According to CoStar Realty Information, the U.S. may now be witnessing the first major contraction in office space leases since the glut following the tech-bubble burst. The pinch on small businesses to contain operating costs may mean a downturn in traditional office leases and upgrades, yet ground has never been more fertile for alternatives.

Enter Ralph Gregory, the self-titled “father of virtual offices.” In 1995, long before the media latched on to various definitions of this term, the Colorado-based Gregory started Intelligent Office on the research-backed premise that other professionals like him would want to work from home or telecommute, while using professionally managed business functions that don’t necessarily require an office, such as phone calls, faxes and e-mail.

In the following interview, Gregory discusses how management has increasingly embraced this model of doing business, and what that means for employees across the hierarchical spectrum.

So how does it work? How does it differ from using an executive suite?
How and when did this industry develop? What was the response to your initial efforts?
Back when I started this, nobody was doing it. We called ourselves a “virtual office” and no one knew what we meant. What we’re doing today is an advanced form of what we we’re doing then. We’re just much better at it now.

A lot of people think you have two choices: You can either work from home or work from a traditional office. That’s just not true. There’s an entire spectrum of choice and we have the full range of services. Clients use us as much or as little as they want.

There seems to be a stereotype of the virtual office as a call center somewhere, while an entrepreneur sits in a coffee shop, conducting business online while sipping on a latte. Is there something more to it than this?
Primarily, the ability of using a service like ours on a sophisticated level allows you to blend your business and your personal life. Maybe you’re with your kids, maybe you’re on the golf course – the point is it doesn’t matter. Your business continues. And if you get that call, we know you, and we know your customers.

Consider childcare. Suppose you have children at home. You can now be home with your children and you can blend the needs of childcare and still run your business professionally. If you want to take the call you do. But let’s say your child is having a meltdown and at this particular moment the phone rings; you can’t take that call. You can tell us so, because you’ve trained us. We know your business life and your personal life.

What percentage of your customers are from companies with fewer than 50 employees?
95 percent of our client companies have 10 or less employees. But a few of those “small” companies are financially responsible groups of larger companies like Intel or Oracle. It generally takes a person with financial authority to make the decision about using Intelligent Office, since our model is “outside the box.”

Are there any disadvantages that customers or even potential customers have mentioned? For instance, the loss of jobs or a more limited number of jobs that come with technology replacing bodies?
This idea of working “intelligent” is loved at the top of the organization chart and the bottom of the organization chart. But middle management jobs do go away. So middle management gets scared.

The truth is, I can be surfing the Net on my computer, and hit Escape when someone comes by my desk, and still feel like, “Pay me.” But with working remotely, management has to look at productivity rather than time worked. It’s not hard, but it initially appears difficult to the middle manager.

Is there talk in your industry about how to handle a recession? Times are tight. Is this a convenience the small business owner can continue to afford?
Even during the last recession, we gained more locations. It was the marketplace speaking. If there is a recession, there may be a number of our clients that go out of business, but there are going to be many more businesses which will be looking around for alternatives. Once they come to us, they stay with us. I can’t think of one client that’s gone back to the traditional office structure.

What will we see down the road for the virtual office industry, and what impact will this have on entrepreneurs and small firms?
This kind of thinking is coming with or without Intelligent Office. Eventually this will be as common as dirt. We’re talking about a new definition of the word “office” that truly does fulfill the professional and personal requirements of the vast majority of people.

We’re at the leading edge of an entire socio-economic shift that is occurring. IBM was really a pioneer in this. They found that people working remotely, with the proper support services, were on average 30 percent more productive than people sitting in a traditional work environment.

And if you’re allowed to work when and where you want, I don’t care where that paycheck is coming from, you’re working for yourself.