2012 GFF Globe ImageOver the past 20 years, information and communication technologies (ICT) have been a key innovation enabler in many domains and have dramatically changed social behavior around the globe. In the past decade, the fortunes of many ICT companies have evolved significantly. And over the past two years, ICT-related manufacturing has been particularly volatile, with leading companies like Nokia, Motorola, Google, Apple, Microsoft, and Hewlett-Packard experiencing commercial dynamics following the introduction of new products arising from their R&D decisions.

As these companies illustrate, success in the ICT marketplace cannot be maintained by being the current market leader and making large R&D investments alone. A clear vision of long-term technology goals aligned with a competitive marketing strategy is essential. For example, Nokia led the cellular market for most of the past 10 years by creating low-cost, reliable handsets. But when the market evolved to more upscale and technologically significant products, Nokia failed to develop a strong smart phone product, a competitive operating system, or a strong industry collaboration. Its market share and position in the upper echelon of all global companies (with about $7 billion investment in R&D, at #11 in our list) could be in jeopardy as a result.

Information & Communication Technologies 2009 2010 Q1-Q3 2011
Top U.S. R&D Expenditures Millions, U.S.$
Microsoft 8,581.0 8,951.0 6,991.0
Intel 5,653.0 6,576.0 6,042.0
International Business Machines 5,820.0 6,026.0 4,702.0
Cisco Systems 4,994.0 5,711.0 4,371.0
Oracle 2,775.0 4,108.0 3,347.0
Google 2,843.0 3,762.0 3,864.0
Hewlett-Packard Co. 2,768.0 3,076.0 2,440.5
Qualcomm 2,432.0 2,624.0 2,348.0
Apple 1,416.0 1,959.0 1,854.0
EMC 1,627.5 1,888.0 1,589.0
Source: Battelle/R&D Magazine/Company information; (e) = estimated

Apple's success, on the other hand, has been well publicized. With lean R&D investments of about $2 billion in 2011, Apple's R&D as a percent of sales is only 2.7%—less than a quarter of that spent by Nokia. But smart investments and a clear market vision by the late CEO Steve Jobs helped Apple rise within the past five years to become, briefly, the first or second largest industrial company in the world. Apple succeeded with smart R&D, close attention to the marketplace and the user, and an emphasis on quality—not just relying on large amounts of R&D or a position as technological leader.

While Nokia and Apple demonstrate some extremes of R&D investment and outcomes, they also illustrate the range of strategies available for R&D in ICT, where product cycles are fast and innovation driven.

U.S. ICT Strength at Risk?
In its latest ICT R&D Policy Report, The Telecommunications Industry Association (TIA) urges U.S. policymakers to take action to reinvigorate investment in ICT innovation. Noting that the U.S. has long been the unrivaled leader in ICT, the report cites a growing gap in basic ICT research funding in the U.S., an inadequate (and uncertain for all industries) R&D tax credit, and the need for greater ICT industry input into U.S. federal agency funding priorities. The report recommends simplifying the R&D tax credit, funding the Wireless Innovation Fund (WIF), doubling the basic science budget by 2015, promoting policies to stimulate broadband deployment, and encouraging cooperation and information sharing with other nations.


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Information & Communication Technologies. Source: Battelle, R&D Magazine, EU R&D Scoreboard

The Economic Intelligence Unit (EIU) affirms that the U.S. remains the world's most competitive country in ICT, but notes that developing nations are beginning to close the gap. Sponsored by the EIU, a report by the Business Software Alliance (BSA)—Benchmarking IT Industry Competitiveness, 2011—ranks the U.S. first overall in ICT (over #2 Finland), first in ICT R&D (over #2 Israel), first in human capital (over #2 China), a close second to Australia in ICT legal environment, first in IT industry environment (over #2 Canada), but ninth in IT infrastructure.

The U.S. and Japan make up nearly 70% of all global ICT R&D investments, according to a recent study by ZDNet. While China is excelling in many other industries, Huawei Technologies is the only Chinese company in the top 30 firms ranked by ICT R&D spending.


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Key ICT technology development areas by 2014. Source: Battelle, R&D Magazine Survey

R&D in the Cloud
At slightly more than $9 billion in R&D spending, Microsoft is the leader in ICT R&D spending, outspending #2 Samsung by more than $1 billion. In early 2011, Microsoft President Jean-Philippe Courtois announced that the company would be spending 90% of its research budget, or more than $8 billion, on improving cloud computing technologies. With the U.S. government alone currently estimated to spend more than $20 billion in cloud computing, this investment by Microsoft may not be as risky as some analysts initially noted. A Microsoft internal marketing study also indicated that 40% of all small and medium businesses (SMBs) would adopt cloud-based computing systems within three years.

One new product outcome of Microsoft's R&D is Office 365, a collaboration and productivity tool delivered through a cloud computing interface for a monthly fee. Office 365 competes directly with the Google Apps cloud-based email and collaboration suite, which was selected by General Motors for more than 100,000 of its employees.


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Global industry leaders in ICT R&D. Source: Battelle, R&D Magazine Survey

U.S. leadership in ICT intellectual property may be weakening. According to a World Intellectual Property Organization (WIPO) 2011 report, the most global Patent Cooperation Treaty applications have been filed by Japan's Panasonic, China's ZTE, the U.S.'s Qualcomm, and China's Huawei Technologies, respectively. Six of the top 20 rankings (based on number of applications filed) are from Japan, four are from the U.S. (Qualcomm # 4, 3M #16, Hewlett-Packard #18, and Microsoft #20), and five are from European Union (EU) countries.

The EU recognizes that its development of ICT intellectual property has lagged the rest of the world. In reports preparing for its Framework Programme 8 (FP8, the EU's premier R&D initiative of more than $120 billion scheduled to run from 2014 to 2020), the EU notes that many ICTs will have matured over the next 15 years, becoming even more widely adopted and integrated in diverse technology platforms. Many of the FP8 research programs will emphasize ICT to build economic advantage for the EU's member states and companies.