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Monday, March 4, 2013 - Page updated at 07:30 p.m.

IBM’s Watson a celebrity, but can it make money?

By Steve Lohr
The New York Times

IBM’s Watson beat “Jeopardy!” quiz-show champions two years ago. But can it whip up something tasty in the kitchen?

That is just one of the questions that IBM is asking as it tries to expand its artificial-intelligence technology and turn Watson into something that actually makes commercial sense.

The company is betting that it can build a big business by taking the Watson technology into new fields, such as developing drugs, predicting when industrial machines need maintenance and even coming up with novel recipes. In health care, Watson is training to become a diagnostic assistant.

The new Watson projects are at the leading edge of a much larger business for IBM and other technology companies. That market involves helping corporations, government agencies and science laboratories find useful insights in a rising flood of data from Web pages, social-network messages, sensor signals, medical images, patent filings, location data from cellphones and others sources.

Advances in several computing technologies have opened this market, now called Big Data. One key has been the software techniques of artificial intelligence like machine learning.

IBM has been building this business for years with acquisitions and internal investment. Today, the company says it is doing Big Data and analytics work with more than 10,000 customers worldwide. Its workforce includes 9,000 business-analytics consultants and 400 mathematicians.

IBM forecasts that its revenue from Big Data work will reach $16 billion by 2015.

IBM faces plenty of competitors in the Big Data market, ranging from startups to major companiessuch as Microsoft, Oracle, SAP and SAS Institute. These companies, like IBM, are employing the data-mining technology to trim costs, design products and find sales opportunities in banking, retailing, manufacturing, health care and other industries.

Yet the Watson initiatives, analysts say, represent pioneering work. With some of those applications, like suggesting innovative recipes, Watson is starting to move beyond producing “Jeopardy!”-style answers to investigating the edges of human knowledge to guide discovery.

“That’s not something we thought of when we started with Watson,” said John E. Kelly III, IBM’s senior vice president for research.

IBM’s Watson projects are not yet big money-makers. But the projects, according to Frank Gens, chief analyst at International Data Corp., make the case that IBM has the advanced technology and deep industry expertise to do things other suppliers cannot, which should become a high-margin business and give IBM an edge as a strategic partner with major customers.

And the new Watson offerings, he said, are services that future users might be able to tap into through a smartphone or tablet. That could significantly broaden Watson’s market, Gens said, as well as ward off competition if question-answering technology from consumer offerings, like Apple’s Siri and Google, improves.

“It will take years for these consumerized technologies to compete with Watson, but that day could certainly come,” Gens said.

John Baldoni, senior vice president for technology and science at Glaxo­SmithKline, got in touch with IBM shortly after watching Watson’s “Jeopardy!” triumph.

He was struck that Watson frequently had the right answer, he said, “but what really impressed me was that it so quickly sifted out so many wrong answers.”

That is a huge challenge in drug discovery, which amounts to making a high-stakes bet, over years of testing, on the success of a chemical compound.

Glaxo and IBM researchers put Watson through a test run. They fed it all the literature on malaria, known anti-malarial drugs and other chemical compounds. Watson correctly identified known anti-malarial drugs and suggested 15 other compounds as potential drugs to combat malaria. The companies are discussing other projects.

“It doesn’t just answer questions; it encourages you to think more widely,” said Catherine E. Peishoff, vice president for computational and structural chemistry at Glaxo.

At the San Jose meeting last week, IBM served analysts a breakfast pastry devised by Watson, called a “Spanish crescent.” It is a collaboration of Watson’s software and James Briscione, a chef instructor at the Institute of Culinary Education in Manhattan.

IBM researchers have watched and talked to Briscione as he works, selecting ingredients and building dishes. Watson has read Briscione’s work notes and 20,000 recipes. The computer-ordered ingredients include cocoa, saffron, black pepper, almonds and honey — but no butter, Watson’s apparent nod to healthful eating.

Then Briscione, working with those ingredients, had to adjust portions.

“If I could have used butter, it would have been a lot easier,” said the chef, who used vegetable oil instead.

Michael Karasick, director of IBM’s Almaden lab, had one of the Spanish crescents for breakfast recently. “Pretty good” was his scientific judgment.

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