IBM, in it for the long haul, is betting big on Watson

Watson, can you grow into a multibillion-dollar business and become the engine of IBM’s resurgence?

IBM is betting its future that the answer is yes. Its campaign to commercialize Watson, the company’s version of artificial intelligence technology, stands out, even during the current AI frenzy in the tech industry.

IBM has invested billions of dollars in its Watson business unit, created at the start of 2014, which now employs an estimated 10,000 workers. Its big-ticket marketing push includes clever television ads that feature Watson trading quips with famous people like Serena Williams and Bob Dylan. And Watson, after a slow start, has shown its mettle by assisting in daunting tasks like diagnosing cancer.

Yet industry experts question how quickly IBM can build a business around Watson. “IBM has pursued big, bespoke moon shot initiatives that can take years and are extremely expensive,” said Tom Austin, a research fellow at Gartner. “It seems like they’re swimming upstream with that.”

Adapting Watson technology to industries like health care and manufacturing, IBM insists, was always going to be a long-term commitment — and one that began shortly after Watson beat human champions on the quiz show “Jeopardy!” in 2011.

But the years of investment and applied-science projects, IBM executives say, are increasingly turning into money-making opportunities in sizable markets.

They point to a new Watson offering in genomics as a prime example of the company’s strategy. IBM is collaborating with Quest Diagnostics, the medical laboratory company, to offer gene sequencing and Watson diagnostic analysis, as a cloud service, to oncologists treating cancer patients, starting Monday. The service will also tap the genomics data and expertise of the Memorial Sloan-Kettering Cancer Center and the Broad Institute.

“This is the broad commercialization of Watson in oncology,” said John Kelly, a senior vice-president who oversees IBM’s research labs and the Watson business.

The technology, IBM executives say, has the potential to make precision medicine and tailored therapies available to millions of cancer patients instead of the small number now treated at elite medical centers with genomics expertise. An estimated 14 million Americans are living with cancer.

The new genomics service, IBM executives say, is one step in the company’s march to build a so-called ecosystem of corporate partners and software developers that use Watson technology.

For a programmer, Watson can provide code that allows a startup’s software to read and interpret legal documents more easily, for example.

For a big company, Watson can provide not just software but also IBM consultants helping a retailer, for example, use the technology to customize marketing and improve customer service.

The artificial intelligence marketplace, analysts agree, is primed to grow rapidly. AI is also the new arena of high-stakes competition in computing, fuelled by big data and innovations in software algorithms.

The market — defined as AI-related hardware, software and services — will surge from $8 billion this year to $47 billion by 2020, predicts IDC, a research firm.

Today, the AI business, experts say, resembles the Internet in the mid-1990s: a thing on its own that eventually will be built into all kinds of products and services. “That’s where we’re headed — AI everywhere,” said Frank Gens, IDC’s chief analyst.

All the major technology companies are investing aggressively in AI software, including companies beyond IBM like Salesforce, SAP and Oracle that focus on business customers.

But consumer Internet companies with large cloud computing businesses, analysts say, are most likely to build the equivalent of operating systems for AI — the so-called platforms on which most developers write applications. Amazon, Google and Microsoft are the front-runners.

IBM may have a chance to join that group. By 2020, IDC predicts, 60 per cent of the AI applications will run on the platform of four companies: Amazon, Google, Microsoft and IBM.

IBM does not report financial results for Watson separately.

But the securities research arm of the Swiss bank UBS estimates that Watson may generate $500 million in revenue this year and could grow rapidly in the years ahead, possibly hitting nearly $6 billion by 2020 and almost $17 billion by 2022.

IBM has acquired industry expertise and proprietary data sources, in addition to supplying AI platform tools and technology.

“IBM has taken a very different approach from Google, Amazon and Microsoft,” said Judith Hurwitz, an independent analyst. “It’s leveraging data and the knowledge of experts.”