IBM’s Watson to Help Rich DBS Clients With ‘Jeopardy’ Smarts

Jan 09, 2014 4:13 pm ET

(Updates with closing share price in 12th paragraph.)

Jan. 9 (Bloomberg) -- Banking clients at DBS Group Holdings Ltd. will soon get investing assistance from Watson, the same International Business Machines Corp. technology that triumphed over human “Jeopardy!” contestants.

The Singapore-based bank plans to begin using the tool, which can answer questions in conversational language and learn from responses, to aid financial planners in guiding its wealth- management unit’s affluent customers, IBM said today. Watson will analyze large volumes of financial data to help DBS, Southeast Asia’s largest lender, offer more customized service.

The agreement gives IBM a proving ground as it tries to show clients the value of its Watson technology. The Armonk, New York-based company announced today it’s creating a separate division for Watson to spur growth after six consecutive quarters of falling revenue. IBM will invest more than $1 billion in the unit, 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 in an interview. “It’s a kind of doubling down.”

High-Profile Bet

As sluggish demand for computer hardware has dragged down sales, 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.

“By putting these parts of the business into one group, I can do things I couldn’t do,” Michael Rhodin, who will lead the Watson Group as senior vice president, said in an interview today in New York. “I can make decisions much, much faster on how to redeploy resources over new opportunities and new ideas. It’s what the whole structure is all about -- it’s about speed.”

Rhodin, previously head of IBM’s Software Solutions Group, will continue to report to fellow Senior Vice President Steve Mills, who oversees software.

IBM 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.

Big Data

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.

IBM shares fell less than 1 percent to $187.38 at the close in New York. The stock fell 2.1 percent in 2013, the year’s lone decliner in the Dow Jones Industrial Average.

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.

Two-Way Street

IBM has received about 890 requests from programmers to build applications in Watson’s so-called developer ecosystem, Rhodin said today. The company declined to comment on the number allowed to use the services.

IBM has to be selective in choosing clients who can use Watson because customers must upload large amounts of data before the system can work, Rhodin said.

“There’s work on both sides here,” he said. “To even get started, you have to first find all of your data. For a lot of companies, that is proving to be harder than they thought it was going to be.”

DBS is willing to invest S$15 million ($12 million) over three years in IBM’s technology, and it plans to extend the Watson service beyond wealth management to its small-business and payment services, CEO Piyush Gupta said today at a briefing in Singapore.

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.”

--With assistance from Sanat Vallikappen in Singapore. Editors: Crayton Harrison, Nick Turner