Editor's Note: R&D Plus Eurekas! Move TechnologyEditor's Note: R&D Plus Eurekas! Move Technology

In the October issue of Optimize, venture capitalist Ned Renzi and CIO John Zarb debated whether the soft economy is stifling tech innovation. Both gentlemen had compelling arguments (optimizemag.com/issue/012/squareoff.htm). It's a topic that often gets discussed in business-technology circles these days. A look at the R&D spending among the 2002 information 500 reveals a decline from 4.5% of IT budgets last year to only 2.5% of budgets this year. But there are companies bucking that trend. Microsoft has committed to a 20% increase for fiscal 2003. Likewise, Sun Microsystems and a handful of other top technology vendors have vowed to increase their spending. Others, of course, have slowed such spending. But the good news is that, in many cases, those cuts aren't as steep or fast as the sales decline has been.

I chatted last week with Danny Hillis, co-chairman and chief technology officer of Applied Minds, about R&D and its impact on continued innovation. During his stints as a scientist, inventor, and businessman, he's seen some phenomenal breakthroughs in the world of information technology. And he's been known to say that some of the greatest ideas come not from R&D on core technologies, but from unexpected eurekas! along the way. Sure, it's appropriate for companies to spend most of their budgets on core product ideas, but they also need to look for ways to go beyond. Sometimes that means acquiring a company with a brilliant development or partnering more closely with universities. In any event, collaboration is the name of the game.

"It seems passé to use the term 'net economy' these days, but it's a reality," Hillis says. "More things get done when you have a network of people doing things they're really good at." While he believes that innovation in the core technology of computers is slowing, what's exciting is the application of that technology to business problems. Indeed, innovation doesn't just come from a technology or a product. It can come from a new process or a new, smarter way of collaborating with partners or customers.

To find out how some of the industry's top vendors are investing in the future, turn to page 30.

Stephanie Stahl, Editor
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