The New Face of R&D at IBM, HP and Microsoft

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HP Labs: Five Big Bets

Hewlett-Packard Co. last year hired Prith Banerjee, the engineering dean at the University of Illinois at Chicago, as the new director of HP Labs, overseeing 600 researchers in seven labs around the world. The company followed up with an announcement the following March that HP Labs would shift focus from a large number of smaller projects to a few "big bet" projects in five major research areas -- information explosion, dynamic cloud services, content transformation, intelligent infrastructure and sustainability.

"These are the big research challenges that we think are most important to our customers in the next decade," Banerjee says. Individual projects include exascale computing, social computing, quantum computing and so-called green computing.

Explains Banerjee, "We had taken the approach of letting 1,000 flowers bloom and hoping a few would pan out. [But] we were working on a large number of projects without enough resources on each one. We'd have two or three people on a project, but now we'll have 20 to 30 large projects, each with 10 to 20 researchers working in teams." As a consequence of this change, he says, product divisions at HP will get research prototypes from HP Labs that are more fully developed, enabling products to be brought to market faster and at lower cost.

Some observers of the new strategy at HP Labs -- including competitor IBM -- suggested it was yet another retreat from long-term basic research in favor of short-term, product-oriented work.

But Banerjee insists the opposite is true. In the past, he says, less than 10% of HP Labs' budget went to exploratory, or "blue sky," research. Under the new plan, he says, one third of spending will be on "exploratory research," one-third on "applied research," and one-third on "advanced product development."

A major thrust of HP's new strategy is increased collaboration with other companies, universities and venture capitalists. Toward that end, the company recently set up the HP IdeaLab Web site, which offers would-be partners sneak previews of research prototypes.

And in May, HP released a global request for proposals to universities seeking collaboration in each of the five major research areas. Banerjee says he's seeking real partnerships in these areas, not ad hoc, one-off joint projects such as HP might have done in the past. "Never in the past have we gone to the outside world with so much detail about what we are working on," he says.

To be sure, behind all the love of open innovation is bottom-line business sense. Such a strategy not only allows HP to cull ideas from a wider pool, it also allows the company to mitigate risk and share research costs.

Clearly, Banerjee has revenue in mind when he says, "Our approach gives us a sharper focus in the areas that we believe will help our customers addresses the challenges they will face in the next decade. It also ... speeds the time it takes to quickly turn breakthrough research into real products and services."

Either way, the change at the top of HP Labs says a lot about where the company is headed, Chesbrough says. "It's interesting that a company the size of HP would bring in, not a career engineer or scientist from the company, but an academic," he notes. "Instead of the go-it-alone attitude, I see this as evidence of a much more collaborative, distributed process. And that's a very good thing."

IBM: "Collaboratories" and More

The buildings that house IBM's Thomas J. Watson and Almaden Research Centers are emblematic of an earlier time and an earlier attitude toward research. "The places are built high on a hill far away from everything else," Chesbrough observes. "They are almost physically designed to keep ideas from leaking out. If you look at the newer ones -- like Microsoft, Google or even Intel -- they are constructed to get ideas to flow in rather than to keep them out."

Buildings notwithstanding, research is a new ball game at IBM, Chesbrough says. "IBM is an old dog that has learned some wonderful new tricks and is having great success doing it."

While IBM remains strong in basic research in materials, semiconductors and the like, it has turned its R&D efforts more and more toward services and support technologies, he says. And a decision to support non-IBM products in its Global Services unit has "pushed IBM Research into the open standards domain -- Linux, Java, blade servers and other things," he says.

Shortly after John Kelly's ascendency to the top of IBM Research last summer, he announced that IBM would spend more than $100 million over three years on each of four "high-risk" basic research areas:

Kelly promised to fund another 15 research topics at $30 million to $50 million each, and many more at lesser levels.

He said IBM would increase collaboration with universities, government agencies and other companies, citing the success of earlier alliances with universities in nanotechnology and semiconductors. He also mentioned speech technology as an area in which IBM would collaborate more.

Part of IBM's new game plan is the establishment of "collaboratories," mostly small, regional joint ventures with universities, foreign governments or commercial partners designed to tap into local skills, funding and sales channels in order to get new technology quickly into the marketplace. For example, in February, IBM announced it would form a nanotechnology collaboratory with Saudi Arabia to develop and market water desalination, solar energy and petrochemical applications.

Mark Dean, an IBM Fellow and a vice president at IBM Research, hails the payoff from distributed collaborative research, but he says it has its challenges. "When you have people everywhere, you need technology to make people feel they are together, like there is some camaraderie," he says. "You need a sense of family on a project. This is an area that has to be worked on."

IBM is adding "big bet" projects in exploratory research, Dean says. "For example, how does DNA interact with carbon nanotubes for self-assembly of circuits?" he says. "[There is] also spintronics and real-time analysis of large amounts of data from sensors all coming at you at one time. These are things nobody has done before."

IBM is also increasingly collaborating with customers, Dean says. For example, it is working with "a prominent candy company" to apply a prototype Web analysis tool, called Business Insights Workbench (BIW), to find hidden patterns and meanings in structured and -- most important -- unstructured data. "The company wants to do business in some emerging markets," Dean explains, "and [BIW] will look at trends and biases within a culture to predict whether a particular brand of chocolate will be bought." Another big plus: The client company will be able to analyze Web-based information in any language without translation, Dean explains.

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