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Jefferies gives IBM Watson a Wall Street reality check

Jefferies gives IBM Watson a Wall Street reality check
From TechCrunch - July 13, 2017

IBMs Watson unit is receiving heat today in the form of a scathing equity research report from JefferiesJames Kisner. The group believes that IBMs investment into Watson will struggle to return value to shareholders. In recent years, IBM has increasingly leaned on Watson as one of its core growth unitsa unit that sits as a proxy for projecting IBMs future value.

In the early days, IBMs competitive advantage was its longstanding relationships with Fortune 500 companies. IBM Watson effectively operates as a consultancy where the company engages in high-value contracts with corporates to implement Watson technology for specific business cases. Unfortunately, IBM is struggling to bridge the gap between client needs and its own technological capability.

Jefferies pulls from an audit of a partnership between IBM Watson and MD Anderson as a case study for IBMs broader problems scaling Watson. MD Anderson cut its ties with IBM after wasting $60 million on a Watson project that was ultimately deemed, not ready for human investigational or clinical use.

The MD Anderson nightmare doesnt stand on its own. I regularly hear from startup founders in the AI space that their own financial services and biotech clients have had similar experiences working with IBM.

The narrative isnt the product of any single malfunction, but rather the result of overhyped marketing, deficiencies in operating with deep learning and GPUs and intensive data preparation demands.

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