‘Jeopardy’ Champ Watson Getting Own Division at IBM

International Business Machines Corp. is turning Watson, the technology that triumphed over human “Jeopardy!” contestants, into a separate division to help the computing-services giant return to growth.

More than $1 billion will be invested in the IBM Watson Group, including $100 million in venture funding for businesses that develop applications based on the technology. Based in New York with a staff of 2,000, the new unit will be separate from IBM’s hardware, software and services divisions, said Stephen Gold, vice president of Watson Solutions.

“It’s the first time that IBM is bringing together all of the disparate functions that support a business,” Gold said said in an interview. “It’s a kind of doubling down.”

The move places more emphasis on IBM’s plan to commercialize the Watson technology, which can answer questions in plain English and learn from responses. Amid six straight reported quarters of falling revenue, IBM has been selling off businesses to focus on more profitable, faster-growing areas such as data analytics and cloud computing. Watson is one of its highest-profile bets.

Michael Rhodin, senior vice president at the IBM Software Solutions Group, will lead the new division, according to a statement today. Rhodin will continue to report to Steve Mills, the senior vice president for software.

IBM, based in Armonk, New York, has stumbled amid the industrywide shift into the cloud era, where information is stored online instead of onsite. The transition has eroded demand for traditional hardware and spawned a new crop of competitors. To cope, IBM has spent more than $7.5 billion since 2010 on 43 software business acquisitions, according to data compiled by Bloomberg.

In July, the company purchased cloud-computing storage provider SoftLayer Technologies Inc. for about $2 billion. IBM will adapt Watson’s technology so it can be delivered through SoftLayer’s cloud infrastructure, it said today.

Watson and other big-data services, which let customers mine vast troves of information to make better decisions, were the company’s biggest focus in 2013, Chief Executive Officer Ginni Rometty said in March. IBM boosted its expected sales from the data-analysis business to $20 billion in 2015, compared with an earlier forecast of $16 billion.

The Watson Group will also include an incubator for businesses to build on the technology, which IBM began offering to outside developers in November. The goal was to have three apps developed on the platform ready to enter the market early this year, the company said at the time.

IBM has received about 750 requests from programmers to build applications, Gold said, declining to comment on the number allowed to use the services.

IBM has collaborated on Watson-based projects with health- care organizations, including insurer WellPoint Inc. and Memorial Sloan-Kettering Cancer Center. The company is also working with Nielsen Holdings NV and Royal Bank of Canada on services that use Watson to interact with customers. Those first projects will show other potential clients Watson’s promise, Gold said.

“The immediate focus is to ensure the success of those early engagements,” he said. “It’s a much more interactive way to work with clients and partners.”

–Editors: Crayton Harrison, Ben Livesey