Beyond plenty of publicity, just what have Apple (NASDAQ:AAPL) and IBM (NYSE:IBM) gained from the much-ballyhooed partnership they announced last July? Well, since then, Apple and IBM have introduced 23 enterprise-focused apps covering a whole host of industries, including social work, insurance, and telecom. And in unveiling their latest creation, Apple and IBM once again demonstrated their big-ticket collaborative potential. Here's a quick review of three important points of this emerging story.
1. Meet Watson Health Cloud
Last week, Apple and IBM announced their newest product: Watson Health Cloud, a collaborative service that leverages the analytical horsepower of IBM's storied Watson computing platform to provide custom, real-time data analytics for health care professionals. The service will also utilize IBM's secure cloud platform to help ensure the safety and integrity of sensitive user health data.
According to the announcement, IBM has partnered with health care powers Johnson & Johnson and Medtronic, in addition to Apple, in developing the service. As an example of its potential use, a doctor or nurse could use IBM's Watson Health Cloud to pull data from multiple sources, including implanted sensors, fitness trackers, and other advanced sensors (Apple Watch?) to more completely analyze patient data to drive more powerful and accurate findings during the treatment process. This new platform will also be available for Apple's recently released ResearchKit, which should equip researchers on the platform with another powerful and secure tool to aid their efforts.
2. It's a great example of why Apple and IBM make sense together
The exact financial terms weren't made available as part of the announcement, and the financial breakdown of Apple and IBM's original deal remains unknown. However, IBM is clearly betting big on the service. To support the development and rollout of Watson Health Cloud, IBM will reportedly launch a dedicated 2,000-person office in Boston, where personnel ranging from doctors to developers to consultants and other med-tech professionals will collaborate on the development of Watson Health Cloud.
Though we don't know the exact financial terms, it seems reasonable to assume Apple and IBM make money here in terms of their current business models. The vast majority of Apple's sales and profits come from hardware sales, whereas IBM derives the bulk of its business from the sale of software and services. As such, it makes sense that Apple profits from selling more of its devices into the enterprise space, and IBM benefits by selling more of its services to corporate users that increasingly require seamless mobile solutions for their businesses. And Watson Health Cloud is another great example of how Apple and IBM are highly complementary partners. IBM's massive sales force can help push IBM's Health Cloud service deeper into the health care system, and both companies make money, a beautiful win-win.
3. It's the tip of the iceberg
IBM and Apple make a great pairing, but it'll likely take several years before the deal will be able to drive significant value for either firm. Although they've made substantial progress since the IBM MobileFirst for iOS deal was announced, the two firms have only released 23 of the over 100 apps they pledged to develop, which has likely constrained their potential customer base since the deal's onset. However, their addressable markets will increase with each new app they add. There's also the larger-screen iPad that Apple has long been rumored to have in development that could help increase the attractiveness of the Apple-IBM cloud computing platform as well.
Researcher IDC claims the market for cloud-based SaaS apps like those Apple and IBM are developing will grow to an over-$50 billion market by 2018. So while this partnership remains in its early innings, it's new and exciting services like Watson Health Cloud that will help Apple and IBM continue to piece together a lucrative and mutually beneficial business in this booming space in the years to come.
Andrew Tonner owns shares of Apple. The Motley Fool recommends Apple and Johnson & Johnson. The Motley Fool owns shares of Apple, International Business Machines, and Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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