Feeds

Microsoft, Nokia, and RIM's wasted R&D billions

Put the lab coats away

5 things you didn’t know about cloud backup

Open...and Shut Over the past few decades, governments have decreased their investments in original research, with corporations taking on a greater role. There are plenty of problems with scientific research funded by private, shareholder-driven companies.

Perhaps the worst, however, is that corporate R&D, at least in the technology market, doesn't appear to work.

Some of the biggest funders of corporate R&D, including Nokia (R&D equals 14.4 per cent of sales), Microsoft (13.9 per cent) and Research in Motion (6.8 per cent), have virtually nothing to show for it. Nothing that is, except declining market share, compared to their more parsimonious peer: Apple (2.7 per cent). No wonder The Wall Street Journal declares, "[T]here's little apparent connection between R&D expenditures and successful product launches."

To put this into even sharper contrast, Microsoft spent more in R&D in 2010 than Apple spent in the last decade. Whose growth trajectory would you rather have?

Google, for its part, spends in the same neighborhood as Microsoft as a percentage of sales (12.8 per cent), but arguably its success stems not from its R&D, but rather from its early stroke of genius in advertising. Other products that yield many users, if not a comparative mountain of revenue, came through acquisition.

Nor is Google alone in this. Microsoft continues to mint money from Office, but even Office's roots extend to acquisition with Forethought.

Perhaps Microsoft and its underperforming-but-R&D-spending peers would do better to save their billions in R&D and instead invest them in M&A?

No, M&A isn't a panacea for poor performance or product development. But when it works, it helps big companies overcome their institutional inertia and bring "new" products to market. For example, high-profile venture capitalist Bill Gurley points to Android as a "freight train" that is both unstoppable and a key to Google's advertising revenue growth in mobile. But Google didn't develop Android. Google bought it.

M&A may not be the best R&D, but looking at the track record of so many tech giants' R&D spending...it can't really be much worse.

Maybe it's time to pack up the white lab coats of the corporate scientists and instead fund the corporate development executives with an eye for innovative startups. Hunch's Chris Dixon insists that "big companies...aren't nearly as successful as startups at creating new products," and urges more VC money be poured into them. Google's Ted T'so counters that startups don't actually innovate technology, but rather how to sell/distribute technology.

Perhaps. But the past decade seems to suggest that Dixon may be right or, at least, that the greater innovation returns lie with startups, rather than corporate R&D.

It's not that R&D nets the giants nothing at all. Microsoft, after all, came up with Kinect somewhere in the middle of its hefty R&D spend. But it's not clear that fat R&D budgets pay for themselves, and wouldn't be better spent snapping up startups.

Nokia has nearly 19,000 R&D employees, as Businessweek points out. That equates to nearly 5,000 four-person startups, at least one of which could probably have come up with a better idea than dumping R&D money down the Symbian rat hole and then capitulating to a Microsoft Windows Phone 7 strategy. Probably a lot more than than one.

Matt Asay is senior vice president of business development at Strobe, a startup that offers an open source framework for building mobile apps. He was formerly chief operating officer of Ubuntu commercial operation Canonical. With more than a decade spent in open source, Asay served as Alfreso's general manager for the Americas and vice president of business development, and he helped put Novell on its open-source track. Asay is an emeritus board member of the Open Source Initiative (OSI). His column, Open...and Shut, appears twice a week on The Register.

Boost IT visibility and business value

More from The Register

next story
The Return of BSOD: Does ANYONE trust Microsoft patches?
Sysadmins, you're either fighting fires or seen as incompetents now
Linux turns 23 and Linus Torvalds celebrates as only he can
No, not with swearing, but by controlling the release cycle
Why has the web gone to hell? Market chaos and HUMAN NATURE
Tim Berners-Lee isn't happy, but we should be
China hopes home-grown OS will oust Microsoft
Doesn't much like Apple or Google, either
Apple promises to lift Curse of the Drained iPhone 5 Battery
Have you tried turning it off and...? Never mind, here's a replacement
Sin COS to tan Windows? Chinese operating system to debut in autumn – report
Development alliance working on desktop, mobe software
Eat up Martha! Microsoft slings handwriting recog into OneNote on Android
Freehand input on non-Windows kit for the first time
Linux kernel devs made to finger their dongles before contributing code
Two-factor auth enabled for Kernel.org repositories
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Scale data protection with your virtual environment
To scale at the rate of virtualization growth, data protection solutions need to adopt new capabilities and simplify current features.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?