Feeds

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

Put the lab coats away

Maximizing your infrastructure through virtualization

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.

Reducing security risks from open source software

More from The Register

next story
HIDDEN packet sniffer spy tech in MILLIONS of iPhones, iPads – expert
Don't panic though – Apple's backdoor is not wide open to all, guru tells us
Do YOU work at Microsoft? Um. Are you SURE about that?
Nokia and marketing types first to get the bullet, says report
Microsoft takes on Chromebook with low-cost Windows laptops
Redmond's chief salesman: We're taking 'hard' decisions
Cheer up, Nokia fans. It can start making mobes again in 18 months
The real winner of the Nokia sale is *drumroll* ... Nokia
EU dons gloves, pokes Google's deals with Android mobe makers
El Reg cops a squint at investigatory letters
Chrome browser has been DRAINING PC batteries for YEARS
Google is only now fixing ancient, energy-sapping bug
Big Blue Apple: IBM to sell iPads, iPhones to enterprises
iOS/2 gear loaded with apps for big biz ... uh oh BlackBerry
prev story

Whitepapers

Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.