There are a lot of good solutions for audio and video conferencing, task, calender and document management. We got specs, uml diagrams, code generators, etc.
But still companies pour tons of cash so that people can be physically there even in the times of recession and i wonder why?
Distance isn't to much the problem, to be honest. You're either co-located or you're not.
We use a combination of Skype IM, Skype Voice, mobile phones and email to keep in touch. We haven't really got into webcams properly, but even then, there's something about face to face contact you can't really replicate with technology.
I think most companies see splitting up their workforce as a step-change. A company that started out with homeworkers is better able to find and establish an office to move them into than the other way round. Money is only one consideration - it really does change the way the team works, and if you get it wrong, you don't have a team, you have a bunch of solo developers who actually take longer to do things.
Of course, it's also easier to recruit and mentor new members of the team if there's an office for everyone to work in.
Many people do better face-to-face. Many people do just as well at a distance. However, people in management tend to more focused on interpersonal relations, which generally means they're face-to-face people. So, as a general rule, people in management tend to dislike or distrust meeting at a distance.
Furthermore, meetings are very often unproductive. This applies to meetings at a distance and face-to-face meetings. Indeed, it's significantly easier to get off-topic, unprofessional, and unproductive when meeting face to face. However, when an at-a-distance meeting is unproductive, it's almost always seen as such because it was at a distance. It can be exceptionally frustrating to deal with the technology and limitations of remote meetings, and it's infinitely easier to blame the situation and the technology for your lack of productivity.
To sum up: people are a problem.
Face to face meetings provide a lot of visual feedbacks which you do not get in other means. This is must if you want to discuss important subjects like architecture, reviews etc, which tend to be slow or useless if done over phone, email, twiki etc.
Typically status updates can be done via other means, we normally use Skype, Twiki, Email, Phone keep in sync.
Some 80% communication is non-verbal, video conferencing helps a bit, but is not good enough.
There have been studies done over success rate of business negotiation and project cooperation depending on type of communication used. It was ranging from 90% success face to face, to less then 10% with email and text only IM.
For example one of such studies, conducted by Harvard Business School professor Kathleen L. Valley yielded for example such results:
"among 24 four-person decision making groups interacting via computer, there were 102 instances of rude or impulsive behavior. Another 24 groups that interacted in person yielded only 12 remarks of that nature."
Related Wired article: "The Secret Cause of Flame Wars"
I really like communication via IM, email or phone. It's totally ok and I really appreciate using it.
Now comes the big "but" (with a single 't'):
You are not able to "just walk over" your colleague and ask him** a short question. For sure, you can IM him or mail him. But it will take some times till he answers your question.
The other point is drinking coffee. You cannot just drink a cup of coffee with him and talk about your problems.
If you let your brain release your thoughts, problem will disappear. And that's one reason behind drinking coffee with colleagues.
I really need personal communication. I need it. About 70% of the communication can be replaced by IM or whatever, but the 30% are very important.
** him = him/her
I have a few cynical and contrary opinions on this, based on my experience working for a large Australian organisation with branches all over the country and my current remote work for a US company.
Cynically - face to face works so you can do deals off the record. This may not be as corrupt or as underhand as it sounds but an astounding amount of management-level decision making happens where people negotiate relative tradeoffs involving influence, favors accrued and owed and stuff which is hard or embarrassing to quantify. Even when an organisation has a commitment to using teleconferencing, groups emerge who negotiate off-camera and thus acquire a competitive advantage.
At the purely technical level, I think face-to-face is nowhere near as important as cited. The political issue is in drawing this distinction - if you label your stuff as non-political and safe to do via remote comms, you are explicitly labeling the other negotiations as somehow not safe. Another aspect is that people looking to move up to management need to become visible and a known player in the face-to-face discussions.
Developers, including myself, are notoriously poor at picking up the non-verbal cues cited above (just ask my wife!). In a relaxed atmosphere of trust, they can use emoticons and in-jokes explicitly in IM sessions without worrying about translating someone else's expression, especially across cultures.
IM sessions, with the ability to search the transcript, are far more efficient than verbal or video conversations, when discussing projects. If you don't pick up some nuance at the time someone says it, you can go back and examine the exact sentence in context.
I use video chat infrequently and the main use of voice chat is so I can talk to my boss in his spare time whilst he's driving. Those are good conversations to give me a general feel for how things are going but usually inadequate for technical.
Here's a podcast that talks about distributed software development: Managing Commercial Software Projects. Here's a blurb from the show page:
Andy Singleton is an entrepreneur who has long studied and practiced the art of distributed software development. Influenced by the open source and agile movements, he has arrived at some startling conclusions about how to manage commercial projects. Among them: don't interview people, don't estimate schedules, and don't spend time in teleconferences. In this conversation with host Jon Udell he explains why not to do these things, and what to do instead.
I thought it was pretty interesting.