For many years Hewlett-Packard has been cutting its research and development (R&D) spending, but focused on acquisition of already established companies to get new technologies and expand its businesses. Last year the company said it would boost R&D spending to drive innovation, but so far nothing has changed. The chairman of HP believes that in addition to in-house R&D, it should look towards startups for innovations.
"Big companies, by and large, do not keep their ear to the ground as well as they should. There is a big community of startups here in the valley that want to talk to HP. They want to have a dialog, and they are not afraid of HP stealing its IP. The marriage of great technology that is protected by IP and the velocity at which a startup moves, combined with the scale that HP can provide, is something that we are trying to be better at," said Ray Lane, the executive chairman of HP, in an interview with eWeek web-site.
Unfortunately for HP, it is too big to take all new promising technologies into serious consideration because of its size. As a result, many things that have potential are lost in bureaucracy.
"You cannot take away the scale of HP. It is 320 000 employees and $130 billion in revenue, not to mention more than 100 000 contractors and business partners. [...] We will never be the company that, if you hit the ball at us, we'll hit it right back at you. We are too big. But we should be responsive, we should determine if new technology fits, and is it synergistic with what we are trying to do," said Mr. Lane.
The executive chairman of HP clearly stressed that working with startups will have to make sense from HP's current project and that the company will not necessarily try to obtain all promising new technologies.
"One thing I will tell you: We are not going to try and do everything. We are not going to try and cover the landscape. We are going to work through younger companies, smaller companies. [That] is going to be a better way of operating," explained Mr. Lane.
For the fiscal 2011, HP spent $3.25 billion on R&D, or around 2.6% of its $124.7 revenue. But chief executive officer Leo Apotheker made a number of very expensive acquisitions during the year and the R&D budget was somewhat capped. Yet another former CEO of HP, Mark Hurd, cut HP's R&D budget to $2.8 billion, or 2.5% of HP's revenue, in its last fiscal year from $3.5 billion, or 4% of earnings, in 2005, when he took over as CEO. By contrast, IBM has been investing around 6% of revenue into its own R&D in the recent years.