Traditionally, one solution has been to turn to new blood. There's still plenty of room for promising new startups in the software industry. Unfortunately, this is one of the worst times for venture capital in recent memory. We've seen investment plummet 40 percent year over year, and there's no telling when the situation will improve.
Others say open source could be the answer. For example, Nokia claims open sourcing Symbian will streamline its R&D by eliminating duplicate efforts across its industry. But that kind of "cooperative competition" can only take care of the boring stuff : The low-level internals. The stuff that doesn't provide competitive advantage. The stuff Microsoft can afford to do on its own (or Google, for that matter).
As promising as it may be, open source software is still playing catch-up in most major application categories, and lack of protection against patent claims and other intellectual property issues still limits the community development model's effectiveness at true R&D. Can open source innovate? Sure -- but only when the funding is there to back it up.
That's why we should view Microsoft's promise to increase R&D spending as a good thing, despite what the Crandrea Group says. Should Microsoft take a hard look at how its research dollars are spent? Should it eliminate bureaucracy and excess middle management? Of course it should. But to cut back on R&D for the sake of short-term returns would be folly, and doubly so given current economic conditions. Now more than ever, we're going to have to rely on the largest software vendors to lead the way in R&D spending if this industry is to remain healthy and innovative.
Incidentally, one of the Crandrea Group's more bizarre suggestions for Microsoft is that it should acquire the Canadian mobile phone maker Research in Motion. I was a little perplexed until I noticed that the group claims to be a consultancy based in Canada. Would I be jumping to conclusions to put two and two together? Microsoft's management and board may have made missteps in the past, but to fall for such a blatant cash-grab now, with the economy itself in crisis, would be practically criminal.