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Inside the labs at Microsoft, HP and IBM

The tech giants' investment in research ranges from basic science to more product-oriented innovation

By James Niccolai, Nancy Gohring and Joab Jackson, IDG News Service
November 29, 2010 04:51 PM ET

IDG News Service - At Microsoft, Hewlett-Packard and IBM, investment in research and development is a reflection of corporate culture. This three-part piece examines the different approaches taken by each of these influential tech companies. Hewlett-Packard prides itself on its pragmatism, while Microsoft holds the flag of basic research aloft -- and IBM continues to file more patent applications, year after year, than any other tech company.

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HP Labs has seen some big changes in the past few years. In 2007 it hired Prith Banerjee, the dean of engineering at the University of Illinois-Chicago, as its new director. A year later the labs started to narrow its focus from the 150 or so projects its scientists had been working on to 20 "big bets" -- projects that, if they paid off, HP hoped would contribute directly to its bottom line.

The labs had lost its focus, with researchers squirreling away in small groups on projects that, while interesting, didn't always serve HP's wider goals. Banerjee calls the new approach "innovation with purpose." He has arranged the big bets around eight broad areas that HP sees as core to its future, including analytics, data management, intelligent infrastructure, sustainability and, of course, the cloud.

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Banerjee brushes off the recent criticism that HP Labs may be underfunded. Last fiscal year the company invested 2.5 percent of its total revenue in R&D, compared to 6.1 percent of revenue at IBM and 14 percent at Microsoft. That's still $2.8 billion, however, of which the labs budget is only a fraction -- in 2008 it was $150 million. The vast majority is spent on later-stage development in HP's product groups.

"People get all hung up on this percentage of revenue figure, but I could spend a ton of money doing completely useless research and development," Banerjee said in a recent interview. "It's the research output that matters, not the amount of dollars you put in."

Plus, he says, the labs devotes more of its resources today -- about one third -- to basic exploratory research that may not pay off for five or 10 years, in areas like nanotechnology and quantum computing. That's up from 10 percent a few years ago. Another third is for applied research, which covers fundamental technologies like compression that can be applied to multiple product areas, and the remainder is for research tied to specific products that could pay off in as little as a year.

Displays are one big focus for the company. HP doesn't manufacture displays, but it sells around 70 million of them each year in PCs, printers and other products. If it could come up with a radically cheaper way to make displays, HP could license the technology to others and also lower its own product costs, says Carl Taussig, director of HP's Information Surfaces Lab.

To do that it is trying to come up with a completely new manufacturing technique. Today, displays are produced essentially one at a time, using a photolithography technique similar to that used for semiconductors. But Taussig and his team have been developing a "roll-to-roll" process that allows manufacturers to almost literally print circuitry onto screens one after the other.

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