Nortel Updates R&D Strategy

Having discovered it spends too much on 'late lifecycle' products, Nortel shuffles its R&D centers

April 3, 2008

2 Min Read
Nortel Updates R&D Strategy

Nortel Networks Ltd. today announced some shuffling aimed at strengthening research and development. (See Nortel Announces R&D Plans.)

According to the company press release, the plan aims to create "a more unified and efficient global network" of R&D centers that will enable its engineers to "innovate more quickly."

Under the initiative, Nortel will concentrate certain skill sets in 15 R&D sites around the world. That's two full-service R&D centers, nine "centers of excellence," and four specialty sites.

Table 1: Nortel's R&D Sites

Full Service R&D Centers

Centers of Excellence

Specialty Sites

Along with the restructuring, Nortel hopes to make its research efforts more efficient, with a common engineering organization to centralize processes and platforms across all of Nortel's businesses and a portfolio management board to oversee the company's investments.

Nortel's hope is to cut costs -- bringing R&D spending to 15 percent of revenues -- without losing ground on the innovation treadmill.

Under the new plan, 20 percent of investment goes into new technologies, 60 percent is used to bolster current technologies, and 20 percent is used to support legacy technologies. As part of the mix, approximately 3 percent of R&D spending will be allocated to funding "startups" within Nortel.

In a blog post written prior to the public announcement, Nortel CTO John Roese details some of the reasons for the shift in the company's R&D strategy. He writes:

There were multiple reasons why we began this transformation. Among them… the fact that we were spending over 50% of our R&D budget on late-lifecycle products; our R&D spend as a percentage of revenue was much too high; we had very little re-use of technology going on across the businesses; we lacked common processes; and the employee satisfaction scores of our R&D teams were getting worse.

Today's announcement is the latest in a series of organizational efforts to get the equipment vendor back on track. In February, Nortel announced it would be cutting 2,100 jobs and move another 1,000 into lower-cost regions as it attempts to return to profitability. (See Nortel Slashes 2,100 Jobs.)

— Ryan Lawler, Reporter, Light Reading

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