e.Digital Corporation (fka EDIG)

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ot-Are Tech Innovations Drying Up?

By Peter Dizikes
November 11, 2002
http://www.newsfactor.com/perl/story/19941.html


Some prominent research figures are putting a positive spin on the end of the technology bubble by saying it has helped them get back to basics.
The technology slump of the past two years has cost thousands of workers their jobs, decimated some companies and slowed down the economy. Will it also result in fewer innovations from America's high-tech firms?
That question can produce contentious responses inside Silicon Valley. But it's also a significant long-term economic issue. A U.S. Commerce Department study shows that information technology companies accounted for nearly 30 percent of national growth between 1995 and 2000, despite comprising just 8 percent of the national GDP. And tech firms grew in large part due to innovations cooked up in America's research labs.

Indeed, research is the lifeblood of the technology industry. And yet, with businesses having chopped information technology spending, the fallout has hit the labs. According to one study, spending on research and development (R&D) in the technology sector declined 8 percent from mid-2001 through early 2002, a total drop of $1.7 billion.

"You're not seeing companies invest as much in basic research as they once did," says Mike Katz, managing director of consultant PricewaterhouseCoopers' Global Technology Center in Menlo Park, Calif. "That is a little worrisome."



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Can a Recession Help Research?
Good times or bad, however, America's bellwether technology firms love to emphasize their commitment to research -- understandably, considering that Wall Street tends to punish companies slashing R&D budgets. Microsoft and General Electric, for instance, have been heavily publicizing the expansion of their research efforts. And some prominent research figures are putting a positive spin on the end of the technology bubble by saying it has helped them get back to basics.

"In a boom time, you're having trouble keeping up with the boom," says Dick Lampman, head of Hewlett-Packard labs in Palo Alto, Calif. "But in a down time, people can refocus."

Jim Mitchell, head of Sun Microsystems' labs in Santa Clara, Calif., says the end of the tech bubble "was traumatic at first," especially when Sun laid off about 4,000 workers. But he adds: "Right now, I'm having more fun at Sun than I've had in a long time. You tend to get more focused on the essentials ... it's actually kind of nice."

Indeed, say some key industry figures, technology research is not so much suffering because of the downturn, but evolving. While the old, idealized image of high-tech research involves a place like Xerox PARC, where inventions flowed freely in the 1970s and the parent company simply left the scientists alone for years, times have changed.

Thus the tech slump seems to have accelerated two broad shifts in the world of research. Scientists, instead of being holed up in the lab, work more with the developers at their companies, churning out new products. And their projects are more frequently driven by the needs of customers -- who, at this point, seem to have a better understanding of technology than the free-spending hordes of a few years ago.

The Holy Grail of 'Technology Transfer'

Take Sun, which, like many tech firms, has cut its R&D funding slightly -- to $1.8 billion in the 2002 fiscal year, down from $2.0 billion in 2001, although that does represent a higher percentage of company revenues being used for research. Sun labs has performed some research triage -- but expects to have the same impact on the company as before.

"We looked very hard at what we were doing, and we did stop a few things in order that we keep other [projects] fully funded," says Mitchell.

As a rule of thumb, Mitchell tries to ensure that he has at least four "harvestable" projects on tap every year. He also directs researchers to spend up to 20 percent of their time working with Sun's product division to bring its ideas to market -- the often-arduous process of "technology transfer."

"Most research labs fall down not in doing the research but in getting it to be a product for the company," says Mitchell, a veteran of Xerox PARC in the 1970s, where scientists' computing breakthroughs were essentially ignored by the parent company. So at Sun, "Basically the research team goes into the product division and works with the engineers" until issues are resolved.

To be sure, this kind of integration predates the tech bust. Robert Morris, head of IBM's Almaden Research center in San Jose -- the envy of many in the industry -- says the trend took off in earnest about a decade ago. Which is, not coincidentally, when IBM overhauled its research operations, even linking evaluations of researchers to the performance of certain company divisions, in an effort to avoid what Morris calls "the silo effect" of isolated research.

Still, in these lean times, it's especially important for research labs to have an active role at any company. At Sun's board meetings, says Mitchell, "I always get asked, 'How much technology transfer do you do every year?'"

The Enlightened Customer

Research divisions are also gaining new directions by dealing more directly with customers. Many agree that businesses still buying technology after the boom have sharper questions to ask -- and are more frequently stimulating to researchers.

"In the Internet craze people were just throwing money at systems," says HP's Lampman. "Now they've had to start thinking."

In particular, one issue businesses are thinking about more often is computer security -- "a rapidly rising issue," according to Lampman, due to the events of Sept. 11, 2001, as well as the prevalence of computer viruses, worms and other well-publicized security flaws. In turn, HP is concentrating on "architectural" security solutions that presume customers will not just passively install systems, but update their security measures and generally take a more active role as consumers.

Security is also a rising priority at IBM, says Morris, where customers will often ask to meet with particular researchers now, having seen or heard about their work. The result, he says, is that "they both learn from each other." That process, says Morris, spurs individual researchers to be more productive.

"The problems have to come from customers and not just be things you've thought of in a lab," says Morris. "That does not contradict the commitment to research. It means you change the way you do research."

'Technology Keeps Moving'

Of course, even IBM tries to balance its customer-spurred research with longer-term efforts. Take, for instance, the company's much-touted "Millipede" project, which employs nanotechnology -- the manipulation of matter at the molecular scale -- to shape plastic in order to provide data storage. The technology, which promises to store the equivalent of 25 DVDs on a surface the size of a postage stamp, figures to be at least five or 10 years from fruition.

IBM's recent decision to sell its hard-drive business -- which at one time helped define the company -- has led to speculation it is essentially making a big bet that nano-scale products will define storage in the future. But Morris is playing it close to the vest when it comes to the purpose of the research.

"We're certainly not willing to say it could replace the disk drive," says Morris. "It's something we're exploring."

Work in nanotechnology, he points out, has a strong institutional impetus at IBM, where it has been taking place since the 1980s. That kind of commitment to a particular form of technology can be self-sustaining, attracting talented researchers and spurring advances regardless of customer needs or the potential for short-term payoffs.

Indeed, for all the talk of integration within companies and with customers, says Andrew Dawson, general manager of ITT's Harrisburg Design Center, there will always be a certain amount of farsighted thinking and discovery taking place in the nation's research labs.

"Technology keeps moving and accelerating independent of the current market timing," says Dawson.

Now if only the economy would improve.
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