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"I think of research as one of the things that we have to do and elect to do in order to ensure we survive over the long term," Craig Mundie, Microsoft's chief research and strategy officer, said early last year at an annual research event. Companies that cut research in the face of short-term pressure or never start pure research tend not to last very long, he said. "My belief is the company would struggle to survive and prosper if we didn't have research investment," he said.

Microsoft's research group, which includes 1,000 people spread across six labs around the world, has a mission of advancing the state-of-the-art in computer science, Herbert said. It is also tasked with looking at ways that those advancements might support Microsoft products.

Microsoft researchers come from a wide range of disciplines and have the freedom to pursue subjects that interest them, Herbert said. They include psychologists, ethnographers, sociologists, mathematicians, astronomers and physicists.

The variety of backgrounds of the researchers reflects the way that computer science has progressed over the years, he said. "Historically, when computer science started as a subject... it was about building better computers, designing better programming languages, inventing algorithms to take on computing tasks we had at the time," he said. "As the subject developed, we as computer scientists needed to build conceptual tools and models to tackle these problems which it turns out are useful in other areas."

For instance, Microsoft researchers built tools that are helpful in testing very large and complex software, essential to try to guarantee that the code does what it's supposed to, he said. Those same tools happen to be useful to biologists at the University of Southampton in the U.K. who are working on modeling the human immune system.

When asked how he decides what the researchers should focus on, Herbert said: "The glib answer is, we don't." Instead, the goal is to hire smart people and give them the chance to pursue topics they want to work on, he said. "When you give them that freedom, they naturally want to work on things that are intellectually challenging in their own right. And the people who commit to work in research labs not only have that academic passion but they want to have an impact on the world and change something."

He encourages the researchers to work together and be aware of what each other are doing so that they can collaborate and then develop projects, he said. "That defines the agenda. It's very bottoms up," he said.

Microsoft's research strategy has its skeptics. The company has been criticized for not doing a particularly great job turning research projects into products, said Matt Rosoff, an analyst with Directions on Microsoft. "The transfer between research and product groups has been slow at times," he said. "They might come up with good ideas but it's not clear how to turn those ideas into products."

Still, he also said that even when Microsoft does find a way to use technologies developed in the research group in commercial products, it doesn't always do a good job talking about it. For instance, technologies developed in the research group ended up in Microsoft's digital rights management products, its SQL Server, and development languages like C#, he said.

It's happened often enough that products from the research group turn into technologies driving important Microsoft products, Herbert said. "Sometimes we find ourselves looking at things in research and people in the product groups probably say, 'we'll never do it that way,' but then there's a change in the market or the business model that suddenly makes those things important," he said.

That happened a few years ago when Microsoft decided to more aggressively pursue the search market. The research group had already invested in technologies like information retrieval which allowed Microsoft to get moving very quickly on a search product, he said. "When we were doing information retrieval, I'm sure we would have found people in the product groups saying, 'why are we doing this?'" he said.

Microsoft Research is most currently boasting about its role in developing technologies behind Kinect, the new Xbox product that will allow users to play games without a controller. The Xbox group had done work developing the system that tracks user movements. "But what they needed was technology that would help their applications confirm that what the tracking system claimed happened, had indeed," Herbert said.

The research group had done work on object recognition technology, which is most often directed toward image search in a search engine or image classification. But in this case, the technology developed in the research group went toward helping Kinect ensure that it is tracking user movements accurately.

That same technology might also turn up in other products. Microsoft has had some meetings with Tesco, a large supermarket chain in Europe, which has expressed interest in using the technology as an alternative to barcode scanners at checkout lines.

Herbert described some other research projects that may become commercial projects. One is known as SenseCam. "The original concept was a small wearable digital camera that decided when to take pictures for itself," he said. Researchers imagined that kids might wear one on a school field trip or workers in safety-critical environments might wear one to be able to later recall exactly what they'd done.

In addition to the camera, the SenseCam includes sensors and processors that determine when to take a photo based on changes in the environment, like movement or changes in lighting and sound.

A hospital heard about the project and began using SenseCam's for patients with various memory loss problems. Those patients were often previously instructed to keep written diaries that they could review. "That's very inefficient. Over time you build up so much diary you can't really review it," Herbert noted.

With SenseCam, the patients can flip through photos from an event. "It turns out that just watching that a few times actually seemed to burn a bit of memory into their brains," Herbert said. A company called Vicon has since licensed the SenseCam technology and is developing products around it.

It's hard to say exactly how much money Microsoft spends on research each year. The company typically spends between 14 percent and 15 percent of revenue on research and development, said Herbert. But it does not break out research on its own.

In a company like Microsoft, that makes it hard to know how much goes toward pure research, Rosoff noted. "With a software company, a lot of your cost is development. That's how the business works. You don't have a high cost of goods. It's about the cost of development and marketing," he said. That means the bulk of the research and development budget is likely development.

The last time that Rosoff's firm investigated Microsoft's research budget was 2002, when it concluded that about 5 percent of the company's research and development budget was pure research. At the time, that amounted to about $250 million, he said. He estimates that budget has grown to around $500 million a year now.

Microsoft is "somewhat unique" among its peers for having a pure research group, Rosoff said. The group is sometimes "judged more like a university research group," based on the papers that Microsoft researchers publish and their participation in setting the agenda for computer science research, he said.

The research group has grown since it was founded around 20 years ago, but otherwise not a lot has changed, Herbert said. When the group was growing rapidly, it was adding the equivalent of a university computer science department each year, he said. As the labs got bigger, the researchers had to adapt to working together as a global organization. Still, "we've had the same mission statement since day one," Herbert said.

Next page: Surviving--and thriving--on research

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