IBM bets on Watson with new global research center in Germany

[LONDON] Bob Dylan may not be impressed with the song-writing abilities of Watson in the advertising campaign IBM is running for its supercomputer that is supposed to understand language and mimic the inductive reasoning of a human brain. But the company is counting on Watson's creativity, paired with a major push into the Internet of Things, to spark sales in its data-analytics and cloud-computing business.

The Internet of Things division will play a key role in driving revenue and profit within five years, Harriet Green, IBM's vice president and general manager for Internet of Things and Education, told Bloomberg Television's Ryan Chilcote in an interview.

The company on Tuesday announced the opening of a new global headquarters and research lab in Munich for a division that will build Watson-based applications for Web-connected devices. The facility and eight other global centers are part of a US$3 billion investment in the unit set out in March by Armonk, New York-based International Business Machines.

"How this fits into the future of IBM is around profitable growth," Mr Green said. "We think it has real high growth, profitable growth potential." After 14 straight quarters of declining revenue, IBM has been looking for ways to grow as sales of its traditional IT services and software slump. The Internet of Things division, which is less than a year old, currently contributes less than 1 per cent of the company's US$93 billion in annual revenue, Mr Green said.

The new global headquarters in Munich is Big Blue's largest investment in Europe in more than two decades and will eventually house 1,000 data scientists and consultants, half of the total the company has committed to the Internet of Things group, IBM said in a statement.

The Internet of Things refers to the idea of using the Web to gather data from and, in some cases, remotely control devices from home appliances to traffic lights to toothbrushes.

Mr Green, who described it as "a movement not a business," said hundreds of IBM clients are already using Watson's Web- connection services. The company has partnered with the Chinese government to find ways to reduce pollution levels in Beijing and with the government in Andalusia, Spain, to improve its ambulance services, she said. At its campus-like headquarters in Munich, IBM will be working with Allianz SE to find ways to streamline insurance underwriting and claims processing, she said.

IBM chose Munich for its new headquarters because Germany makes so much of the stuff - from dishwashers to giant printing presses - that researchers envision connecting to the Internet in the future, Green said.

"Germany in terms of its manufacturing centers, around automotive, around industry, they have been drivers," she said. "Germany is a great place for the sort of talent we need in terms of the designers and architects, people doing research and development." IBM is hardly the only major company pushing into the Internet of Things. Companies from Siemens AG to Microsoft to General Electric have announced major initiatives in the area in the past year.

"What no one else has is Watson," Mr Green said. "As we enter this era of cognition, we have a capability that can process at scale even unstructured data, that can reason with purpose, give interventions, reason and speak in natural language." While Watson can't write a song as well as Dylan, that the supercomputer can figure out what he is singing shows there's hope for understanding other inscrutable data, too.

BLOOMBERG