IBM is reportedly exiting healthcare and will focus on cloud computing. The company is looking to sell off IBM Watson Health by the end of January 2022. It is unclear at this moment whether IBM is leaving behind healthcare for good or if the company is planning to sell any other AI-based Watson solutions.
Following in the footsteps of Google, which quit the healthcare sector last year in August, tech giant IBM is also looking for a way out. One would expect IBM to persevere in healthcare, despite not achieving any significant milestones, especially now that the pandemic has forced governments worldwide to reinforce the sector.
What’s even more surprising is that Big Blue is willing to let go of the analytics tool for a significant loss amounting to billions of dollars. According to Axios, which first reported the story, IBM hopes to get $1 billion for IBM Watson Health against the approximately $4 billion it spent developing it over the years. This includes the cost of acquiring multiple companies, such as Phytel, Explorys, Truven, and Merge Healthcare.
Rumors of the sale initially surfaced in February 2021, a month after its CEO Arvind Krishna was appointed the company chairman. Krishna is a long-time IBM executive who originally joined the company way back in 1990 in the Watson Research division. Over the years, Krishna’s focus shifted to cloud computing, another lucrative and high-growth area.
Before his promotion as the chief executive of IBM in January 2020, Krishna was the SVP of hybrid cloud research and later cloud and cognitive-software division. So it became increasingly clear where IBM management believes its future lay. The company has fallen behind peers Microsoft, Apple, and others.
To catch up with Amazon Web Services, Microsoft Azure, and Google Cloud, IBM even signed its biggest deal yet, Red Hat’s $34 billion acquisition in July 2019 with Krishna at the wheel. But before that, IBM Watson Health itself was a major project at the Armonk, NY-based company.
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IBM Watson Health is based on Watson, Big Blue’s artificial intelligence-based analytical supercomputer. Besides healthcare, the IBM Watson brand is used across multiple sectors: financial services, advertising, business automation, customer services, IT operations, etc.
IBM Watson Health, a cognitive computing system, delivers meaningful insights to hospitals, drugmakers, and insurance agencies. It processes and evaluates vast amounts of complex, transitional and dynamic data such as medical terms, patient records, genomic data, and more using machine learning algorithms and generates relevant hypotheses.
To grow Watson Health, IBM spent big money on acquiring Phytel ($230 million), Explorys for clinical data sets and healthcare intelligence, Truven for healthcare data and analytics and nearly 8,500 clients ($2.6 billion) and Merge Healthcare for medical image processing ($1 billion). Merge Healthcare was used across over 7,000 healthcare facilities at the time.
Medical institutions such as the Maine Center for Cancer Medicine, Westmed Medical Group, Manipal Hospitals, and insurer Fukoku Mutual Life Insurance have used IBM Watson Health. Nevertheless, CEO Ginni Rometty’s big ambitions failed to materialize.
Krishna described IBM’s position in healthcare as “too optimistic.†He told Axios, “Health care is always going to turn out to be more subtle, as well as more regulated for the right reasons, than it is in other areas. And to me, that’s natural. It is a decision that may impact somebody’s life or death. You got to be more careful. So in health care, it turns out maybe we were too optimistic.â€
IBM is working with BofA Securities to find potential buyers for IBM Watson Health. One strategic buyer and other private equity firms are interested in the analytics system and have submitted their bids to IBM. The company is expected to decide by the end of January.
Updated on January 24, 2021
IBM has found a taker for IBM Watson Health and confirmedOpens a new window offloading the data-driven, AI-based healthcare analytics tool to Francisco Partners, a private equity firm based out of San Francisco. Currently subject to regulatory approvals, the deal is expected to close in Q2 2022.
Terms of the deal remain undisclosed as of now, but the definitive agreement comprises of the sale of data sets and products, including Health Insights, MarketScan, Clinical Development, Social Program Management, Micromedex, and imaging software offerings.
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