The new face of R&D at IBM, HP and Microsoft

R&D is always under pressure in an economic slowdown, but the investment by the top IT companies is still enormous, so what are they doing to maximise its value?

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IBM, Microsoft and Hewlett-Packard together spend $17 billion (£8.5 billion) annually on research and development.

While much of this is directed at product development, hundreds of millions are flowing into areas like computational biology, nanotechnology and advanced mathematics that may take years to bear fruit, if ever.

It's significant that each of these companies has undergone substantial changes in its research labs recently:

  • In July 2007, IBM named a new research director and announced plans to invest more than $100 million in each of four long-term exploratory research projects.
  • A month later, HP also brought in a new research director and shortly after that launched a new strategy based on five mega-areas of IT research
  • Then, earlier this year, Microsoft China said that it would build a new R&D centre in Beijing, and Microsoft Research announced that it would open a new lab in the US

While the three companies have strikingly different research agendas, they have one important thing in common. All three are increasingly reaching outside of lab walls to collaborate in research with other companies, universities and customers. With that outreach comes a new openness that can speed the flow of ideas into the marketplace, according to Henry Chesbrough, executive director of the Center for Open Innovation at the University of California, Berkeley.

A short history of R&D

"R&D is basically seeking out new knowledge, and the question is, where are the good ideas?" Chesbrough says. "After World War II, the good ideas were loaded up in a small number of large companies -- Bell Labs, IBM, Xerox PARC, GE and so on. These were islands of towering knowledge in a relative desert."

At the time, he says, universities generally disdained working with companies and instead relied on a federal government that was eager to fund research that might help win the Cold War.

Then the Berlin Wall fell, and much of the federal largess dried up, Chesbrough continues. With its antitrust actions, the government turned its attention to reining in technology giants like AT&T and IBM. Meanwhile, Silicon Valley was born, and so was the Internet.

"The result was product markets got more competitive, and those big companies couldn't sustain the long-term investments in research that they could in the earlier period," he says -- their money went instead to competing in their markets in the short term.

Into this research breach stepped smaller, newer technology companies, universities, companies in Europe and Asia, and in some cases, even customers. To Chesbrough, that's all good news. "Today, no one has locked up the really good ideas, and the R&D processes of large companies have to connect to these parties and make use of them," he says.

In fact, HP, IBM and Microsoft are all currently showing a strong move toward a favourite research concept of Chesbrough, "open innovation." As Chesbrough spells out in his book of the same title, open innovation calls for good ideas to come from both inside and outside the company. In turn, companies take the fruits of those ideas to market through internal as well as external paths.

What follows is an overview of how three of the biggest names in research are putting open innovation and other concepts into practice in a changing R&D landscape.

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