Beyond 'Jeopardy': How IBM will make billions from Watson

At a time when companies spend billions on patent wars and frivolous acquisitions, IBM makes money the old-fashioned way: through R&D

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The potential benefits are obvious: quicker, more accurate diagnoses and fewer unnecessary expensive tests. Starting soon is a partnership with Sloan-Kettering, a leading cancer research institute, to study various forms of cancer with Watson's help, first with lung cancer, then moving on to breast and prostate cancer.

Gold says that Watson is currently "learning" about oncology and is being trained to answer questions about it, in much the same way it was trained for the "Jeopardy" challenge. An Associated Press report on the IBM/Sloan-Kettering partnership put it this way: "Watson will be fed textbooks, medical journals and -- with permission -- individual medical records. Then it will be tested with more and more complicated cancer scenarios and assessed with the help of an advisory panel."

As you may have noticed in the "Jeopardy" events, Watson generally doesn't give definitive answers. Instead, it calculates a probability that an answer is correct, an important distinction in the world of medical research.

A third pilot program was announced in March: Citigroup will use Watson to study ways to improve customer service. Citigroup hopes that Watson's content analysis and evidence-based learning abilities can improve customer transactions and simplify the overall banking services. No, that's not curing cancer. But landing Citigroup as a client is an important step in proving that Watson can be a moneymaker.

How much money Watson can generate still remains to be seen, of course. But in a research note late last year, CLSA analyst Ed Maguire estimated that Watson may generate $2.7 billion in revenue in 2015, adding 52 cents of earnings per share. The technology is so new that IBM is still looking at a variety of pricing models. It will likely be related to results Watson achieves, Gold says.

IBM is not the juggernaut it once was, nor is it quite the paradise for researchers it used to be. But a company that can still spend some $6 billion a year on R&D and embark on what Gold calls "a grand challenge" every decade is a light-year ahead of companies pouring money down the rat holes of useless litigation and frivolous acquisitions.

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This article, "Beyond 'Jeopardy': How IBM will make billions from Watson," was originally published by Read more of Bill Snyder's Tech's Bottom Line blog and follow the latest technology business developments at For the latest business technology news, follow on Twitter.

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