Crisis? Pshaw. Be Bold with Research Investments

Bottom line: The smart companies will weather this fiscal crisis by “steering into the skid,” and actually increasing their investment in the future.

One of my last pieces of advice to DIA’s director before leaving last year was to increase the amount of money annually invested in IT research and innovation. DIA’s technology budget was typically too bloated on the side of operations and maintenance for current systems, and not investing enough in the future, though during my time there we had made significant progress in redressing that, increasing the resources (people and money) put against “what comes next.”

In government-agencies particularly (and many torpid commercial enterprises also), budgeteers make the mistake of throwing money at legacy systems instead of being bold and prioritizing research for the next generation of systems. (Last year I wrote about these issues in “Moving Money to the Left.”)

Now, no one has asked me about my views on the fiscal “bailout package,” which makes sense, particularly when there are people who make far more sense than me expressing their well-founded opinions in ways I thoroughly agree with – such as, say, Harvard economist Jeffrey Miron in his excellent op-ed piece for CNN last night (“Bankruptcy not Bailout is the Answer“).

But a number of people have asked me what the impact on Microsoft might be from the current “crisis” and market volatility.  I have to say that I’m pretty optimistic, precisely because Microsoft is investing in the future, in ways that are designed to carry us through short-term downtimes and on to exciting new platforms.  The company’s cash-rich, which helps. 

 Most importantly, our CEO Steve Ballmer firmly pointed to our increasing bet on our new approaches to the future.  Speaking in Silicon Valley, he said proudly that not only will Microsoft continue to buy about 20 innovative companies a year, but we will also keep spending $9 billion a year, or 14 percent of revenues, on internal research and development. (See the Venture Beat story here.) 

 

Microsoft “will use the slump as a chance to invest more in our future than the other guys we’re competing with” – Steve Ballmer, quoted in Bloomberg.com  

 

There are going to be winners and losers coming out of this slump, as there have been in each of the tech slumps I’ve seen in my short (!) life over the past three decades I’ve been involved.  The winners are inevitably those with a vision for the long term and the determination to plan beyond the horizon. 

Microsoft won’t be the only winner (see “Microsoft, Xerox Invest in Innovation” for a description of the Xerox CTO’s similar thoughts), but I’m convinced we will be in the front rank.

 

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One Response

  1. Lewis,

    if memory serves, Microsoft was well served by the same thought process as the air was rapidly exiting the .com bubble in the early part of this century. They stockpiled cash, invested in promising technologies, and lead the SOA charge (before it was known as SOA) with .Net and web services offerings and evangelism.

    I had the DIA R&D investment conversation with Grant when considering applying for your old position as well as Bob Gourley’s. Grant’s responses precluded me sending in a package for the “Innovation” job, and well, I guess you know how that has all played out.

    Torpid may be the best descriptor of IT in Government I’ve ever read. Bravo.

    Cheers,

    –Tim

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