IBM is currently trying to figure out how best to invest its large R&D budget in a world that revolves around intangible services as opposed to tangible products. In an excellent piece in Technology Review, we learn that Big Blue is struggling to determine how R&D applies differently to services than the chips, computers and software that have traditionally dominated its research budget.
As the piece points out, "pure services are sold by IBM’s 180,000 consultants and range from wholesale IT outsourcing to training, human-capital management, and the On Demand Innovation Services effort, a broad (that is, vague) effort to make widely disparate systems communicate more effectively, and in real time. These services don’t have profit margins as high as those of IBM’s proprietary hardware and software, but service sales often follow product sales (and sometimes drive more product sales)...The term 'services' is also used by people at IBM to mean any work that helps improve a product or a process. The product could be a piece of hardware or software; the process could be the way consultants present data to clients. But whether services are thought of as discrete products or product enhancers, IBM sees them as critical to its future."
Paul Horn, a solid-state physicist who has run IBM Research since 1996, is responsible for taking the $6 billion research organization and reorienting it for a world in which services represent as much as two-third's of IBM's business. Mostly, however, there's a sense that IBM has not yet fully made the turn. "We’re making a lot of progress, but would I like it to be faster? Yeah, I would,” says Horn.
What the piece points out is that research organization hasn't quite been able to keep pace with the company as it shifts from hardware to software to services. However, the company's decision to buy PricewaterhouseCoopers in 2002 has accelerated the effort. What's different? “Services is a people business,” says Paul Maglio, a cognitive scientist in IBM’s Almaden research lab in San Jose, CA. “I’m a cognitive scientist; I’m interested in people generally. What we were doing in human-computer interfaces was fine, but it didn’t get the whole picture. I thought we could create a new breed of research.”
At this point, the company's accomplishments on this front are acknowledged to be few. Research teams are focused heavily on the "on-demand" effort. They've also invested heavily in analytical activities to captitalize on corporate data (particularly for customer service departments) and "optimization" initiatives to enhance operations (which has met some success in the pharmaceutical industry).
Maybe it's time to think from the outside-in instead of the inside-out. The article makes it sound like the folks in lab coats (who work in "labs") are still overwhelmingly more important to IBM than the occasional "business anthropologist" who does his or her best research out in the field with clients. One line in the Technology Review piece notes that IBM's research group considered using the term "services science," but can't seem to continue uttering it with a straight face. That, in itself, strikes me as quite telling. Maybe it's time to take anthropology -- and other opportunities to observe real people using technology in real situations -- a lot more seriously.