IBM Creates $1 Billion Watson Group

IBM said Thursday it's investing $1 billion to create a new division called the Watson Group centered around commercializing its Watson supercomputer. IBM said the 2,000-strong group would be located in "Silicon Alley" in downtown New York and would seed development with $100 million in venture investments going toward startups and businesses building Watson apps and an ecosystem around the technology.

At a press event Thursday streamed live online, IBM Chief Executive Virginia "Ginni" Rometty said the Jeopardy-winning computer has the "potential to transform industry and enterprises to new levels of knowledge for citizens and the masses." IBM said the Watson Group will be led by Michael Rhodin, who served as senior vice president, IBM Software Solutions Group. Rhodin's new title is senior vice president, IBM Watson Group.

Rometty said its Watson Group will help Big Blue and partners push into new markets and bring a new class of software, services and apps that "think, improve by learning, and discover answers and insights to complex questions from massive amounts of Big Data."

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Tom Hughes, director of alliances for Technology Solutions Group of Ciber, a Colorado Springs, Colo.-based IBM partner, said he is bullish on Watson technology making an impact on his business, but says it could take three to four years for that to happen.

"I'm extremely impressed with how Watson is transforming health care and the treatment of cancer. It's a phenomenal tool. But for channel partners, it's still just an intellectual argument. It still needs to be proven it can solve day-to-day business challenges," Hughes said.

In October, Rometty said Watson will generate $10 billion in annual revenue within 10 years and $1 billion of revenue a year by 2018, according to an IBM conference-call transcript reviewed by The Wall Street Journal. To date, Watson had total revenue of less than $100 million, according WSJ.

During IBM's Thursday press conference, IBM showcased a number of applications for Watson. Watson Discovery Advisor is aimed at research and development within the pharmaceutical and biotech businesses. Watson Analytics and Watson Explorer are IBM's Big Data apps for sorting through unstructured data via natural language queries and extracting actionable data from massive amounts of information.

Partners already developing apps around the Watson ecosystem are mostly health-care-related and include WellTok, MD Buyline, Fluid, Elance and Healthline.

So far, IBM has faced a number of different hurdles commercializing Watson technology. According to The Wall Street Journal, customers have complained that translating Watson's ability to dominate Jeopardy into a business solution is extremely difficult.

To that end, IBM is hoping its $100 million in venture investments in startups and businesses building Watson apps will encourage more developers to help build business applications.

"In our industry, it's about productizing innovation," Rhodin said. "Transformational solutions and enterprise solutions is right up IBM's alley. We recognize the value of this technology and what it can do for everyone. We need help, we need an ecosystem, we need partners, and we are opening Watson up to the world and asking for that help."