Three years after its splash appearance on Jeopardy, IBM is turning to the Watson computer system for inspiration again--this time as the centerpiece of a major new business unit in the Big Apple. The company will announce a major new business unit, at an event Thursday that it's created the IBM Watson Group to build out an ecosystem around Watson--and hopefully start making big-picture money off it--out of a major new office in New York City's East Village.
IBM says it plans to spend over $1 billion on the new unit, which already includes over 2,000 employees, in the next several years, out of the new 51 Astor Place. Mike Rhodin will head up the group, which the company hopes will help it reach a $20 billion revenue projection for its big data and analytics services by 2015.
"This is one of the top innovations in IBM history," says Stephen Gold, vice president of IBM Watson group. "Watson is agile, it's fast, it's cloud. Those are not things that the market perception has had of IBM, and that's invigorated IBMers."
The announcement of the new unit and its headquarters in 'Silicon Alley' is for a simple reason: to find some positive momentum for IBM within CEO Ginni Rometty's 2015 roadmap, while showing techies in New York that IBM can be cool, the company hopes.
[Update: "Very symbolically this group will be headquartered in Silicon Alley," Rometty said Thursday. Rometty also stressed the new office would have an incubator space.]
IBM has struggled in recent years to reset the narrative on its momentum, as it's cut or furloughed hundreds of staff and struggled in recent earnings. But at the same time, Watson has grown to over 2,000 staffers and now it's own independent unit--like an incubated startup proving itself one by one with other units of the company, Gold says--even as Watson itself has improved to operate 24x faster while taking up 90% less space.
To launch the new unit, the company has announced three initial products for Watson: Discovery Advisor, Analytics, and Explorer, billed to help find patterns in large data sets, offer visualization tools, and then apply that data to projects.
That puts IBM in competition with a crowd data analytics and visualization field, but Gold says Watson's adaptability will set the company apart from promising startups like Ayasdi, which recently raised $30 million in the big data mapping field.
"Watson isn't limited by software updates and it learns as it goes, which should open up the market," says Gold. "There is something out there for everybody, but what's really unique about Watson is it's not a technology, but a set of technologies."
IBM's also hoping the location of the Watson group will stand out, particularly to engineering talent and potential partners unimpressed with IBM's recent innovation or its sleepier Armonk, NY headquarters. The Watson Group will operate out of a major new development in Astor Place, a block away from AOL and not far from the startup-rich Flatiron District and Union Square. IBMers will now jostle for space and spread the company's message of revival alongside design students at New York University and The Cooper Union.
But aside from the snazzy new digs, Watson will have to make serious money before long if the company will meet its revenue goals. IBM says early test clients in healthcare have reached 3,000 doctor's services today, while over 700 companies have applied to the two-month old open Watson application system, the IBM Watson Developers Cloud. The company's targeting biomedicine, pharmaceuticals, healthcare providers, education and finance as initial customer fits.
Watson is the company's best hope for an internal jolt as it's also acquired companies aggressively--and some experts say at costly premiums--to pursue more lucrative opportunities in the cloud. IBM has spent about half of an earmarked $20 billion as part of the 2015 plan but still has more work to do, such as in customer management and automated marketing, industry experts have told FORBES.
Watson could prove a major lift with time and will earn some revenue right away. Major gains, as typical for subscription-based or revenue-share enterprise services, will take several years to realize. Gold wouldn't specify any exact revenue target for the new business unit, but says Watson's potential contributed to IBM's decision to raise its projection for big data and analytics revenues by 2015 up to $20 billion.
So Thursday's announcement is as much a statement of purpose as a proof of progress, but IBM thinks it found a winner in Watson not just for trivia games, but for its future role in the cloud ecosystem, too.
"Watson has renewed for the market and especially inside IBM that really, this is a cool company," says Gold. "We think this redefines our industry."
Updates from live event, Thursday AM:
IBM is now announcing the Watson Group at a press event in downtown Manhattan. "We don't form a business unit very often," CEO Ginni Rometty says. "This is a new era and I cant be prouder of the IBMers and the clients that brought us to this today."
Rhodin continued the Watson-as-startup theme that Gold discussed with me previously. 27 core researchers spent four years on Watson before the team shifted to Austin to work quietly on commercialization. "We intentionally hid them, a tiny group," Rhodin says. "We believe we've created something that is ready to go mainstream."
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