The goal is to increase the likelihood that Microsoft's investments in research will translate into products that will actually ship, said Stacy Drake, a spokeswoman for Microsoft.
"Economic conditions do play a role" in the changes, she said. Moving the Live Labs researchers into product groups will allow them to contribute directly to those products.
Drake would not say how many people were in the Live Labs group, but she said roughly half would remain there. They'll focus broadly on Web experiences including exploration, information retrieval and discovery, navigation, and organization approaches, she said.
Live Labs launched early in 2006 under the direction of Gary Flake, who will continue to lead what remains of the group. He came to Microsoft from Yahoo, where he ran the company's research lab.
Researchers at Live Labs developed and launched Photosynth, a technology that can stitch together hundreds of photographs into one large image that viewers can navigate around. They also developed Seadragon, another photo application that lets users view a photo of a distant city skyline, for example, and zoom in close enough to clearly see a person in a window.
Perhaps in anticipation of the changes, a high-profile member of the Live Labs group recently left. Don Lindsay, formerly a design director for Live Labs, appears to have taken a job at Research In Motion, according to his LinkedIn profile and a story first reported in . Before Microsoft he worked at Apple.
Microsoft often promotes the importance of research. "Research is really critical to the company," Craig Mundie, Microsoft's chief research and strategy officer, said earlier this year at an event where the company's researchers show off their inventions. Companies that cut research in response to short-term pressures, or that never do pure research, tend not to last very long, he said. "My belief is the company would struggle to survive and prosper if we didn't have research investment."