Microsoft Ups R&D Budget To $6.2 Billion Over The Next Year

Speaking at a business conference, Microsoft CEO Steve Ballmer said that his company would spend $6.2 billion over the next year, $2 billion more than previously budgeted. Most of this investment will go towards further developing Microsoft's online businesses.

Ballmer also spoke about how the open source phenomenon presented a challenge to Microsoft some years back, and it took the company a few years to learn to deal with it. The advent of Google has presented them with a new challenge that a transformation is "not optional." While Google exemplifies the type of company success that ad supported software services can yield, Microsoft's model to date has been entirely different.

Regarding the Google Dell distribution deal, Ballmer stated:

The cost of online customer acquisition is going up. Everybody has got to decide at what level they want to pay to play. So that was bravo. We know very well that people will change their defaults, people will change their search. They will go look, if they think something is worth looking for, and our job is to create that value. This is a case where you could say we decided that the return to our shareholders was not there in the business deal that could be done.

With Microsoft's plans for transformation, they rightly need to exercise patience and allow their company enough space time to adapt to a new model of business, and learn to compete in an area they are not currently leading.