According to IBM, IBM plans to sell its Watson Health division for just $ 1 billion an Axios report. The question is, why is IBM running away from healthcare just as it seems to be warming up, and at such a low price?
Just last month Oracle has spent $ 28 billion to buy the Cerner digital health record company. Last spring Microsoft spent nearly $ 20 billion To buy Nuance, which is heavily used in the medical industry and has 10,000 healthcare customers. That’s a lot of money, which suggests corporate companies are trying to embrace this the healthcare industry and willing to spend a lot of money on it.
IBM launched Watson Health in April 2015 too much fanfare. It should take Watson, IBM’s artificial intelligence platform, and use it on health issues. The argument went something like this. Even the best doctor cannot read all of the literature, but a computer can do it quickly and could provide recommendations for action to increase the doctor’s knowledge and get better results.
It then did what IBM does when it focuses on something. It opened build a fancy headquarters in Cambridge this September. It also started with the announcement of partnerships. It checked all the boxes and worked with CVS, Apple, and Johnson & Johnson.
Then it started buying companies. The first acquisitions were medical data companies, Phytel and Explorys. That was part of a pattern. Next came $ 1 billion for Fusion Healthcare, a company that would provide medical imaging data. Later it would be his most expensive purchase Truven Health Analytics for $ 2.6 billion. It reportedly spent $ 4 billion in total, which seems a bit modest compared to what Oracle and Microsoft just spent, but it was a ton of money in 2015 and 2016 when it upgraded.
All of this was about taking a data-centric approach to feed Watson Health’s machine learning models. For some reason it didn’t actually work as planned, but it was a big part of former CEO Ginni Romettys plan to modernize the company by focusing on areas like cloud and AI.
Rometti was optimistic when she spoke to him Harvard Business Review in 2017:
Our moon shot brings world class healthcare to every corner of the world. Some of this is already happening. Watson is trained by the best cancer centers in the world and then introduced to hundreds of hospitals in China and India. Some of these areas only have one oncologist for perhaps 1,600 patients. The people in these regions had no chance of first class healthcare. Now they can, with Watson as an oncology consultant to help doctors make decisions. And thats just the beginning.
But Rometti Leaving 2019, and her successor, Arvind Krishna, has other priorities. He said Axios this broad vision in healthcare may have been overly optimistic. That could explain why IBM wants to get out, says Holger Mueller, an analyst at Constellation Research.
“IBM is really focused on its hybrid cloud strategy. In doing so, it tries to get rid of all assets that distract attention and capital and to bear the risk of reputational damage. Watson Health is certainly qualified for all three, so it is not surprising that IBM could sell the unit, ”said Mueller.
While IBM will likely run the healthcare business differently across the company, even if it dumped Watson Health, it would have to be viewed as a failed strategy after putting so much money into it and getting so little back. Of course, it’s still considered a rumor, even though it wouldn’t be a big surprise if it turned out to be true.
