Xerox's Research Arm Now a Business, Execs Say
Since its establishment in 1970, the Palo Alto Research Center funded by Xerox has developed groundbreaking technologies, including Ethernet, the GUI (graphical user interface) and the computer mouse.
Xerox failed to profit from some of those technologies, ultimately made successful by companies like Apple, which hired researchers from PARC to develop the GUI. Xerox instead made money from PARC projects such as laser printers, which fit the model of a document and imaging company.
PARC was spun off from Xerox in 2002 and now focuses its research on technologies that it can commercialize through its parent or startup companies. The technologies it is researching include self-erasable paper, solid ink and intelligent documents. From 280 researchers during its heyday between the late 1980s and early 1990s, the lab now staffs about 165 researchers, who work with other Xerox researchers worldwide.
IDG News Service sat down with Sophie Vandebroek, Xerox's chief technology officer and Mark Bernstein, PARC's president and center director, to talk about the lab's past inventions and future focus. An edited transcript of that interview follows.
IDG: PARC invented some technologies that it failed to commercialize, like the GUI and mouse. What exactly happened?
Bernstein: The core question people are asking is why didn't PARC turn Xerox into a computer company. You have to look at .... proximal development so Xerox could adopt things that it understood the risk and the value [of]. That clearly wasn't the case for the distributed computing environment that was invented here. [Xerox] ended up creating business to take advantage of that when it created the Star, but by that time the notion of there being a proprietary hardware computing system wasn't going to fly and it was moving off to IBM PC and Microsoft and Apple. [Star is an Information System workstation with a GUI, mouse and Ethernet, introduced in 1981.]
IDG: How did Apple get the GUI? Did you license it to Apple?
Bernstein: They created their version of it. The notion of software patents wasn't very well understood and they hired people who used to work here and they created it.
IDG: Has PARC's business model changed?
Bernstein: It absolutely has. One of the things we've done here by bringing business development people and sticking them in the labs -- they work with the researchers in the lab. Very early on they are testing ... concepts and later on they are trying to align the technology with the right application. What you see, from Xerox's perspective -- their alignment of resources with where their core business is as well as the recognition of where the next generation of service technologies are going to generate value.
Vandebroek: Not only PARC in the past but Xerox in the '90s were launching many products and devices with all of these features that the customer necessarily didn't want at that point in time and didn't definitely want to pay for. ... As a result, in 2000, [Xerox] was losing about US$3.5 million a year, but we made $1.1 billion profit last year. The key element is focus on the customer across the value chain starting with PARC and other research centers.
IDG: What research is Xerox and PARC focused on?
Vandebroek: In Xerox we have three main strategic plans. These three elements -- color, mass customization and smart documents for document-intensive business processes -- are the core of the focus of the research. Within PARC we extend it well beyond that. Horizontally overlaying everything is the sustainability and environmental focus.
Bernstein: The area that PARC takes a real grand challenge in is information access and building tools and technologies that understand the need for information inside of a context that can be inferred by all sorts of systems. The question isn't how much information can I get my hands on anymore. It is how much time do I have to get the information that I need? The answer's not enough. The smarter documents technology is an example of being able to leverage an understanding of the work process in order to facilitate the transmission of content needed by that person at that point of the process, and being able to reduce cost and increase efficiency.
IDG: Many research examples, like smart documents seem to focus on enterprises. Is research being geared toward consumers too?
Vandebroek: It depends. The research is often applicable to both. Within Xerox, we are geared towards small and medium business like a law firm and hospitals to very large global enterprises. However, the intellectual property can be used for end consumers. In fact, PARC just supported a spin-off, Powerset, with some of our core technologies.
Bernstein: Understanding the meaning of words and phrases through linguistic applications is a technology that's at the core of Powerset's search facility. It's focused on consumer search, but rather than Google, which uses keyword matching, you just simply ask a question and it understands by the context of the phrase, disambiguates the meanings and gives you the information you are looking for. It was originally developed to facilitate translation of meaning -- not just words -- of documents from one language to another. The technology now is being used for other purposes around content.
IDG: With the economic downturn, research labs like HP's are cutting back operations. There is pressure to reduce costs. What is the future of research labs?
Vandebroek: I do believe in innovation -- you have to continually refresh your products and services. Back in 2000 when Xerox was going through very difficult times -- we were losing money -- [Chairman and CEO] Anne Mulcahy and the senior team turned the company around. She got a lot of pressure also at that time ... [to] cut more R&D. Her statement, which I strongly believe is held across the company, is 'how can I rescue it today and jeopardize the future?' If you don't invest, you have no future of new products and services. In the last three years we launched over 100 new products and services and it's our intention to keep doing that. We are not cutting R&D at all. The beauty of PARC's model, of course, is to be able to reach to clients across the world.
Bernstein: In the last 15 years, there's much less basic research being supported by the government. Much of that has to happen in academia. I think the other side of that is what research is intended to accomplish and the value that comes back from that accomplishment. HP was, I thought, being very explicit, saying, 'We've got too many little things and not a critical mass. Tell me what the most important opportunities are that you can identify? How are you going to staff them at a level that's at critical mass and is going to make a difference. Where are your big bets? Let's be clear about them and let's resource them to be successful.' Sophie and Xerox are absolutely addressing the same kinds of issues.
IDG: You developed a lot of the technology that we are now seeing. What is the future of PCs?
Bernstein: Mobility is where things are headed. I think you are going to see the proliferation of devices for particular purposes. You'll see more generic platforms where the client will be rather thin. As soon as we get to ubiquitous connectivity at a reasonable bandwidth, then you'll see more of a computational horsepower being borne by the network and that there will be a whole array of different applications -- hopefully, not just Microsoft applications -- that we will have access to. The notion of computation generally is it's going to be less focused activity and more how we live, the computation would recede into the fabric of our lives and help us work and play. That hasn't happened, but I think that is what is going to play out as the network gets smarter and is able to help us do things that it knows we need to be attending to.