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The Future of Tech August 27, 2009, 5:00PM EST

Big Blue's Global Lab

How Big Blue is forging cutting-edge partnerships around the world

By Steve Hamm

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Saudi Arabia's KAUST is "a magnet for smart people," says CIO Al-Ghaslan Ben Baker/Redux Pictures

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Niu Gang is looking to IBM to transform China Telecom technology David Hogsholt/Getty Images

When Brazilian President Luiz Inácio Lula da Silva met with IBM (IBM) Chief Executive Samuel J. Palmisano in Brasilia on Aug. 5, the former firebrand labor leader and the captain of industry had plenty to talk about. Brazil is planning to invest $22 billion in science and technology innovation in 2010, and it's pressing companies to contribute billions more to the effort. IBM, meanwhile, is prowling the world to set up what it calls "collaboratories," which match up its researchers with experts from governments, universities, and companies. As the two leaders discussed their ambitions, the meeting stretched from its scheduled 30 minutes to nearly an hour. "I hope to see you many more times," da Silva told Palmisano in the end, with a twinkle in his eye, "because it would mean you're announcing many investments in my country."

Any deal between IBM and Brazil is months away, but the company's new research approach is taking off now. IBM is trying to convince countries and companies that it can help them improve their ability to innovate at an important moment for the global economy. "Investments in innovation are critical, especially in a downturn," says Palmisano. "They can help Brazil and other countries, including the U.S., realize an economic expansion."

IBM has hammered out six deals for collaboratories in short order—in Saudi Arabia, Switzerland, China, Ireland, Taiwan, and India. Four more are in the works. John E. Kelly III, director of IBM Research, says there's enough demand for 100 more tieups. "The world is our lab now," says Kelly. "I figure I can have a much larger impact on the company and our research if I operate this way."

The strategy marks a sharp break with how corporations have historically conducted basic research. For decades companies such as IBM, AT&T (T), and Xerox (XRX) treated the work done in their labs as top secret. Research facilities were fortress-like, with special passes for the most sensitive areas. In recent years, companies such as Hewlett-Packard and Intel have begun tapping talent from outside for essential bits of science and technology—a concept called open innovation. Now IBM is moving a giant step further by making collaboration with outsiders an essential piece of its research strategy. The depth of that collaboration, the number of partners, the staff involved, and its global reach set IBM apart. "To move in this direction you have to be willing to not just take risks but be open to accepting ideas from around the world," says Soumitra Dutta, professor of business and technology at Europe's INSEAD.

There's no guarantee IBM can make this approach work on a grand scale. Many of the more limited joint projects have run into problems as companies tussled over expenses and intellectual property rights. But if the approach succeeds for IBM, other companies may follow its lead. "This is a great way to diversify your research portfolio, leverage what you have already, and get new knowledge and inventions," says Karim R. Lakhani, an assistant professor at the Harvard Business School.

Such collaborations are controversial, though. What's good for IBM and its corporate brethren isn't necessarily good for America. Critics say U.S. competitiveness is weakened when flagship corporations do crucial research projects overseas. "I'm alarmed," says Clyde V. Prestowitz Jr., president of the think tank Economic Strategy Institute. He says it's sensible for American multinationals to seek these tieups but urges the U.S. government to intercede and offer incentives to keep the most important research here. "We need a change in mentality. The attitude of Washington has been aggressively hands-off," he says.

STRETCHING DOLLARS

The U.S. may have to act quickly to forestall a rising tide of offshore research.

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