Space, not Place!

It's 9.30 am and there's near commotion at a building in Gurgaon that houses offshoring units of US firms. The parking is full - employees are being turned away - and there are long queues that snake their way to the elevators. The lifts themselves are packed to the gills. Inside an office, employees sit within sniffing distance of each other. Cubicles have made way for linear sitting, and the office does not look too different from a factory shop floor. Lavatories are few, and it isn't uncommon to spot a line outside them. The scene at the cafeteria is not much different from that at the parking lot or the lift. Welcome to just another day at a typical small or medium-sized IT outsourcing company…(Source: Economic Times - IT companies function in cramped offices to cut costs, Sobia Khan, Ravi Teja Sharma & Indu Nanda Kumar)

  

Office space appears to be under sever crunch especially in IT and ITES. The primary reasons attributed to such shortage of space are rising real-estate costs, shrinking margins and competitive pressures resulting high salaries.In short the companies are hard pressed on cash.    
The impact of such shrinking work spaces are negative on the employees that range from increased workplace stress, encroachment on privacy of an individual and poor work culture. 
With workplace design being stated as one of the top HR trends and challenges, such practices shall definitely be detrimental for the engagement of the workers. Research has shown that especially for Gen Y the workplace design plays a great role in their performance, creativity and retention.
So What?
Telecommuting or working from home options has to become more widespread across the industry and has to be promoted across employee groups. IBM does it wonderfully well. I personally know of a lady who works as a Project manager with IBM, has a five year old school-going daughter and still manages because of this work-from-home option extended to her by IBM. She has the flexibility of working from home or logging-on to the office and for most of the days in a week she manages to work from home.And all you know, she appears to be very highly engaged to her company.
However telecommuting has its own downsides if not managed properly for instance issues like data security, visibility of the telecommuting employee to the rest of the organization and ofcourse choosing the right kind of telecommuting plan for the employee (lbetween occassional, temporray and permanent telecommuting). However with due diligence such issues can be sorted-out.
Long and short of this is it is better to let people work from home rather then giving them mumbai local-type workstations. Telecommuting can ease of the load and balance people and space requirements both working from the office and out of the office. Not to say engagement shall be better as well.