About 10 months after creating an independent business unit for Watson, IBM is still figuring out how to derive significant revenue from the computing system in which it plans to invest at least $1 billion.
What gained fame in 2011 as a “Jeopardy!”-winning supercomputer is now analytic software that the company is aggressively marketing in a variety of industries: health care, retail, financial advising and even cooking, among others. Last week, the company formally opened Watson’s headquarters in New York City’s so-called Silicon Alley, the start-up-dense neighborhood that will serve as a base for several hundred employees. Their mission is to refine a system that mines large volumes of information, processes natural speech and answers queries.
Mike Rhodin, senior vice president of the Watson Group, declined to share details about Watson’s financial progress, but noted that it is contributing to IBM’s goal of generating $20 billion from analytics services by the end of 2015.
“It’s in there, and every quarter it becomes a bigger piece” of the analytics goal, Rhodin said. “Over time, [the Watson Group] will start looking bigger and more substantial from the outside.”
Want to publish your own articles on DistilINFO Publications?
Send us an email, we will get in touch with you.
Even so, in the Watson Group’s first year, more than 100 businesses and nonprofits have signed on, many of which are paying to integrate Watson technology into their services, chief executive Ginni Rometty announced at the opening of Watson’s headquarters in New York.
Rhodin said IBM is pursuing industries in which “the amount of information being produced has overrun the ability of professionals in those businesses to keep up with it.” IBM is working with law centers to develop applications to process legal documents and is gradually entering the education market: Deakin University, a public university in Australia, is using Watson to power a student adviser application, called “Ask Alfred,” named after the school’s namesake, former prime minister Alfred Deakin.
But big-business adoption is only one part of IBM’s strategy, Rhodin said. The company is also encouraging entrepreneurs to use Watson in their own software products. A few months ago, IBM began offering software developers free access to Watson with the intention of collecting a fee once the clients start to make money off it. Last week, for instance, Travelocity founder and Kayak.com founding chairman Terry Jones announced plans to use Watson in his new travel adviser service WayBlazer.
IBM chose to place Watson’s headquarters in downtown Manhattan, blocks from the New York offices of Google, Twitter and Facebook, to establish itself among entrepreneurs, Rhodin said.
“We wanted to be where the start-ups were, so by having the physical presence, we can have Thursday night cocktail hours or tech discussions or hackathons. And doing that right there in that building [makes] it easily accessible to the . . . guys that have an idea,” he said.
The Watson Group represents IBM’s strategic attempt to keep up with competitors such as Oracle, Microsoft and SAP, as well as smaller players such as Splunk, which offer big-data analytics software, said Morningstar analyst Peter Wahlstrom. Some companies offer “plug-and-play” data software that can immediately start analyzing information when given a data set.
Watson’s system aims to do more in-depth analysis than many of its competitors but requires time and financial investments from IBM to train and customize it, Wahlstrom said.
“IBM did very well 20 to 30 years ago when everything was effectively in a spreadsheet,” he said. Now, tech companies are scrambling to analyze phone conversations, social media posts and large volumes of non-numerical, unstructured data. “Watson can do that, but it’s a very fast-growing yet crowded marketplace, and it’s difficult to differentiate offerings,” he said.
Date: October 12, 2014