Xerox PARC: On the Money Trail

Xerox's Palo Alto Research Center in California is where much of the personal computer was invented. But now the famed research lab is faced with a new challenge: re-inventing itself.

After more than 30 years marked with famous breakthroughs that have shaped the high-tech world, PARC is at a new stage in its history. In January, Xerox, struggling in recent years and streamlining its research efforts, spun off the Palo Alto center to be a separate financial entity. That means PARC must now seek its own revenues through patents, licensing its technology and finding new high-tech backers.

And with an annual budget in 2001 of $65 million, the famed research center is no nickel-and-dime operation, either. Thus PARC, once the purest of pure technology research labs, has added a business development team and even has interns now from Harvard Business School. And yet some of the same economic problems that have hurt Xerox figure to weigh down PARC as it strikes out on its own.

"The recession is in full force here," says Mark Bernstein, interim CEO of Xerox PARC, noting the prevalence of empty office space within walking distance of PARC's campus in Palo Alto.

So, in a way, PARC is undertaking a new experiment: Can a research institution churn out enough good ideas to make money? And can it do so in a bad business climate?

Where the PC Came to Life

If any other research lab were faced with a similar predicament, observers might simply shrug. But PARC isn't any old research lab. It's the place where, in a few short years in the 1970s, an all-star cast of computer scientists and researchers either dreamed up or put into action many of the things you're using to read this piece on your computer.

The very concept of what-you-see-is-what-you-get computing came from Xerox PARC, along with many of the specific elements of the graphical user interface (GUI) we're all used to, including icons, pop-up menus and multiple windows on the computer screen. Other PARC advances from the same time, like the ethernet and object-oriented programming, have become staples of our wired world. For good measure, PARC scientists of the 1970s also developed the laser copier and pushed color imaging further than it had ever gone.

That rich history of innovation comes with a twist, however: Xerox was notoriously slow to recognize the potential of the gadgets being developed at PARC. To be sure, the company made billions from the laser copier — certainly enough to call its investment in PARC a success — but failed to cash in on any of the research center's personal-computer innovations.

Did Start-Ups Usurp the Labs?

Scientists at Xerox PARC have continued to do respected work in an expanding variety of fields though the 1980s and 1990s, from computer science to nanotechnology. But the speeded-up pace of the business product development cycle, and the rising pressure on companies to show increasing returns on investment — especially in the 1990s — has made many firms, including Xerox, more reluctant to spend money on long-term research.

Then too, the abundance of venture capital for smaller firms in the 1990s meant that, in the world of high-tech innovation, "start-ups were like monkeys at typewriters," as Geoffrey Nunberg, a former Xerox PARC researcher, put it in an essay about the center this year in Perspective magazine. "With hundreds of them working on every problem, corporations didn't have to make major investments in basic research."

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