Innovation Ships Out - outsourcing - impact on innovation and supply chains as big U.S. computer makers move R&D overseas - CIO Magazine - Jan 15,2005 For all those of you who didn't believe the predictions in the Jan/Feb issue of Corporate Innovation on how Innovation Outsourcing and the continuing strength of the Asian super-economies - have a look at this article.

CIO's Christopher Koch looks at the increasing trend for IT companies to outsource not only the manufacturing and fullfillment parts of the industry (as is the norm nowadays) - but to outsource their whole R&D function too to save money.

But might this this whole push to save money at any cost backfire in the long run? Already, spending on R&D by U.S. companies declined more in 2002 (3.9 percent) than it has since the National Science Foundation began tracking the number in 1953. In addition, according to the senior economist at the National Institute of Standards and Technology, most of the remaining spend has been on incremental improvements rather than original research.

What really shocks me is that for a country that built up its competitive advantage and economic wealth on a strong base of leading edge research during the industrial age - the US, and US companies, are being remarkably slow to react to what is really the outsourcing of one of the greatest sources of competitive advantage for them. Just how long will it take for the foreign companies who are providing the outsourced innovation services to turn the tables and take over more and more of the process until they are the powerhouses and not vice versa? Already some Far Eastern ex-allies have begun to retalliate - BenQ, a former supplier, has now begun selling its own cellphones and other equipment in the US under its own brand - offering good quality for a lot less price.

You've got to wander just what will be left of US companies - will they simply become outsourced sales and marketing organisations?...