What we call \u201ccolocation\u201d used to be just \u201cgoing to the office.\u201d A group of people, in one place, working on one thing.\nBut, with the rise of communication tools that enabled people to work from anywhere, the idea of a distributed workforce gained prominence. This was due in part because it would cut costs and raise productivity, and because it provided a tool to accelerate recruiting when organizations struggled to hire exceptional people fast enough.\nWe are starting to see the pendulum swing back in favor of colocation. This happens as organizations discover that software engineering focused on innovation, product development or core business strategy is best developed, in terms of cost and outcomes, by an engineering team, in one place, working on one thing.\nImportance of interpersonal interactions\nWhy is the idea of colocation once again gaining prominence?\nBecause software development is not just a technical endeavor. It is an interpersonal exercise where trust and reliance on others is as critical as the programming skills of an individual developer. The best way to build that trust to a level where teams are performing at their peak is to create an environment where informal interactions consistently occur and reinforce team bonds.\nWhile this is not impossible to do remotely, any barrier (geographic, time difference, cultural, etc.) lowers the possibility that that software outcomes will be as good as they can be.\nBarriers to interpersonal interactions also limit the technical team\u2019s understanding of organizational goals and what its place is within the overall business strategy.\nIf development teams are not working alongside their business counterparts, they are not part of the informal conversations that help them to intuitively understand the needs and wants of product owners or line-of-business leaders. A lightning bolt of innovation is often precipitated by overhearing or witnessing casual interactions and applying them to solve a technical or business problem.\nColocation\u2019s impact on digital transformation\nDigital transformation is about organizational change that allows technical teams to be more core to the business. The only way for that to happen is for technical teams to understand the business at a deep, intuitive level.\nColocation is a prerequisite for this, as it facilitates technical teams participating in the decision-making process. And colocation, or at least local presence, makes it easier for engineering teams to both be customers to and understand customers of the business.\nThe transition away from remote engineering teams, whether they are outsourced or internal teams that are widely dispersed, places technologists closer to the heart of the organization. Software requirements that were once tossed over the wall from business to IT are now crafted in tandem by product owners and engineers who can anticipate customer needs and tie them to business outcomes.\nMeasuring impact of colocation\nAs with anything that involves human variables, measuring the impact of colocation on your organization\u2019s software outcomes is imperfect. But, there are measurements that stand as proxies for the improvement and impact colocation has on organization outcomes.\nOne of these is points delivered and accepted by a product owner of a co-located versus an offshore or dispersed development team. This shows how colocation can increase software quality and align engineering with what the organization needs.\nThere is also empirical evidence, as outlined by Robert S. Huckman and Bradley Staats in the Harvard Business Review, of the benefits of team familiarity in producing better outcomes. Measuring productivity, Professors Huckman and Staats found that a 50 percent increase in team familiarity led to a 19 percent decrease in defects and a 30 percent decrease in deviations from budget.\nA core tool to boost familiarity, beyond reducing turnover of teams, is to have both technical and business teams working alongside each other, absorbing and co-creating a common culture. While offshore or disparate teams can have longevity, they struggle to create the bonds with the business needed to push innovation and digital transformation forward and improve organization outcomes.\nExecuting on a colocation strategy is not easy, but it is necessary. IT procurement and facilities functions will struggle with unit and real estate costs as compared to offshore teams. Without innovative tools to solve the problem, managers may struggle to quickly find exceptional talent and teams.\nBut, in the long run, the work and willingness to explore creative solutions will lead to improved software outcomes and productivity of co-located teams which will more than pay for itself.\nIt is up to origination transformation leaders, be they CEOs, CIOs, or product owners, to advocate for the change. By challenging assumptions about whether colocation matters, your organization can differentiate itself from the competition and deliver on its innovation potential.