Why Invest in Global Research & Development?

There is nothing like getting on an international phone call at 11pm for the latest status update on an important development project.  Or doing a performance review 10 time zones away in a language you are not sure is well understood by the recipient. Or being questioned by your boss about the likelihood of making an on-time delivery next week when the development team is in Brazil and Carnival starts in two days.

Conducting research and development internationally is complicated. So why bother? A controller might say something about how labor is less expensive in many places outside the U.S. and it’s all about cost containment.  It is time to reset some misconceptions  and directly address the reality of the situation.

Let’s focus on the IT market, one we at EMC love and understand. How did SAP get started? Kaspersky Security? Those ubiquitous USB drives? How about the avatars you see when playing with an Xbox gaming console? Or the ARM chips that are found in more than 60% of the world’s mobile devices? None of these products was invented or developed in the U.S.!

The fact that Silicon Valley, Boston, New York, Seattle and a few other U.S. locations have so many more startups than other places around the world leads some people to think it is enough to depend only on what can be found in the U.S. This is certainly not the case if you want innovative technology such as the internationally-developed products mentioned in the previous paragraph, which represent just a small subset of the universe of those invented outside of the U.S.

In addition to product innovation, access to very talented people is another great reason to be developing products in locations such as Rio de Janeiro, St. Petersburg and Chengdu (a subset of locations where EMC has established R&D centers and Centers of Excellence or COEs around the world). The large number of patents filed from our international locations is a huge proof point here.  Just think, the fastest growing product line in EMC’s entire history – the market leading all-flash storage array XtremIO – was originally conceived and developed OUTSIDE the U.S., in Israel.

And finally, it’s projected that more than half the growth in the IT market over the next 10 years will come from emerging economies (not to mention that approximately half of EMC’s revenue comes from outside the U.S.). When making purchase decisions, these emerging countries are showing very clear preference for companies that have local R&D and/or manufacturing facilities.  So if you want to be a growth-oriented multinational technology company, you NEED to establish an R&D presence in these rapidly expanding markets.  And it’s not always necessary to establish a COE or an R&D center.  Often funding a university research project or hiring a professor is enough to get started.  That’s just what we’re looking to do in countries like Colombia and Kazakhstan.

Keep these considerations in mind the next time you are sitting in on a status meeting at midnight your local time. Global R&D is ESSENTIAL for both INNOVATION and revenue GROWTH.

About the Author: Joel Schwartz