefit from remote working, but so too can their employers profit from this practice. 65% of business leaders surveyed by IWG said that a flexible workspace helps reduce both capital and operational expenditure, manage risk, and consolidate their portfolio. On the other hand, 85% of the respondents confirmed that productivity increased in their business as a result of greater flexibility. 8 Furthermore, researchers from Harvard Business School and Northeastern University implied that applying work from anywhere policies could improve workers’ productivity. Their results indicate that the work output of patent examiners – which have a highly technical and specialized job – increased by 4.4% after transition to WFA, with no significant increase in rework (re-writing of patent decisions upon appeal from inventors). They also showed that patent quality – as measured by examiner-added citations – did not deteriorate. 10
The Solactive Flexible Office Index Concept
Given the rising trend of remote working, we have decided to create our Solactive Flexible Office Index Concept. The index provides exposure to companies offering key technological infrastructure and services that help enable working remotely, rather than companies offering work from home policies themselves. The set of technologies we have chosen are the following:
- Cloud Technologies: We currently live in an era in which myriads of data are accessible to an unprecedented scale. As higher business-relevant data volumes become attainable for the broader public, companies will have to enable both data accessibility and processing for their workers to operate efficiently – even when working from home with less-powerful devices. Companies offering cloud technology services and on-demand availability to computer system resources may help solve this issue – thus allowing data-reliant firms to operate smoothly.
- Cybersecurity: Given the increasing number of cyberthreats companies will be exposed to in their transition towards a more flexible workplace, the demand for the services and expertise of cybersecurity firms should increase accordingly. This assumption may be particularly the case if both the quantity and sophistication of cyberattacks continue to increase.
- Online Project and Document Management: Applications that enable teams to manage documents and projects under a collaborative setting can greatly help organizations with remote work policies articulate project missions, assign roles and responsibilities, create detailed project plans, and establish performance metrics — whilst keeping team members on the same page when it comes to the progress of both projects and shared documents. 11
- Remote Communications: Body language, hear tone, and inflection are essential to effectively sharing complex or personal information. Therefore, videoconferencing services can serve to bridge the communication gap for remote workers. All the while, instant messaging or e-mail applications can be used to convey small, or non-urgent requests. This set of tools may enable a smooth communication between coworkers, even when they are physically far apart. 11
Some of these technologies – or ones similar to them – may not necessarily be new or groundbreaking. However, a greater degree of acceptance towards them from employers and employees alike may potentially further increase their relevance. Even more, better and faster connectivity from – for instance – 5G technologies could exacerbate the shift towards flexible offices all around the world.
In order to obtain our company universe, we use ARTIS®, Solactive’s proprietary natural language processing software. ARTIS® stands for Algorithmic Theme Identification System. The algorithm identifies the thematic exposure of a broad set of companies by analyzing more than 500,000 text documents related to them, and determining their degree of thematic relevance based on theme-related keywords given to the algorithm as an input. In order to obtain the index’s constituents, we ran four separate ARTIS® queries (one for each of the aforementioned technologies) and picked the top-10 companies by thematic relevance of each one of them – after applying liquidity filters.
The 40 components of the Solactive Flexible Office Index Concept are equally weighted. As of its latest rebalance (done on the 2nd of March 2020), 90% of the index’s weight is allocated to companies with primary listing in the United States. The remaining markets of primary listing of the index’s constituents are the following: Canada, China, Germany, and Japan. On the other hand, the most heavily represented industries in the index are the packaged software, information technology services, internet software/services, and telecommunication equipment sectors. Its largest constituent by free-float market capitalization is Microsoft, closely followed by Amazon.
The two companies with the most thematic relevance – according to ARTIS® – within each individual category are the following:
- Cloud Technologies: VMware and Inseego.
- Cybersecurity: Okta and Fortinet
- Online Project and Document Management: Upland Software and Box
- Remote Communications: Zoom Video Communications and 8×8
New technologies are changing many dimensions of our lives to a great extent. These changes are also being translated into the workplace. Companies offering a wide array of services are currently more able than ever before to enable employers’ work from home policies, without them suffering losses in productivity. This shift is being, by and large, embraced by their employees, who increasingly value having a flexible workplace setting. The Solactive Flexible Office Index Concept particularly provides exposure to companies offering the necessary infrastructure and services enabling telecommuting – such as Cloud Technologies, Cybersecurity, Online Project and Document Management, and Remote Communications. This set of firms is set to benefit from the direction work dynamics are heading to, potentially benefitting their investors in the process.
Dr. Axel Haus, Team Head Qualitative Research
Javier Almeida, Qualitative Research Analyst