IBM's hopeful cash cow: Watson the supercomputer

IBM's big bet on a technology whose biggest accomplishment so far has been winning the game show "Jeopardy."

June 10, 2014 2:24PM ET

by Kristyn Martin @kristynmartin

IBM is one of the oldest tech companies in the world. Now, it’s banking on one system to be a major cash cow: a supercomputer called Watson. IBM hopes Watson will be as revolutionary as the personal computer or the mainframe. And they’re making a big investment in the supercomputer, creating the Watson Group in January and backing it with a billion dollar investment.

You might remember Watson from the trivia game show, “Jeopardy”. In 2011, the supercomputer beat two Jeopardy world champions on national television. It was a pivotal moment that showed the world cold listen, think and communicate – kind of like a human. “Jeopardy showcased how a cognitive computer could navigate the complexities of human speech,” says Steve Gold, Vice President of IBM’s Watson Group. “[It] could investigate large and vast amounts of information and in that case 200 million pages of data in a little under three seconds – and how it could learn.”

Launching IBM’s new Watson Group comes at a crucial time for the 103-year-old company. In May, IBM’s CEO admitted it’s been a “rocky time” for the company. Revenue growth at IBM has been slow, and new technologies are threatening some of the company’s traditional businesses in hardware and software.

Since Watson’s “Jeopardy” appearance, the supercomputer has undergone a profound transformation. It’s shrunk in size, from around 90 servers during its “Jeopardy” days, to a system today that can be accessed on an iPad.

Dr. Mark Kris is Chief of Thoracic Oncology at Memorial Sloan Kettering Hospital in New York City. He’s training Watson to check patient information against vast amounts of medical literature to suggest top treatment options for lung cancer patients.

“I’m one of Watson’s teachers,” said Dr. Kris. “I help it collect the medical literature, I help keep it up to date.”

Watson is good with big data. It can take in high volumes of information about any topic: medical literature, financial data, retail information and then help a person make highly informed decisions. But there are kinks in the system.

“Medical literature is growing exponentially, and trying to find it and get it in a timely manner is a struggle,” said Dr. Kris. It’s a lot of work, but once the data is loaded into Watson, it can make treatment recommendations based on an individual’s medical history. Watson ranks several treatment suggestions and will explain why other choices aren’t as good. Dr. Kris then teaches the supercomputer which recommendations work, and which do not – and Watson remembers for the next time.

This is an essential part of Watson’s ingenuity – even outside of the healthcare realm. But it could also be a detriment to potential customers. “Watson isn’t a plug and play system that you plug into a room ad it starts working,” said Peter Wahlstrom, Sr. Technology Analyst with Morninstar. “There’s a lot of initial interaction that needs to happen to make Watson ‘smarter’.”

“I’m one of Watson’s teachers. I help it collect the medical literature, I help keep it up to date.”

Dr. Mark Kris

Thoracic Oncology, Memorial Sloan Kettering

Dr. Mark Kris, Chief Thoracic Oncology at Memorial Sloan-Kettering is working with IBM to create a Watson that can help doctors treat lung cancer

IBM aims to use the super computer in many ways outside of healthcare. For example, a Watson that learns your taste in clothes and becomes a personal shopper that you can teach along the way – or a Watson that learns your past financial investments and goals – and then makes investment suggestions for you. All of this will be accessible on handheld devices like an iPad or smart phone app.

The company praedicts Watson will create $10 billion dollars in revenue in the next ten years. But analysts are skeptical. “I think it’s generally true that it can be impactful but it’s too early to give the company credit to say Watson is going to be a $10 billion business,” said Wahlstrom.

And so far, Wahlstrom says Watson hasn’t delivered quite as the company expected. “IBM has come short of Watson’s original revenue projections,” he said. “Watson isn’t going to be the game changer the company is looking for but it is designed to be a slot and fill an important role in the future.”

Not surprisingly, IBM sees it differently. IBM has also earmarked $100 million in venture capital money for entrepreneurs who want to use the technology in their own companies.

“We’re bullish because we think it’s important to drive change, but more importantly because we think it’s realistic that it can be achieved,” said Gold.