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Pardon the pun, but there’s nothing elementary about IBM’s newly formed, New York City-based Watson Business Unit (BU).

IBM is committing $1 billion and 2,000 employees, as well as its considerable research and development (R&D) talents and marketing muscle to Watson, thus putting the full weight of its global technology and services brand behind the newly formed BU and initiative.

IBM CEO Virginia Rometty said that Michael Rhodin, most recently SVP of IBM’s Software Solutions Group, will take charge of the Watson Group. According to Rometty, the company established Watson as a separate BU based on the strong demand for cognitive computing. The IBM Watson Group will develop cloud-based technologies that can power services for businesses, industries and consumers.

Rometty also said the new IBM Watson Group notably integrates design, services, core functions, technologies, and a fully formed ecosystem which includes a design lab as well as hundreds of outside external partner applicants, foundations and advisors. All of these elements are crucial if Watson is to succeed.

Big Blue’s $1 billion investment includes a $100 million equity fund designed to foster innovation in the company’s Watson Developers Cloud – which is one component of the overarching Watson Ecosystem – which IBM opened up to external application developers in 2013. The $100 million will be invested in key startup companies that are building applications to run on the Watson Developer cloud.

The new Watson Group BU will consist of four organizations. They are:

  • The IBM Watson Innovation team, which will concentrate on core research and development.
  • The IBM Watson Transformation team which will focus on business development.
  • The IBM Watson Implementation team will deploy Watson services and systems on behalf of IBM clients.
  • The IBM Watson Engagement team will handle sales and marketing activities.

WHAT IS WATSON?

Watson, best known as the supercomputer that famously beat Jeopardy contestants during a 2011 televised challenge match, is named after legendary IBM president Thomas Watson. It incorporates embedded artificial intelligence and in its present and future iterations it uses cognitive computing capabilities to move beyond traditional compute processing functionality. IBM engineered Watson to utilize natural language capabilities and analytics and to process information in a similar manner to the way humans think. This in turn, enables Watson to more quickly and effectively learn, analyze and interpret large amounts of data. During the launch event, IBM executives underscored the fact that Watson has the ability to understand natural language and human style communication; the ability to generate and evaluate evidence-based hypothesis and to adapt and learn from training, interaction and outcomes.

Stephen Gold, VP of IBM Watson Solutions marketing said the company has constructed an entire ecosystem around Watson that presently includes 890 outside development partner applicants. Gold noted that IBM has constructed the Watson Group as a cloud service that helps corporate enterprises address real world business problems. The Watson-based cognitive computing systems will act as “smart advisors” to perform a variety of functions across a wide range of vertical markets. For example, it can assist doctors diagnose medical conditions and advise patients on courses of treatment based on the patients’ preferences. It can also help retail businesses devise marketing and business strategies that align with their customers’ target goals.

WATSON ANNOUNCEMENT HIGHLIGHTS

The IBM Watson Group announcement revealed a full-fleshed out technology and business initiative with specific products and a business plan that includes a timeline for return on investment and revenue forecasts. Among the other highlights:

  • IBM unveiled three Watson cloud-based offerings: the Watson Discovery Advisor; the Watson Analytics and the Watson Explorer to accelerate product and technology deliverables. The IBM Watson Discovery Advisor is a leading edge search service designed for educational institutions and pharmaceutical and publishing companies. The IBM Watson Analytics can field natural-language questions from users and search for a variety of answers from among cloud-based data repositories. IBM Watson Explorer helps users across an enterprise uncover and share data-driven insights more easily and assists them in launching Big Data initiatives faster.
  • Watson will be deployed on SoftLayer Technologies, Inc., a Dallas, Texas-based privately held cloud computing infrastructure business IBM purchased last June. SoftLayer is a well established cloud provider with approximately 21,000 enterprise customers and a global cloud infrastructure platform spanning 13 datacenters throughout the U.S., Asia and Europe. SoftLayer provides the infrastructure for cloud-centric, performance-intensive applications in the areas of mobile, social media, gaming and analytics, all market segments that closely align to IBM’s own business and technology strategy.
  • Watson Labs: The Watson Group will feature labs where customers and prospective customers do hands-on learning and test the cognitive computing systems. IBM will also offer workshops and seminars on the benefits of cognitive computing.
  • Watson on Power Systems P8: IBM Watson running on its Power Systems P8 Power Series servers has the ability to share content and learn more quickly in cloud environments to facilitate the increasingly popular crowd sourcing mechanisms.
  • Watson Headquarters: The IBM Watson Group’s will be headquartered in a “green” building in the heart of NYC’s “Silicon Alley” at 51 Astor Place on the edge of the East Village.

IBM also had executives from several key customer and partners on hand from its strategic vertical markets in finance, healthcare retail and travel to discuss the ways in which they are using Watson’s cognitive computing abilities to drive greater efficiencies and economies of scale in their respective market segments. These included Memorial Sloan Kettering Hospital, Elsevier, Fluid Retail and Travelocity.

Memorial Sloan Kettering chief executive officer Mark Thompson said that IBM’s Watson’s cognitive capabilities has assisted 125 thousand physicians perform gene sequencing on breast cancer tumors. As a result, Thompson said cancer treatment therapies have “increased exponentially from four to 800 in the last 20 years.” Oncologists, Thompson said, can now identify and distinguish over 50 types of breast cancer tumors and develop more targeted and effective treatments.

ANALYSIS

The looming question with respect to the Watson Group is now that IBM has built it; will corporations and consumers buy it?

A day before the January 9 announcement, The Wall Street Journal ran an article titled “IBM Struggles to Turn Watson Computer Into Big Business,” which openly questioned Watson’s ability to generate a large recurring revenue stream in the short term. The article noted that although Rometty expects Watson to generate $10 billion in annual revenue over the next decade, it has only made $100 million since 2011.

Fair enough. Healthy skepticism is always a good thing with respect to technology and product deliverables. At the same time, The Wall Street Journal article overlooks the obvious fact that cloud computing and cognitive computing is still in its early stages. The potential leading edge enterprise adopters in banking, finance, healthcare, retail insurance are naturally conservative and cautious about deployment; they will almost always opt to ascertain that the benefits outweigh the risks in advance of any upgrade or migration. Mainstream adoption of Watson cognitive computing solutions should gain significant traction over the next two-to-three years. If by 2016, IBM Watson Group is not generating substantial and recurring annual revenue, then there will be cause for concern.

IBM clearly has embraced cognitive computing wholeheartedly. Based on its $1 billion investment, IBM is betting Watson will succeed. The Watson presentation was impressive from both a technology and business standpoint. IBM is known for its carefully stalwart attitude and very rarely makes a capricious move.

Over the past several years, the company has continuously bolstered its position in cloud computing, mobility, security and management services via a series of targeted acquisitions, such as the SoftLayer purchase. Additionally, in the three years since the Jeopardy challenge, IBM has continuously evolved the core Watson technology. To cite just one example, Big Blue has shrunk Watson to the size of “three stacked pizza boxes; down from its original size of a master bedroom,” which is a significant advantage for potential enterprise customers who are concerned about consolidating physical space in their datacenters.

All of these initiatives are designed to provide or add to a solid foundation for the Watson cognitive computing initiative. IBM executive leadership is betting that Watson and cognitive computing will be revolutionary technology much like the mainframe, the personal computer and mobile phones.

CONCLUSIONS

Overall, IBM’s Watson Group announcement was extremely well thought out from both a short term tactical and a long term strategic perspective. IBM has amassed all of the right ingredients for success: dedication and commitment in terms of manpower, monetary investment, a well-developed partner ecosystem and the right geographic location.

IBM’s decision to base the Watson Group on the edge of New York City’s Greenwich Village is both practical and symbolic. Big Blue’s Watson headquarters is within walking distance of Wall Street and the financial district, as well as large hospitals and universities which include many of the company’s top customers in banking, healthcare, insurance and education.

The fact that many of these potential customers will be able to be within a walking distance, or a short bus or subway ride to visit the labs and get access to hands on experience and training was a savvy move on IBM’s part. The decision to situate the Watson BU in the center of one of the world’s top financial, engineering and academic spots bodes well for sparking interest and generating revenue among a wide variety of businesses and professionals.

In summary, IBM is positioning the Watson BU for success and doing everything within its power to lure prospective enterprises and development partners to this powerful, emerging cognitive computing platform.

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