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Communications of the ACM

Communications of the ACM

The Rise and Fall of Industrial Research Labs

Communications Editor-in-Chief Moshe Y. Vardi

I spent some of my most formative years as a researcher at the IBM Almaden Research Center. Those were magical years. IBM Research was then a Camelot of computing research, with the motto of being "Famous for its science, and vital to IBM for its technology." IBM researchers received Nobel prizes for their discoveries of high-temperature superconductivity and the scanning tunneling microscope. IBM researchers invented the magnetic disk drive and relational databases. As a young researcher, I could not ask for a better research environment.

But the economic recession of the early 1990s hit IBM very hard, and the stress was acutely felt inside the Research Division. From an equal emphasis on science and technology, the balance was shifting more and more toward technology. When IBM reported its financial results in October 1992, its worst-ever quarterly loss of close to $3 billion shook the corporation to its core. IBM's CEO, John Akers, resigned in January 1993, and Louis Gerstner arrived as new CEO in April 1993, embarking on his storied transformation of IBM. The Research Division never fully recovered from the trauma of the early 1990s. Just as IBM lost the leadership of the computing world, passing the mantle to Cisco, Intel, and Microsoft, IBM Research lost the leadership of computing research. A mass exodus of talent took place throughout the 1990s. (I resigned in 1995.) IBM Research today is still a powerhouse of talent, with occasional outstanding research accomplishments, for example, Deep Blue and Watson; its main focus, however, is on supporting the near-term business of IBM's business units. The mantle of computing-research leadership passed to Microsoft Research, with close to 1,000 researchers and many research labs all over the world.

I was acutely reminded of those challenging times in the 1990s, when the news flashed last September that Microsoft Research closed down its Silicon Valley Lab, laying off dozens of researchers. Of course, Microsoft's business challenges have been a topic of wide public discussion for the past few years, and the lab closure was part of a major strategy shift in Microsoft, which included layoffs of 18,000 employees. Yet, the swiftness of the lab closure, and the fact that Microsoft decided to close a lab located in Silicon Valley, widely considered the mecca of computing, shook the computing-research community.

This sense of nasty surprise led to an unusual public exchange of letters in October. Some 28 members of the theoretical computer science community posted an open letter to Microsoft Research management, expressing "the research community's shock and disappointment at the sudden and harsh way in which the members of the Microsoft Research Silicon Valley Lab were dismissed," and calling for "a dialogue about the ways in which Microsoft can try to restore the environment that enabled MSR to produce such great research in the past." Microsoft Research's management issued a response within a week, explaining the closure of the lab as a business necessity, and stating Microsoft's continued commitment to fundamental research. (See story on the Computing Research Association's Computing Policy Blog,

While the specifics of Microsoft Research's actions may have been surprising, these actions are entirely consistent with the historical pattern of the rise and fall of industrial research labs. While the rise and fall of IBM Research is discussed above, other research labs, such as Bell Labs, Xerox Palo Alto Research Center, and DEC's Research Labs, went through similar phases. The technology business is conducive to a "winner-takes-all" pattern; whereby an early entrant develops a technology niche and goes on to dominate it, establishing an effective monopoly. Dominant corporations can afford to establish research divisions that focus not only on research that is directly relevant to the corporation's business, but also on research of broader scope and longer term. Inevitably, however, the business environment changes, dominance is lost, and emphasis on research yields to more pressing business needs.

Microsoft Research after the closure of the Silicon Valley Lab is a changed place. Once a sense of invincibility is lost, it simply cannot be regained. The decision to close a single lab and lay off most of its researchers—including many top performers—rather than spread the pain across the whole research division, whatever its business rationale (which I cannot judge), means that Microsoft researchers are now acutely aware of their vulnerability. This sense of vulnerability may have serious consequences. Ultimately, the future of Microsoft Research is intimately tied to the future of Microsoft itself. Can Microsoft retain its dominance? Can Microsoft Research retain its commitment to fundamental research?

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The Digital Library is published by the Association for Computing Machinery. Copyright © 2015 ACM, Inc.


Karar Faysal

Yes! you are absolutely right. "Once a sense of invincibility is lost, it simply cannot be regained."

K.R. Chowdhary

I do not find any product from Microsoft, which was found with a lasting and robust solution. In spite of so many operating systems, and advancement in those, one always need to spend annually an antivirus software causing a recurrent budget for end user. Looking to the other OS, it was never the case, whether Linux, Unix, Nowell, or the latest smart phone OSs. Why can't they come with an OS which does not need an antivirus software.

It is now the time for Microsoft to come out of the cage of onward compatibility, this caries forward many of the problems of their early systems. In fact, they may come up with a totally different OS, which is unix like, and not upward compatible with previous versions, but with a tool, to transfer all the old fines into new format.

Other alternative for them is, make all the source code as open, and let the public improve it, it can sustain Microsoft.

Serap Sahin

You are exactly right. Thanks for this article.
By this decision Microsoft voluntarily leaves from the leadership of the IT Technologies.
I am also remembering the similar time period for IBM. Many new technological inventories have done by other companies, hence IBM also lost in market very fastly. Most probably, we will see similar situation for Microsoft in near future.

Jon Crowcroft

The view from Beijing (where I am typing this) is quite different - there is massive investment in research labs. This is also true in India. I assume Brasil is much the same (we'll see when ACM SIGCOMM is there in 2016). This is a US/EU centric pessimistic view and is driven by market people who have absolutely no idea of the cost/benefit of research to society or the economy at large - the same argument is being used to shrink Universities. An equally stupid idea, and wrong economically too - the problem is - who measures it, and how do we get collective reason:)

David Espinosa

Microsoft has been heroic in funding research, despite relatively low ROI. Instead, you should blame the many companies that don't fund research hardly at all ! But how to integrate research and product development? Google's "hybrid approach" ( proposes an integrated pipeline that spans time scales and personnel and eliminates the usual separation between research and product development.

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