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International Business Machine Corp. Expands Watson's Reach

By Tim Brugger - Sep 15, 2015 at 12:00PM

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Big Blue leaves little doubt it’s going all in on its Watson supercomputing division, particularly focused on healthcare.

It was January 2014 when IBM (IBM 0.53%) first announced it was investing $1 billion to fund a new division featuring its Watson supercomputer. Watson, as many investors have come to learn, is the cognitive computing wonder that famously beat two longtime Jeopardy winners at their own game. Outsmarting game show contestants is one thing, but spending $1 billion on what is still an early-stage market is another altogether.

Turns out, CEO Ginni Rometty's Watson "moonshot" -- an integral part of IBM's strategic imperatives initiative to drive growth via cutting-edge technologies -- was just getting started. In the past year and a half, IBM's Watson unit has made multiple acquisitions, and announced a number of deals with big-time industry players. Based on several recent moves, it's clear IBM intends to keep its Watson momentum moving full steam ahead.

What's the big deal?
What makes business analytics such a big deal is big data. As the world around us becomes more and more "connected" thanks to billions of mobile devices and the Internet of Things, the sheer volume of data has business leaders already scrambling to figure out how best to utilize all that information. Not only will the advent of IoT devices in our cars, cities, and homes ostensibly make our lives more efficient, they will become sources for reams of user data.

In a recent study, 89% of the business execs surveyed said that big data will "revolutionize business operations in the same way the Internet did." All that information makes for what most expect will be a significant revenue opportunity for the likes of IBM and its Watson competitors including Microsoft (MSFT 2.26%). Conservative estimates suggest big data alone will become a nearly $100 billion industry in 10 years, and other studies predict a great deal more than that.

Not surprisingly, much of the analytics associated with all that data will be conducted in the cloud, which is one reason both IBM and Microsoft each has a laser-like focus on growing their respective cloud-related operations. IBM's annual run rate of $4.5 billion in cloud sales doesn't quite match Microsoft's $8 billion plus, but when it comes to analytics, the positions of the two tech behemoths are reversed.

Laying the foundation
The Watson business unit has been awfully busy snatching up various early-stage cognitive computing firms to expand IBM's reach in the fast-growing big data and analytics marketplace. A few of IBM's deals, in particular point, to one of the applications it sees as a focal point of Watson's future: healthcare.

News of IBM's deals for healthcare software provider Phytel and Explorys, a developer of "the largest clinical data sets in the world," earlier this year was announced in conjunction with another little tidbit: the formation of a separate unit called Watson Health. Since then, Watson Health has inked a $1 billion deal for Merge Healthcare that, combined with Watson's "learning" capabilities, will allow it to "see" pictures, including the medical images stored by Merge's more than 7,500 clinical customers.

And there's more
In the last few days alone, Watson Health has taken yet more strides to turn one of Rometty's strategic imperatives into a legitimate source of revenue. In addition to bringing on senior exec Deborah DiSanzo as Watson Health's general manager, IBM has announced new deals with Boston Children's hospital, Ireland-based ICON, and privately held Sage Bionetworks.

The addition of DiSanzo to the Watson Health team adds to its more than 2,000 person workforce, just as the new deals add to its growing number of big-named clients. Oh, let's not forget another deal shared at the same time as the others: the world's largest generic drug maker Teva Pharmaceutical is now a Watson Health partner, via its cloud solution.

Finally, IBM unveiled its new life sciences compliance solution, and announced plans to open a Watson Health world headquarters in Boston, Mass. Rometty's betting big on business analytics in general and Watson Health in particular. And if big data, IoT and cognitive computing pundit's expectations for these fast-growing markets are even close, IBM is sitting on a Watson-inspired gold mine.

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