Big Blue's Innovation Engine Drives Big Results
It has been an especially busy year for technology vendors. However, eWEEK was most intrigued by the momentum generated by IBM to date, given that in its third quarter fiscal 2010 earnings, IBM's Systems and Technology Group (STG) saw its largest rise in six years.
Revenues from IBM's Systems and Technology segment totaled $4.3 billion for the quarter, up 10 percent from the third quarter of 2009. Moreover, 2010 is the first time in years that Big Blue will refresh every system in its server portfolio, an impressive feat at a time when the down economy has forced many technology vendors to slash their R&D budgets.
Big Blue has continued to invest a whopping $6 billion to R&D compared to half of that from its closest competitors. To understand the business reasons and extent of IBM's innovative culture, eWEEK recently connected with Jai Menon, Ph.D., an IBM Fellow, chief technology officer and vice president of technical strategy at IBM's Systems and Technology Group. Menon is responsible for technical leadership, research collaboration and technical vitality for IBM Systems.
In this interview, conducted at a recent IBM storage event in New York, eWeek senior editor Darryl K. Taft put four simple questions to Menon, who took the time to show just what makes IBM's systems research arm tick.
eWEEK: What makes IBM's innovation credo unique?
Menon: IBM is unique in how we treat innovation. Innovation is embedded into our culture to tackle the toughest computing challenges for our clients. For example, IBM has approximately 400 technical senior executives, who manage tens of thousands of employees charged with transforming burgeoning technologies into pragmatic client solutions. Take storage technology with the movement of data. We're delivering intelligent methods to automatically move "hot" data to solid-state drives, while shifting "cold" data to less expensive tape, to help clients manage the explosion of content in popular areas like mobile networks, medical imaging and video surveillance, among others.
We innovate in products and services, and we also innovate in business models. For example, our microelectronics business uses an alliance-based (versus our competitors' go-it-alone) approach to bring together leaders in the semiconductor industry to more efficiently solve today's R&D challenges, while sharing development costs that would be difficult for any one company to undertake on its own. Members benefit from early access to technology, the ability to define industry standards, and access to a common manufacturing base. This effort reduces technology development costs by pooling intellectual resources and capital assets, centralizes basic research, and creates an open technology platform with common chip design libraries. By working with industry leaders, IBM is able to fund a multi-hundred-million-dollar annual investment in process technology for next-generation technology.
Innovation is not a spigot you turn on or off. Innovation requires continued financial investments over a long period of time. Since 2002, IBM's R&D spending is up 21 percent. IBM is spending far more of our revenues in R&D than our competitors.
eWEEK: How does IBM use innovation to drive business results and value for your clients and stockholders?
Menon: IBM's $6 billion-strong R&D budget allows the brightest minds to give us headlights into the future. At the end of each year, IBM's lab researchers prepare a global technology outlook, which presents senior management with an assessment and predictions about key technologies over the coming several years. Our research team projects which types of emerging technologies will benefit clients, saving IBM millions by selecting acquisition targets ahead of the competition while avoiding bidding wars.
We also move our researchers into product divisions to get closer to clients. Many members of IBM's executive team and I started our careers in research.
IBM has also innovated in areas where the rest of the industry has cast doubts, like the mainframe, which continues to run the business transactions of the world's top banks. This August, we launched a new zEnterprise system to help clients run mixed workloads with all the flagship benefits of the mainframe, such as availability and security, which are a result of 45 years of relentless innovation. The new zBX is the world's first heterogeneous architecture system-another milestone from IBM.
eWEEK: Why is this an important time for innovation? Shouldn't we be concerned about doing things better, faster and cheaper?
Menon: Actually, it's both. We're at a critical juncture of solving the toughest computing challenges in the most cost-effective manner possible. With billions of devices added daily alongside insatiable consumer demand for mobile services and unpredictable transaction rates, our clients are grappling with how to turn IT into a competitive advantage with limited resources.
This is an important time for innovation, because clients tell us that their computing environments are complex, have been built over years of investments and require specialized services. One size does not fit all when it comes to computing-contrary to popular belief. Our clients tell us that they need a smart business infrastructure to analyze and extract intelligence from information, irrespective of where data resides, in real time-without being bound by a particular system or platform. For example, IBM pureScale Application with Power7 technology and Smart Analytics systems for x86 and mainframe environments are each integrated at every level-from microprocessors to hardware and software, highly tuned for analyzing enormous amounts of data in real time and handling data-intensive transactions.
eWEEK: What's your view on IBM's innovation leadership compared to your competitors?
Menon: It seems as if our competitors are always trying to copy us. We got into services and have been investing in storage; [now] everyone wants to copy us-our competitors have been buying services companies and storage companies. We showed the importance of integrating the whole stack; now our competitors keep talking of wanting to be like IBM and integrate hardware and software.
As a scientist, innovator and businessman, I cannot see myself working for any other company but IBM.
IBM is technically the most innovative. In 2010, IBM is No. 1 on the U.S. patent list, [has been No. 1] for 17 consecutive years, and was the first company to achieve more than 4,900 U.S. patents in one year.
IBM is strategically inquisitive and investment focused. Since 2003, IBM has acquired more than 100 companies, which reflects an investment of more than $25 billion.
IBM is a technology innovator, while others are simply distributors. We're the only company left in the world that owns and develops every portion of the technology "stack" across processors, firmware, systems and software to deliver an optimized product for clients. IBM is on the seventh generation of power systems; fifth generation of x86 systems; and is the global leader in middleware, according to Forrester. It would take many more decades for most companies to catch up. The reality is that our competitors are just distributors; they buy pieces of the technology at premium prices and repackage [them] as a unique solution.