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But splitting research and development activities at IBM isn't that easy, says Robert Morris, VP and director of IBM's Almaden Research Center. Yes, IBM has some 3,000 researchers in eight labs around the world working on everything from new semiconductor materials to nanotechnology to studying how people interact with computers. But Morris describes the research-to-development work as a continuum, with basic research finding its way into fundamental technologies that ultimately serve as the basis for new products. IBM's R&D budget has held steady at around $5 billion, or 6% of sales, in recent years.

Not Negotiable
Many vendors are holding the line on R&D spending despite tough times Fiscal 2000 Fiscal 2001 Fiscal 2002 R&D spending % of sales R&D spending % of sales R&D spending % of sales ($ in millions) ($ in millions) ($ in millions) BEA Systems $61 13% $89 11% $121 12% Cisco $2,685 14% $3,778 17% $3,301 17% Computer Associates $568 9% $695 17% $678 23% Dell $374 1% $482 2% $452 1% EMC $783 9% $929 13% $595* 15% Hewlett-Packard $2,634 5% $2,670 6% $2,923** 5% IBM $5,151 6% $5,006 6% $3,546* 6% Intel $3,897 12% $3,796 14% $3,012* 15% Microsoft $3,775 16% $4,379 17% $4,307 15% Oracle $1,010 10% $1,139 10% $1,076 11% PeopleSoft $321 18% $299 14% $253* 18% SAP $910 15% $800 12% $629* 13% Siebel $146 8% $199 10% $158* 13% Sun Microsystems $1,630 10% $1,995 11% $1,836 15% *9 months ended Sept. 30 **9 months ended July 31; includes Compaq results Data: information

During the last couple of years, IBM has been shifting resources toward developing technologies and practices to reduce the staffing costs associated with computing, Morris says. This year, the company unveiled a number of autonomic computing products based on that research for making IT systems more self-managing and self-correcting.

While most of Sun's R&D efforts are on the development side, the company's Sun Labs is engaged in more basic IT research. That includes cooling technology for computers; core semiconductor technology; Java Virtual Machine development; and basic reliability, availability, and serviceability. Although that research isn't geared toward specific products, Tolliver says it's intended to find its way into Sun products. But Sun Labs accounts for a relatively small amount of Sun's total R&D budget, Tolliver says, although Sun won't disclose how much.

Lately, Sun has been augmenting its R&D efforts through acquisitions. To boost its semiconductor-development efforts, Sun bought Afara WebSystems Inc. in July in a deal that brings back some of the original designers of the company's UltraSparc chip. And its buyout of Pirus Networks Inc., announced in September and expected to close by the end of December, will add to Sun's unified data-storage research and development efforts, Tolliver says.

Jump-starting R&D efforts through acquisition has long been a favorite strategy of some vendors, including Cisco. Harvard's Chesbrough expects such activity to pick up now that stock prices are low for small companies with leading-edge technologies.

To help get the most out of its $4 billion R&D budget, Intel has been building laboratories next door to leading IT research universities such as Carnegie Mellon University, the University of Washington, and the University of California, Berkeley. Chesbrough says that's indicative of how IT companies are looking beyond their internal development operations for new technologies and new product ideas.

In tight economic times, customers are more selective about the IT products they buy, IBM's Morris says. That gives the edge to companies that invest in developing technology that customers really need. "They're less likely to jump at overhyped technologies," he says. "This is a great time to innovate."

Photo by Angie Wyant.
Photo of Lewis by Jason Grow.