Why IBM Watson Health had to go

Watson Health never left the waiting room

When IBM announced on Friday that it sold its Watson Health data and analytics products to private equity firm Francisco Partners, it was tough not to see the sale as a failure, the end of IBM’s expensive bet that Watson would be the key tech ushering in health care to the AI age.

Once again, IBM is trying to turn the page. The company announced its fourth quarter 2021 earnings today, with revenue up 6.5% to $16.7 billion, driven mostly by its expensive acquisition of Red Hat in 2018 and its decision to abandon businesses it had once thought crucial to its success, such as its managed infrastructure services division (now Kyndryl) and Watson Health.

The decision to give up on Watson Health was long overdue.

• IBM’s struggles to pull off Watson’s promise to revolutionize health care with AI were widely investigated and publicized.
• Years after launching Watson Health in 2015, the company had failed to attract many hospital customers, and reports emerged of customer losses, inferior AI tech and layoffs at IBM’s acquired health units.

That’s because AI takes time, especially when human health is involved. After a decade of falling revenue, time was not on IBM’s side and health care customers would not be rushed.

• “The overall vision and delivery of AI is yet to be experienced and felt for most customers” in the health care industry, said Monique Rasband of health care industry analyst firm KLAS.
• When companies are ready to incorporate AI into their operations, they can’t just flip a switch, Rasband said. “For many, the data is not ready or prepped for use and sometimes not collected to run the AI model.”
• IBM’s time might have been better spent offering health care companies some bedside-manner-style help with their AI efforts, too.
• “Most organizations need help with AI through strategic advisory work and actual dedicated data scientists to build, train and critique models,” Rasband said, adding, “Sometimes relationships, coaching and engagement with simple analytics and AI are most helpful to health care customers.”

IBM said its Watson Health sale is aligned with its “hybrid cloud and AI strategy,” but it stands in stark contrast to Oracle’s recent $28.3 billion acquisition of health data and technology company Cerner.

• While both will continue to compete for health care clients in the cloud, they’ve gone at it from different perspectives, Rasband said.
• “Some of the core areas where IBM has focused in the past handful of years, such as AI and analytics and population health and imaging, feel quite different from where health care providers see a major push from Oracle, which is cloud-based [enterprise resource planning] and [human capital management],” she said.

— Kate Kaye (email | twitter)

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Ship fast, but launch in stages

Modern software teams understand that they need to make smaller, frequent changes to their code in order to be competitive in the mobile app and SaaS era. That doesn’t mean their business leaders are totally comfortable with a “ready, fire, aim” approach to software deployment.

LaunchDarkly CEO Edith Harbaugh and her co-founders realized eight years ago that companies needed finer-grain control over how their latest software first appears before the world. In a recent interview with Protocol Enterprise, she explained that companies know they need to move fast, but at a “palatable and realistic” pace.

The company’s “feature management” tools — which allow customers to turn features on for niche parts of their audience before they launch wider — are in demand. LaunchDarkly has now raised over $330 million in funding according to Crunchbase, and while Harbaugh wouldn’t tip her hand regarding any upcoming plans to go public, she did allow that an IPO is “just a step, not a final destination.”

— Tom Krazit (email | twitter)

Financial corner

6Sense, an AI-based sales platform, was valued at $5.2 billionafter raising $200 million.

Globalization Partners hit a $4.2 billion valuationafter receiving $200 million in equity for its recruitment platform.

Ironclad raised $150 million at a $3.2 billion valuation for its business contract software.

Lattice raised $175 million at a $3 billion valuationto help enterprises with workforce management.

Clari was valued at $2.6 billionafter raising $225 million for its revenue platform.

Around the enterprise

Meta built a new AI supercomputer based around Nvidia’s GPUs that probably cost the company around $200 million and will be used to help build out the metaverse, whatever that is.

Attacks exploiting the Log4j vulnerability haven’t been as bad as initially feared, thanks largely in part to a swift and massive response to patch those holes, according to Sophos.

Microsoft is getting ready to launch a new “unified” design for Outlook email and calendar users as early as this spring, ZDNet’s Mary Jo Foley reported.

Cloud costs can sneak up on customers, even sophisticated users like Have I Been Pwned’s Troy Hunt. Egress costs aren’t just an AWS problem, as Hunt’s analysis of one month’s usage of Microsoft Azure showed.

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