Why Is Apple Spending Only 2% Of Its Money On Research?

Apple is filthy rich. It sold four million phones in three days. It’s worth more than Exxon. It’s got a staggering stockpile of cash, just sitting around. So why does it spend merely 2.2 per cent of revenue on cooking concepts?

ZDNet reports Apple’s R&D funding is miles behind competitors like Google and Microsoft, who doled out 14 and 13 per cent of their revenues to internal labs, respectively. So why the gap? Apple’s 2.2 per cent marks a 10-year low. Even with a commanding presence in the smartphone game, and complete dominance among tablets, why wouldn’t Apple spend more on ideas?

There’s more here than it seems. First, Apple’s R&D spending is actually increasing–it’s just that its massive cash-raking is outpacing its research as a portion of the whole.

Second, Apple’s a very different company compared to a Google or Microsoft. It makes a variety of computers, yeah, along with MP3 players, phones, tablets and requisite software. But that pales compared to Google, which cooks up so many experimental features that it has to kill off the failed ones in droves. Microsoft, to serve its sprawling software wing and vanguard video game business, has a prominent and decidedly separate R&D operation — Microsoft Research — which chews through cash like cheesepuffs.

And there’s a cultural difference there. Google has its employees locked into pet projects, yeah, but earmarked a bunch of money for its Labs. Microsoft has Research — experimentation is segmented away from the rest of the show. But Apple’s engineers function as a sort of dispersed R&D lab, beyond whatever dedicated operation they run. Personal side projects are the norm, accounting for a large part of the company’s overall ingenuity — and meaning the “R&D spending” seems a lot lower than it actually is.

Still, it makes me wonder: if they can accomplish this much with so little, what if they were to spend Microsoft money on wild new things? [ZDNet]

Photo: Al Fenn/LIFE

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