R&D a game changer in fast-moving IT world

When it comes to spending on research and development, a company is bound to ask what sort of bang it is getting for its buck. During the downturn, many companies cut back on their research and development. The implication was that it was not delivering enough to justify more funds in a tight market.

The 2010 Global Innovation 1000 survey put out by the global consulting firm Booz and Co, found the 1000 companies that spent the most on research and development decreased their total spending on it by 3.5 percent to $503 billion in 2009.

Software, internet and telecommunications companies led the charge. Significantly, a study Booz released back in 2005 revealed there was little evidence to show that jacking up research spending delivered performance results. It found no significant difference between financial results of average and above-average spenders.

Still, it conceded there were some notable exceptions – for example, Apple. And Apple’s extraordinary success suggests research and development should not be written off.

Certainly the tech sector is ahead of the pack when it comes to research and development in Australia, something all resellers should note. Figures released by the Australian Computer Society last year showed the total spending in all research fields in the ICT sector came to $14.3 billion in the private sector. Another $6.7 billion was added by higher education facilities. ICT represented 25.58 percent of all research and development expenditure in the private sector, with higher education research and development spending representing 3.25 percent.

A 2010 study by McKinsey found companies with a higher concentration of knowledge workers, above 35 percent of the workforce, on average create returns per employee three times higher than for those companies with fewer knowledge workers (20 percent or less of their workforce). Yet the returns are variable. There are great differences between competitors in the same industry, which illustrates the importance of innovation and the need to release new products and services.