Investing in Technology Doesn’t Always Add Up

Investing+in+Technology+Doesn%E2%80%99t+Always+Add+Up

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“Companies often spend a lot of money on cultivating their technology, but a study suggests nearly 70 percent of what is spent may be misdirected,” entertainmentmedianews.net reported. If someone invests 1 million dollars on a project involving technology, about 700,000 dollars would likely be wasted, added the source.

Recode.net proclaimed, “For one thing, R&D spending is a bad predictor of future stock performance. R&D, Sacconaghi hypothesizes, is a “scale game,” meaning that smaller players have to spend more of their resources to compete with larger players. But more important than the spending levels are the results of the research. Any company can spend big on research that comes to naught, and some are simply better at it than others.

Apple is the prime example of a company that spends less on R&D — historically about two percent of sales — but has also tended to enjoy a big bang for its research buck.” According to genpack.com, technology spending is about 5 trillion dollars a year, but it is likely that this year it will decrease, maybe by 4% or 5%.

“Last year, Bernstein Research analyzed historical R&D spending as a percentage of sales, and drew a correlation to the stock performance of 68 large-cap technology companies. In many cases, those that shelled out the most actually saw a decline in their share prices after five years, while those that spent less performed better, suggesting that R&D isn’t an ideal benchmark of stock performance or innovation.” stated hitc.com.

“Out of a host of technology that includes cloud computing, big data and social technology, at least 67 percent of those efforts are either scrapped, or end up being underwhelming, Gianni Giacomelli, (Research Institute) Genpact’s senior vice president of product innovation, told CNBC in an interview. “Possibly the reason for this problem is that the technology companies are using the money for previously existing projects, rather than working on new and innovative ideas,” explained cnbc.com.