The Big Blue balancing act
Published: 06 Mar 2006 14:30 GMT
Paul Horn, the director of IBM Research and a physicist by training, faces one of the toughest maths problems at the computing giant: how to divide a $5bn to $6bn yearly research budget across hardware, software and — increasingly — services.
IBM Research is a 60-year-old institution that's had its hand in many technologies people now take for granted. The list extends to everyday devices like hard drives and programming languages. But today, about half of Big Blue's revenues derive from consulting services — hardly a hard science.
Horn's job is to make the squishy field of services resemble something like an engineering discipline. Without applying technologies and research to services, IBM Global Services risks being undercut on price by lower-cost rivals.
He also has to strike the right balance between fundamental research in fields like nanotechnology and the needs of IBM's product groups, which count on inventions to get an edge over competitors.
Horn spoke to ZDNet UK sister site CNET News.com about research in services and IBM's investment in emerging technologies, from natural language processing to special-purpose hardware appliances to open source software.
Q: Microsoft has a comparatively sized research organisation. How would you compare IBM Research and Microsoft Research?
We have a very different corporate culture and corporate focus than Microsoft. IBM would like to think of itself as sort of a major player in the open communities. We really think of ourselves as helping others use our intellectual property and our patents, helping open communities within which we operate and flourish.
Microsoft is sort of where we were at 15 or 20 years ago. They are manically focused on how they will build their next generation of their application suites and how they will maintain the Wintel duopoly and how they will maintain Windows position. That's perfectly understandable given where their company is, but we have a completely different focus
Many disruptive technologies emerge that can threaten established businesses within IBM. How do you get these into the company?
I spend eight hours with [chief executive] Sam Palmisano and the senior vice-presidents of the company every December to discuss the disruptive technologies that are coming down the pipe. I'd like to think that that presentation I make every year and the follow-up action, at least in the recent history, helped us avoid missing major disruptions. And there are major disruptions that are coming down the pipe. It's interesting to watch some of our competitors when they hit those disruptions, it's much more traumatic for them than for us because they haven't seen them coming.
Let's take an example. What company would you say would fight open source the most? We have over a billion dollars a year of bottom-line profit from licensing intellectual property and yet we're embracing open source because we know it's going to be completely disruptive. We are the biggest scale-up [server] manufacturer but we built two-processor [servers] and we built Blue Gene. So we're ready to embrace those disruptive technologies. It's not easy but it's better we do it than someone else.
How do you split up your research dollars?
We spend in the ballpark of a third on services, a third on software and a third on systems and technology. Our portfolio in research investment is not exactly one third and one third and one third, but it's been moving from hardware, which at one time was 85 percent of the division, to now more software and services.
How does research play into services delivery?
In services, to a very large degree, we will take over someone's data centre. Or we will provide applications that solve problems for customers and we'll provide them remotely. And people pay for that as a service.
So you can go after this business in two ways. One is, you can basically just do labour arbitrage, which means you do whatever you can in India or in some low-cost labour environment. Or instead of lowering the cost of the people, take the people out — use automation. Research is really good in helping actually with both of those but really good at helping with automation.
Sounds like you're investing in technologies to make your consultants more efficient and effective in engagements.
It's the same thing that we've done for years in manufacturing. You use automation in manufacturing to fundamentally lower the cost of manufacturing, when you take out as much physical labour as possible.
This is the same — except that technology hasn't been applied to IT services delivery. So there is more opportunity for automation, and the...
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