IBM Corp is putting its money where its mouth is, and investing $1bn into a new organization dedicated to researching how it can deliver its products as on-demand services.
Last month, IBM CEO and president Sam Palmisano said that the company had invested $10bn in gearing its products and services to the point where clients can meet their IT needs without needing to buy new machines and hire large numbers of professionals.
The company spent $5.3bn on research and development last year, although the vast majority of this was plowed into software development, electrical engineering and pure mathematics. Some $1bn of its research budget for the next three years will now be pumped into On Demand Innovation Services (ODIS), a new division that will operate alongside IBM Business Consulting – the 60,000-strong consulting unit created by the $3.5bn takeover of PwC Consulting.
ODIS will pool together 200 research scientists who will employ mathematical and scientific research techniques to improve the way that IBM develops its products and services around an on-demand model. The company gave the example of how its research operation had recently helped outsourcing client Air Canada improve its plane and crew schedules in order to cut costs. ODIS will initially focus on four main areas: advance analytics; business process transformation; information integration, and experimental economics.
IBM is one of the biggest spenders on R&D in the world, and Paul Horn, IBM’s senior vice president of research said the focus on its services business marks a fundamental shift in the IT industry’s research agenda. In truth, the $1bn figure does not represent a big change in IBM’s research strategy. If the company’s annual research expenditure stays at around $5bn for the next three years, the $1bn commitment will account for just 7% of the yearly total.