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Big Blue sends its vaunted research staffers out of the labs to put its technology to work solving customers' problems

YORKTOWN HEIGHTS, N.Y. -- Inside IBM Corp.'s Thomas J. Watson Research Center, oblivious to a snow squall outside, Tze-Chiang "T.C." Chen is earnestly describing how Big Blue's researchers spent 11 years developing copper circuitry to replace aluminum in the wiring on silicon chips. The technical barriers were daunting, recalled Chen, a vice president of science and technology who holds the honorific of IBM fellow, but "we took that as an opportunity."


Watson Research Center, named for IBM's founder and opened in 1961, has always been about smart people thinking big and leaping hurdles. This is a place where horizons are long, and distractions of the outside world can seem far away. It is the nerve center of the world's largest industrial research organization. Where it once vied with Bell Labs, RCA Labs, and Xerox PARC for supremacy in pure technology research, those other stars have faded. Today, among the private sector's historic research giants, IBM has the landscape largely to itself.

But the landscape is changing. These days IBM's leadership is pushing the 3,000-person research division toward the marketplace. Long-term research continues, in fields ranging from nanotechnology to autonomous computing, but the new priority is to integrate research more tightly with IBM's focus on finding business and technology solutions for its clients' problems. That means working in concert with IBM's operating divisions, its business partners, and its customers.

"You invent something, that's nice, but it doesn't buy you a whole lot," said Paul M. Horn, the IBM senior vice president for research. "It's invention in the marketplace that counts. . . . We call it On-Demand Innovation Services." Then he admitted, in a tone both impatient and amused, "Some people here call it `Rent-a-Researcher."

Increasingly, the storied IBM researchers are troubleshooters on call. From Yorktown Heights and its sister research houses in Silicon Valley and the Swiss Alps, they can be dispatched to customer sites around the planet. There they deploy their cutting-edge technology to help Staples Inc. install software connecting stores and suppliers, or enable Fidelity Capital's BostonCoach unit to optimize its fleet of executive sedans, or implement a digital branding strategy that repositions Philip Morris as Altria Group Inc.

"They are now laser-focused on innovation around services," said Roger Letalien, the Boston-based IBM Global Services chief who frequently taps researchers to work with customers.

While some relish their interaction with the business world, Horn acknowledged there can be dissonance among researchers who came to IBM expecting to work on the fastest supercomputer or the next frontier in fractal geometry and instead find themselves applying technology to the problems of the airline or the petrochemical industry. "It is a bit of a cultural shift," he said.

Nonetheless, the transition is very much aligned with IBM's corporate strategy of moving its business "up the value chain," in the words of Irving Wladawsky-Berger, the veteran IBM vice president of technology and strategy. In the past, IBM's best minds were engaged in making computer hardware and software work, Wladawsky-Berger said, but now "a lot of innovation is coming in figuring out what to do with all this technology."

Toward that end, IBM has been building up its services business, which offers clients everything from technology advice to contracted outsourcing. And, last year, it gained a foothold in consulting through its $3.5 billion acquisition of PricewaterhouseCoopers.

Together, services and consulting now make up over half of the company's more than $80 billion in annual revenues, with hardware, software, storage, and other information technology products accounting for most of the rest.

The new challenge is combining these assets to address customer needs. Historically, "we created incredible things in our laboratories and we thrust them upon you," Samuel J. Palisano, the IBM chairman and chief executive, told a gathering of clients at the San Francisco Museum of Modern Art last month. But going forward, he said, "the client is now setting the IT agenda."

Each of IBM's operating divisions is devoting considerable resources to analyzing how technology -- and the goods or services it offers -- will impact business processes and transactions in specific industries.

On Dec. 1, the company said it was dividing the development and sales force at its $13 billion software business, which includes the Massachusetts-based Lotus and Rational brands as well as WebSphere and Tivoli, to focus on a dozen industry segments from life sciences to financial services. The new structure is similar to the way PricewaterhouseCoopers approaches the market.

"We're going to give customers technology that will allow them to model their business," said Douglas Heintzman, technical strategy director for the IBM Software Group in Somers, N.Y., now the second-largest seller of software globally, after Microsoft Corp. That means custom-designing software and other IBM technology to boost clients' productivity, efficiency, and profitablity.

The new role of IBM Research is to support such efforts, and to help expand the business. Working with consultants and salespeople, the research division expects to "influence" about $100 million of IBM business this year, Horn said, and he sees plenty of room for growth.

Such a measure can be sobering for outsiders who view IBM as a harbinger for US corporate research. Its new approach is being watched with interest and concern by many in business and academia, who already are noticing other companies following suit.

"The name of the game is cutting costs, so the first thing that goes at many companies today is basic research," said Mark Jeffery, a technology professor at Northwestern University's Kellogg School of Management, who collaborated with IBM as a research engineer at the University of California at Berkeley in the 1990s.

"From a business perspective, getting closer to the customer is good. But from the long-term perspective of the country, it might hurt innovation. We may be seeing more incrementalism in technology, but fewer breakthroughs."

Clients aren't complaining, though. Unicco Service Co., which cleans buildings throughout North America, hired IBM to build an "account management" Web portal for sharing data with its customers. In addition to a team from its software and technical architecture groups, IBM assigned a researcher to help the Newton-based company gain a competitive edge by bringing technology to bear on facility management and deploying a large work force.

"We told them we want to use technology as a differentiator in this space," said Jeff P. Peterson, vice president of information technology for Unicco.

And for IBM researchers who have adapted, the new customer focus brings a welcome dose of reality to what can be an ivory-tower environment.

"People like myself love to go out to client sites because it grounds our research," said Kate Ehrlich, a former Lotus employee who is now a research staff member at Watson's satellite lab in Cambridge. Speaking on the phone from Minneapolis, where she was teaming with IBM consultants to help a client employ collaboration technology, Ehrlich said "having someone from research along with someone from consulting brings a powerful blend of skills."

But doing it right requires smooth collaboration at the company that is showing its clients how to collaborate. And that means cultural change at IBM.

"There's always going to be some people who, for whatever reason, aren't interested in doing it," Ehrlich conceded.

Robert Weisman can be reached at

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