When Lou Gerstner took over five years ago as chairman and CEO at IBM, the company was losing money and drastic steps were called for. As part of a sweeping reorganization, he slashed the company's research and development budget from $6 billion to $5 billion. He took a 37% bite out of the corporate research lab, reducing funding from $650 million to $475 million and trimming its work force from 3,500 to 2,500.
But Gerstner spared funding for long-term projects from the budget ax, emphasizing that advanced research was the cornerstone of the company's success.
As IBM's fortunes rebounded, so did its financial investment in IBM Research. The group is up to 2,900 employees and has an annual budget of $600 million.
But any ivory-tower attitudes that may once have existed are long gone. Researchers now spend time with customers and will take on the development of a new product specifically in response to customer requests.
For example, researchers in natural language and knowledge-based systems are working for a bank to develop software that will route incoming e-mails to the appropriate bank department.
IBM also has a new way of transferring technology from researchers to product developers that is similar to the SunLabs model. In the past, the researchers would develop technology to a certain point and then hand it off to the product teams. But within the past five years, a new approach has been adopted in which a mixed team of advanced researchers and product engineers works together until a commercial product is introduced. The product gets to market faster, and the researchers "learn about issues that they wouldn't learn about if they were just researchers,'' says Paul Horn, director of IBM Research.
To sum up, he says exploratory programs into highly experimental areas have survived, while at the same time, IBM Research now feels "a marketplace pull'' to go along with its technology push.
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