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Amazon spends 193x more on R&D than Deutsche TelekomAmazon spends 193x more on R&D than Deutsche Telekom

Everyone is innovative if you believe what they say, but few companies could even dream of playing the same R&D game as the worlds’ tech big boys.

Jamie Davies

September 4, 2017

4 Min Read
Amazon spends 193x more on R&D than Deutsche Telekom

Everyone is innovative if you believe what they say, but few companies could even dream of playing the same R&D game as the worlds’ tech big boys.

Although it would be considered a relatively simplistic method of judging future success of a business, the money being spent on research and development is a good indication. This is of course no guarantee of success, but it at least provides some guidance. Data from Factset has revealed the biggest R&D spenders in the US are the tech companies, and it should come as little surprise who is at the time of the list.

Amazon hits top-spot, with $16.1 billion spent on R&D last year, with Google hitting second at $13.9 billion, Intel in third at $12.7 billion, while Microsoft and Apple complete the top five with $12.3 billion and $10 billion respectively.

Amazon has proven once again to be a company which cares more about the long-term, bigger picture, than quarterly dividends and pressure from those who want an immediate pay-off. The gap at the top is quite considerable, especially considering Google, a company not known for being shy in the R&D space, is in a notably distant second.

Perhaps the question should be what Amazon is actually spending money on? It turned the retail space on its head with an aggressive investment strategy similar to this, so what vertical should be keeping an eye out? The virtual assistant and smart home space by the looks of it.

The battle with Google for control of the living room is a very public one, but recruitment evidence may also give an indication this is the top priority for Amazon. The Alexa business unit is hiring hundreds of software engineers, having been given preference over other business areas, while Tom Taylor has been appointed as the units chief. Taylor has quite a reputation in the business, known for scaling high-growth operations. The omens are pointing towards Alexa.

But how does this compare to the rest of the world, and also those in the telco space?

Looking at the giants of the technology world, the US is still leading the charge. YCharts estimates that the Chinese firms are spending big, but not it the same ballpark. Over the course of 2016, Baidu put $1.525 billion into R&D, while Alibaba hit $2.53 billion. In Korea, Samsung was more in-line with Silicon Valley, accounting for investments of $12.14 in 2016, while Japanese Sony decided to put $4.09 billion investment into the future.

On the telco side of things, money is being spent in the places you might expect. Huawei, the staggering leader in the infrastructure game, is able to compete with Silicon Valley’s best and brightest, with roughly $11.27 billion of R&D spend across 2016, while Ericsson and Nokia once again languished with $3.9 billion and $5.49 billion respectively.

Looking at the operators, they were surprisingly quiet. Not in terms of chest beating or declaring they are the best things ever. No, the arrogant operators were excellently equipped to tell us they are truly innovative, but when it comes to actual evidence there is little to shout about. We had a look on the Orange, AT&T, Vodafone and Verizon websites and were unable to find much information about concrete investment in R&D.

The only one we were able to find a specific number was Deutsche Telekom. Here, those crafty Germans managed to pump €84.1 million into R&D. We suspect the investment levels won’t be too different when you look at the other operators. We’re not saying operators should be spending billions, but this is a meagre amount, accounting for 1.13% of total revenues. Huawei in comparison puts 15% of total revenues into R&D, while Amazon stood at almost 12%.

And there is perhaps the reason why the telcos are viewed as completely un-innovative. They aren’t attracting the right people or spending on R&D. Is it any surprise the industry is being relegated to the highly regulated role of utility? The operators aren’t helping themselves at all, merely presenting themselves as custodians and misleading marketers, as opposed to a critical aspect of the technology ecosystem.

The telcos are important and will continue to be important, but not in the way they necessarily want to be. IoT is an area which could have turned fortunes, but the investment levels remained low. The telcos will capture the connectivity revenues, but this is only a small slice of the pie; what about the rest? What about the digital transformation fortunes which even seems eager to claim? Not likely. The Accenture’s or IBM’s or CapGemini’s of the world are doing well to secure these.

Once again, the dumb pipe phrase will raise its ugly head, and it can hardly be blamed. The operators are contributing to their own downfall.

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