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Inside the Labs at Microsoft, HP and IBM

IBM: Research is survival

by Joab Jackson

When the economic conditions are difficult, the temptation of any large company is to slash its research and development. After all, for most corporations, research does not directly contribute the bottom line, and given its speculative nature, may never do so.

Still, when the global economy hit the doldrums in 2008 of 2009, IBM shielded its R&D work from budget reductions.

"I've never been pressured to look for places to cut," said Robert Morris, the IBM vice president who heads up the company's research in the field of services. For IBM, research is not a luxury or a public relations play; it is essential to the company's survival.

"Many companies are reacting to the current global downturn by drastically curtailing spending and investment, even in areas that are important to their future [while] we're continuing to invest in R&D," IBM president and chairman Sam Palmisano instructed company shareholders in a 2009 letter. "In other words, we will not simply ride out the storm. Rather, we will take a long-term view, and go on offense."

Since 2002, IBM has increased R&D spending 21 percent. In 2009, it had spent $5.8 billion on R&D. The company now employs 3,000 researchers across eight labs worldwide, and is building a ninth lab in Brazil.

Rarely a week goes by without word of some new IBM innovation: In the middle of September, the company announced that it was shipping the world's fastest microprocessor. The week before, Big Blue announced that it invented an optical bus that added another 50 percent in throughput speed. And the week before that, it announced a virtualization technology that solved the problem of moving live virtual workloads across different data centers.

And some of IBM inventions have changed the world, even if they sometimes show up in fields far from IT. IBM can lay claim to not only inventing the personal computer, the disk drive and relational database, but also the SABRE travel reservation system, the technique that led to LASIK eye surgery and a blood separator technology used to treat leukemia.

IBM has held the record for most U.S. Patents issued in a year for the past 17 years -- and the recession hasn't slowed the company. In 2008 it received over 4,186 patents and in 2009 the number had jumped to 4,914.

But perhaps the best measure of success is not the number of patents it is awarded, but how well IBM profits from this work.

In fact, IBM has made headway on one of the most difficult problems facing any company investing in R&D: How to turn the research into business.

Venture capital investors sometimes refer this challenge as crossing the Valley of Death, meaning it is a slow, difficult trek to transform some solid research into a profitable product or service. And many good technologies have died on the way.

"We cracked that problem. We never have any problem getting the research close to the development," Morris said.

The trick, Morris explained, is to get the business units and even clients involved in choosing which projects to pursue. "We do not build things in the lab and figure out how to transfer them into the field. We're not an ivory tower. We're not a sandbox," Morris said.

Each year, the labs presents an outlook report to the IBM chairman suggesting future trends IBM should follow. In many cases, the company follows the lead of the report. Analytics, for instance, was highlighted in a report nearly a decade ago. Earlier this year, IBM announced that it anticipates that analytics will generate up to $16 billion in annual revenue for the company by 2014.

And work that the labs have done in the field of analytics has already been reapplied in IBM systems. For instance, IBM Research teamed with the IBM Global Business Services unit to develop analytics software to catch tax cheaters.

"We built in a real time analytics process, so as a tax return hits the computer system, we score it for the probability that it's a fraud," said Shaun Barry, an IBM global solutions executive who oversaw the implementation. "For those high-probability things we immediately stop the refund" so it can be examined manually.

The New York State Department of Taxation and Finance, which suspects is losing up to $1 billion annually due to suspicious tax returns, has been using the system. Use is expected to generate an additional $100 million revenue over a three year period.

Not surprisingly, the company is investing heavily into areas where it feels the application of information technology may revolutionize some field, such as analytics, city planning, health care, biology or energy.

One such project is an urban traffic prediction system. This system, being tested in a number of different cities such as Singapore, can take input from various road sensors and, using a traffic flow model for that city, not only show where the traffic jams are now, but even can predict where traffic jams may occur. With this knowledge, traffic management departments can make adjustments of the traffic, through road signs that suggest alternate routes.

"We calibrate a set of models on the most recent data, and in real time these models are applied to the real-time data feed," said IBM researcher Laura Wynter who works on the system.

Health care is another area of interest to IBM. In July, the company announced that it would invest $100 million in health care technology. The company's Zurich research center is working on what it calls a lab-on-a-chip that could radically cut the costs of lab testing. This device is actually a small strip that can soak up a sample of blood and detect the proteins are tell-tale signs of viruses and diseases.

"Our intent was to leverage our expertise in microfabrication. IBM makes a lot of processors and we can use these fabrication techniques to make chips that interface with biology," said Luc Gervais, the researcher working on the technology.

For IBM, research is a way of anticipating, or even creating, new markets. If you look over its 100 year history, you can see IBM moving from one field to the next. While it started out selling tabulating machines, IBM is now the largest services company in the world.

"When I first started doing services research, it was all about IT services," Morris said. "Now we're working on our clients' services: Health care services, city services, government services."

Research Labs At a Glance:

IBM:

History: IBM opened its first formal research lab in 1945, using a renovated fraternity house near Columbia University in New York. In 1961, the lab moved to Yorktown Heights, New York, where it was renamed the T.J. Watson Research Center.

Number of researchers: 3,000

Lab locations: In the U.S.: Almaden and San Jose, California; Austin, Texas; Yorktown Heights and Hawthorne, New York; Cambridge, Massachusetts; Brazil; China (Beijing, Shanghai); Haifa, Israel, India (Bangalore, New Delhi); Tokyo, Japan; Zurich, Switzerland

Key research areas: Computer science, science and technology, service science, storage systems, analytics, distributed computing, networking, future systems, health care IT, "Smarter Planet" initiatives (IT-led research in urban planning, agriculture, energy management, government, infrastructure, education and others).

Microsoft:

History: Microsoft Research was founded in 1991

Number of researchers: 850

Lab locations: Bejing, China; Cambridge, England; Bangalore, India; Cambridge, Massachusetts; Redmond, Washington; Mountain View, California

Key research areas: Computational linguistics, economics, health and well-being, human-computer interaction, machine learning, social science and theory

HP:

History: Research group founded in 1966

Number of researchers: 500

Lab locations: Palo Alto, CA; Bangalore, India; Bristol, UK; Singapore; Haifa, Israel; St Petersburg, Russia

Key research areas: Analytics, It Infrastructure, Digital commercial printing; Displays, Interaction and communications, Sustainable computing, Cloud platforms, information management

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