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Mon 5 Apr 2010 04:00 AM

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Keeping ahead

CommsMEA spoke to BT's Mike Galvin and EMC's Bill Teuber about how their businesses utilise new ideas for the broadband and storage sector, and how they will impact the telecom sector.

Keeping ahead
Bill Teuber says EMC expects to spend US$2 billion on research in 2010.
Keeping ahead
BT’s Mike Galvin says telecom companies must move up the value chain.

CommsMEA spoke to BT's Mike Galvin and EMC's Bill Teuber about how their businesses utilise new ideas for the broadband and storage sector, and how they will impact the telecom sector.

There are a host of ways to bring new ideas to market and monetise them, from internal research and development teams creating new products and services, to working with small start-ups tightly focused on a particular area, through to the acquisition of fully-fledged firms that might offer a product or service that has a natural overlap with the business.

Innovation lies at the heart of the most successful firms in the telecom and technology sector, and however it is harnessed it is an essential component of a high-achieving business. But the recent global economic turmoil has caused businesses to reappraise all aspects of their operations, throwing a spotlight on the role that R&D plays.

Mike Galvin, BT's managing director of Research, 21C Customer Experience and Technology Strategy, says that he expects research to undergo a lot of changes over the next few years. "The old idea where we had a corporate research department is rapidly receding and you can see that globally. My aim is to modernise what we do, be more global in taking in new ideas and to make sure that research is plugged in to every stage of the innovation chain."

One way to make sure that happens is to ensure that adequate funds are channelled into the right areas. Although there may be a temptation to cut back on areas like R&D that don't show an immediate benefit, the impact is likely to be felt once companies emerge from the downturn, and those that have maintained levels of investment could see themselves pull ahead of competitors.

EMC claims that its "differentiated value" comes from sustained and substantial investment in R&D. It says it has "thousands" of technical R&D employees around the world, and according to vice chairman Bill Teuber investment in research and development is essential for the further development of the company.

Teuber says there has been "sustained" R&D investment over the past few years. In 2008 it stood at $1.7 billion, which dipped slightly to $1.6 billion last year, but it is expected to reach $2 billion this year. Indeed, spending on research and development reflects Teuber's belief that "2010 will be a better year than 2009".

Future investment

Teuber says that although information storage is where the EMC business "grew up", a few years ago the management team at the US-based firm decided it was not enough. "We saw how important virtualisation was going to be, and so we bought Vmware for US$600 million in 2004.  For Teuber, the financial results are proof that the move was the right one. "At the time, it was doing $800 million in revenue, and then last year it did $2 billion," he says.

EMC has stuck with its acquisitive approach to innovation, and last year it bought Data Domain, a firm that specialises in data deduplication technology, allowing users just to store things once. "It compresses tremendously the amount of information that has to be stored," says Teuber.

Involving customers

BT's Galvin expects customers and clients to get more involved in research than they ever have done before, primarily because it is now easier to be in contact with people who might be geographically dispersed.

"At one end of the scale it's about involving customers; asking them questions, sharing ideas with them and working together on projects, sometimes quite informally," says Galvin. "At the other end of the scale it is actually using customers to help with pilots and trials. There are a range of options in the middle that go around understanding the business problems that other people have, and looking at what research questions they are trying to solve and working collaboratively like that."

He says that under the "old model" the process would start with a question, followed by research. Now, the starting point might instead be to go to the customer and ask them about their needs.

"For example, we might say, ‘Well what are you going to use a 1GB Ethernet for?' It's now more complicated as you try to understand the whole value chain of where you are introducing the new technology and new techniques."

Galvin points to social networking and the techniques and applications that have flowed from social networking sites as a prime example of human factors in research."Perhaps a much softer question but of vital importance is how we understand the ways in which people use technology, because it's different. Five years ago, no one had heard of Facebook. Ten years ago, broadband was an expensive luxury for a few. And 20 years ago, nobody had heard of the internet; we launched our first internet service in 1996 and it was one of those funny modems - very clunky and it was definitely for geeks. Now, in the UK and in most of Western Europe you can't sell your house unless it's got broadband connectivity."


"We will continue to acquire, and invest heavily in R&D and in technologies that we think have broad market appeal and drive our ability to help people manage and become more efficient in their information," Teuber says.

"We have a broad range of portfolios, where we invest in start-ups, and then we take a look at how it develops. We obviously want to keep our knowledge base up of what they are doing, and it depends on how they develop in terms of whether or not we want to further our investment."

BT has what Galvin describes as "extensive" scouting activity and relations with 300 companies worldwide, particularly in places like Silicon Valley and also South East Asia and Japan, where it keeps a close eye on what is coming on the market in terms of start ups.

In "most cases" the relationship with a start up doesn't go much beyond an informal relationship, but in a few cases it can result in a partnership and the decision to jointly develop products together.

"We can help start-ups and they can help us," Galvin says. "Start ups are one of the innovation engines that perhaps you didn't have 30 years ago. They've got a different model where they might not rely on lab research, and instead they have smaller, highly skilled teams that have been brought together to solve a particular problem. Being able to lever that is one of the powerful tools that we have."

Despite the global economic turmoil of the past 18 months, Teuber thinks that EMC has been "consistent" in the number of start-ups it deals with. "The number of start-ups probably declined last year, just because there wasn't a lot of funding out there but I think we will see an upswing in 2010," he says.

"What we are trying to do is develop a culture around not only being an intelligent buyer but actually being a contributor to what you are buying as well," says Galvin. "I think that start-ups come after that, so you need that strong academic thread on the technical side before you start seeing some of these technical start-ups happening. I think start ups in the Middle East will get stronger and stronger as that technical thread gets developed and we are keen to play our part in that."

Transforming telcos

"I think it will become increasingly difficult to say what a telecom operator actually is," says Galvin. "ICT and telecoms will merge, and entertainment and telecoms will merge, so the idea that there is a company out there that just provides you with telephone calls will, in the future, be viewed as quaint."

EMC wants to be one of the companies that facilitates the transformation of telecom operators, and it plans to work with operators in the region that want to broaden the range of value added services they offer to end users, with cloud computing one way in particular for telcos to tackle the competition they face from the likes of Google and Amazon.

At the moment EMC provides mobile infrastructure and solutions like content management and virtualisation and security in the guise of hardware and solutions. Says Teuber: "Fixed line revenue is in decline, and operators around the world are asking how they can enhance their streams of revenue. One of the ways is by being a public cloud, for consumers or companies.

"What the telco industry is trying to do is expand the services they can offer their customers, because they have the customers already, so the easiest thing to do, the easiest path to new customers is not acquiring new customers, but expanding what they do for their current customers. EMC has been playing an important role in the virtualisation technology, which really is the backbone of cloud computing," adds the EMC vice chairman.

Galvin says he expects to see a period of "more or less continuous change over the next few years", as the entertainment and ICT functions morph and migrate on to a single personal device. "Telecom companies have a central role to play in that," says BT's research chief. "You do hear it said that telecom companies are bit carriers and that they don't have great opportunities. I think bit carrying in the future is going to be an important function, but it is largely going to be a commodity item, so telecom companies must move up that value chain."


The next big thing

While the rise of Google was predictable, says BT's Mike Galvin, Facebook and the other social networking sites were not. "They were driven by personal choice," he says. "I think you will see the next innovations come out of that type of environment... I suspect it will come in the area of management of personal data, and I think that's where the big opportunities are.

A lot of the ways we do it at the moment are quite clunky, but if you really could control where your data went and was used, you would have quite a powerful tool, and I think that's where the next innovation will occur.

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