IBM reportedly shopping Watson Health just as healthcare gets hot

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IBM looking to sell Watson Health division for just $1 billion, according to an axios report, The question is, why is IBM shying away from the healthcare vertical, as it’s getting hotter, and for such a low price?

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Just last month, Oracle spent $28 billion to buy digital health records company Cerner. Last spring, Microsoft spent nearly $20 billion to buy Nuance, which is heavily used in the medical industry, which has 10,000 healthcare customers. This is huge money, suggesting that venture companies trying to embrace healthcare are willing to spend huge sums of money to do so.

ibm Launched Watson Health in April 2015 With much fanfare. It was supposed to take Watson, IBM’s artificial intelligence platform, and work it out on health-related problems. The debate went something like this. Even the best doctor can’t read all the literature out there, but a computer can do it quickly, and with a suggested course of action to increase the doctor’s expertise and produce better results may come.

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It did what IBM does when it’s focused on something. It opened a fancy headquarters in Cambridge in September of that year. It also started announcing partnerships. It checked all the boxes, partnering with the likes of CVS, Apple, and Johnson & Johnson.

Then he started buying companies. The first acquisitions were medical data companies, Phytel and Explorys, He was part of a pattern. Then came $1 billion for Merge Healthcare, a company that would provide medical imaging data. It will later make its most expensive purchase, Truven Health Analytics, for $2.6 billion. Overall, it spent $4 billion, according to reports, which seems modest now compared to what Oracle and Microsoft spent, but that was a lot of money in 2015 and 2016 when it was gearing up.

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It was all about taking a data-centric approach to feed Watson Health’s machine learning models. For whatever reason, it didn’t really work out as planned, but it was a big part of former CEO Ginni Rometty’s plan to modernize the company by focusing on areas like cloud and AI.

Rometty was optimistic when he spoke to them Harvard Business Review in 2017,

“Our Moon Shot is bringing world-class health care to every corner of the world. Some of this is already happening. Watson is being trained by the best cancer centers in the world and then implemented in hundreds of hospitals in China and India. Some of those areas have just one oncologist for perhaps 1,600 patients. People in those areas have no chance of getting world-class health care. Now they can assist doctors with decision making with Watson as an oncology consultant. And this is just the beginning.”

But Rometty left in 2019 and Aravind Krishna in his place has different priorities. She told axios That comprehensive healthcare vision may be too optimistic. This may explain why IBM wants to exit, Holger Müller, an analyst at Constellation Research, told me.

“IBM is really focusing on its hybrid cloud strategy. In the process it is trying to get rid of all assets that distract attention and capital, as well as risk damaging reputation. Watson Health certainly qualifies for all three, so it’s no surprise that IBM might sell the unit,” Mueller said.

While IBM will likely continue to pursue the healthcare business in other ways across the company, even if it ends up dumping Watson Health, it should be considered a failed strategy after putting so much money into it and getting so little back. Of course, this still qualifies as a rumor, even if it’s no big surprise to see it pass.

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