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IBM has offered its underachieving IBM Watson Well being unit for an undisclosed price ticket to a world funding agency after virtually a 12 months’s value of rumors that stated IBM has been attempting to exit this a part of its enterprise.
In a terse Jan. 21 announcement, IBM stated that Francisco Partners is acquiring the healthcare data and analytics assets from the IBM Watson Well being enterprise unit, together with Well being Insights, MarketScan, Scientific Improvement, Social Program Administration, Micromedex, and imaging software program choices.
Rumors about IBM wanting to sell its Watson Health unit – which reportedly introduced in $1 billion in income yearly however has didn’t make a revenue – have been circulating within the press no less than twice since no less than February of 2021. The experiences stated the transfer was being eyed in order that Massive Blue might get out of the healthcare market and focus its operations and sights on the profitable cloud computing market.
A Jan. 21 report on the sale by Bloomberg stated the value of the assets involved in the transaction total more than $1 billion, in response to individuals accustomed to the plans.
In response to IBM’s announcement, which is the primary time that the corporate has commented on a attainable sale of IBM Watson Well being for the reason that rumors started, the transaction is anticipated to shut within the second quarter of this 12 months and is topic to customary regulatory clearances.
What’s unclear from the corporate’s press launch is whether or not the sale consists of all of the analytics and information holdings from Watson Well being or if IBM will retain any a part of that enterprise in any respect. The discharge doesn’t give any additional particulars on the character of the sale.
Timothy F. Davidson of IBM company communications didn’t reply on to these particular questions when he replied Jan. 21 to an emailed inquiry from EnterpriseAI.
“The transaction introduced in the present day will lead to healthcare information and analytics property which can be at present a part of the Watson Well being enterprise, transferring possession, upon closing (anticipated in 2Q22), to Francisco Companions,” Davidson wrote. “Additionally, upon shut, the brand new standalone firm is anticipated to proceed its work as a healthcare AI, information and analytics enterprise delivering industry-leading software program, know-how and automation options throughout the healthcare worth chain.”
One other IBM government, Tom Rosamilia, a senior vice chairman with IBM Software program, stated in an announcement that the sale of the Watson Well being property to Francisco Companions “is a transparent subsequent step as IBM turns into much more targeted on our platform-based hybrid cloud and AI technique. IBM stays dedicated to Watson, our broader AI enterprise, and to the shoppers and companions we assist in healthcare IT. By this transaction, Francisco Companions acquires information and analytics property that can profit from the improved funding and experience of a healthcare {industry} targeted portfolio.”
Below the phrases of the settlement, the present administration staff will proceed in comparable roles within the new standalone firm, serving present shoppers in life sciences, supplier, imaging, payer and employer, and authorities well being and human companies sectors, in response to IBM and Francisco Companions.
Analysts Reply
Dan Olds, analyst
Dan Olds, the chief analysis officer for Intersect360 Analysis, informed EnterpriseAI that the sale of the Watson Well being property should be a disappointment to IBM.
“Watson Well being was at all times the instance that IBM pointed to when discussing how Watson was going to alter the world,” stated Olds. “Quick ahead seven years and we discover IBM promoting off its Watson Well being unit, which was alleged to be the crown jewel of the Watson product line.”
And although the unit has cracked $1 billion in income for the corporate, “a portion of that may be attributed to a number of billion dollar-plus acquisitions that bolstered the underside line for the division,” stated Olds. “Nonetheless, Watson Well being didn’t make a revenue, regardless of enormous a great deal of advertising hype, thus inserting it on the chopping block. There have been some notable failures for Watson through the years together with a five-year relationship with MD Anderson Most cancers Middle that ended after MD Anderson alleged that Watson did not provide safe and correct treatment recommendations. Ouch.”
The issue for IBM, stated Olds, is that the corporate “led with advertising and the advertising imaginative and prescient was method past what their know-how might ship. AI can completely be a giant boon to healthcare, however not the way in which that IBM carried out it. IBM paid extra consideration to gathering information and mining tutorial papers and fewer consideration to consulting with actual docs who’re seeing sufferers each day.”
As a substitute of taking the time to be taught from the precise docs who have been alleged to work with Watson, IBM “devoted their time and assets to a top-down strategy that they offered to directors,” stated Olds. “They not solely put the cart earlier than the horse, however they piled the cart excessive with visions of revolutionary enhancements in affected person care that didn’t come near materializing. So, relatively than radically disrupting healthcare know-how, IBM’s Watson Well being goes out with a whimper and can in all probability change into a cautionary story on the best way to not introduce new tech.”
Rob Enderle, analyst
One other analyst, Rob Enderle, principal of Enderle Group, stated that Watson Well being was by no means a battle that IBM was structured to win.
“The price of sustaining a healthcare enterprise, significantly throughout a pandemic, is daunting primarily due to the lack to entry important medical data to supply correct analysis and therapy,” stated Enderle. “To do that efficiently wants focus and funding, and IBM, which is present process a turnaround, needed to choose its battles. Thus, the medical property that IBM gathered – that are important – are extra priceless to an entity like Francisco Companions that may make higher use of them by their different investments.”
IBM’s curiosity in promoting Watson Well being was seen as a part of a technique by CEO Arvind Krishna to streamline the corporate and change into extra aggressive in cloud computing and different markets.
The Watson Health unit integrates AI, analytics and information to create augmented intelligence for hospitals, insurers and pharmaceutical corporations.
IBM Watson Well being’s monetary efficiency has been a priority for IBM’s bean-counters prior to now as effectively. In April of 2019 IBM halted the development and sales of its Watson AI drug discovery instruments, citing disappointing gross sales, in response to an earlier EnterpriseAI story. With the transfer, the corporate shifted the main target of its Watson Well being providing to “scientific improvement” because it readjusted its market technique. That transfer got here amid experiences of declining gross sales and rising skepticism concerning the utility of machine studying for complicated medical analysis, the story reported.
IBM’s troubles with Watson Well being got here at a time when opponents have been discovering success within the well being care market. In December of 2021, Oracle acquired Cerner Corp. for $28.3 billion, which made the corporate a significant participant in digital healthcare information (EHR).
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