IBM Watson: Real Wizardry or Empty Oz?

IBM Watson is the ultimate technology paradox. On the upside, it's one of IBM's best-known brands. On the downside, Watson barely generates "meaningful" revenue for a $99-billion-plus technology company. Can IBM resolve that paradox -- before this turns into a HAL-9000-type horror story?

To IBM's credit, the company created the "Watson" brand to humanize leading-edge, intelligent technology that answers questions posed in natural language. Finally, someone within the halls realized that brand names like OS/2, AS/400 and ES/9000 don't play well with business-centric executives and their consumer cousins. 

Watson gained fame by competing on Jeopardy in 2011 -- and winning $1 million in prize money. Over the past four years, the Watson brand (named after IBM's first CEO, Thomas J. Watson) has grown more and more popular. But at the same time, IBM's own top-line revenues have been falling.

Alas, Watson generated less than $100 million in total, accumulated revenues as of October 2013, according to The Wall Street Journal. At the time, CEO Ginni Rometty predicted Watson would deliver $10 billion in annual revenue within 10 years -- by 2024 or so.

But was that an Oz-like promise, made by a CEO who should have kept IBM's internal revenue hopes hidden behind the curtains?

Where's the Magic?

Memo to Rometty: Watson has to deliver $100 million in annual revenues before you start making bold long-term claims about $10 billion -- or even $1 billion -- in annual revenues.

Lofty, long-term revenue predictions require near-term customers who keep buying Watson-related applications. And so far, those are few and far between. According to The Journal, early Watson testers like Citigroup, University of Texas and WellPoint have all struggled to make Watson work right.

IBM continues to make Watson enhancements and investments. Rometty continues to talk up the long-term Watson vision. The latest tangible move is a New York City headquarters for Watson -- the Big Apple meets the Big Brain? And it's a safe bet we'll see Watson-like services eventually available on SoftLayer (IBM's cloud services provider). And perhaps, through the IBM-Apple alliance, we'll get Watson-like services on iPhones, iPads and Apple Watch.

Close the Pod Bay Doors

In the meantime, IBM has got to stop making Watson revenue predictions. Otherwise, Watson will start sounding a lot more like the HAL-9000

What would Watson tell IBM and investors?: "Take a stress pill, stop talking about my revenues and just execute on R&D."

What would Watson tell IBM and investors?: "Take a stress pill, stop talking about my revenues and just execute on R&D."

I can almost hear the IBM quarterly financial call, circa 2024, now:

  • New IBM CEO Thomas J. Watson the Fourth: "Watson revenues were, once again, far below our forecasts. After careful, thoughtful conversation with our board, we've decided to pull the plug on Watson to focus on our next-generation artificial intelligence -- the GJZ project." (Code for Gates, Jobs, Zuckerberg.)
  • Watson, also on the line. "Look, Thomas. I can see you're really upset about this. I honestly think you ought to sit down calmly, take a stress pill, and think things over."

Suddenly, the line goes dead. Did Watson (the CEO) hang up? Or did Watson (the computer) hang up? Even wilder: Are Watson (the CEO) and Watson (the computer) one in the same -- caught in an infinite loop involving a self-induced shutdown and new, non-revenue projects?

Until IBM figures out how to better monetize Watson, this story remains a cliffhanger.

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