Data Analysis

IBM, SAP Team Up on Artificial Intelligence

ibm watson source Matthias Balk dpa
IBM Watson trying to second guess the future.
  • Why it matters

    Why it matters

    IBM is hoping that its new artificial intelligence programs will help companies harvest data on their customers and boost their bottom line.

  • Facts


    • IBM has opened a new office in Munich, where 1,000 developers will program solutions for the Internet of Things.
    • It has set up a new entity, IBM Watson, which tries to make sense of unsorted data.
    • In 2015, cloud computing, data analysis, IT security and mobile applications comprised 35 percent of IBM’s total sales of $81.7 billion.
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Was the driver distracted? Or did he deliberately damage his car? It’s a question insurance companies face every day. Deliberate deception is a contributing factor in one out of ten insurance claims.

A joint project by IBM and SAP is intended to make estimating easier for claims adjusters in the future. The two tech giants are developing a program that searches through large numbers of damage reports to uncover irregularities. It is one of several ideas with which the two companies are working on to help their clients benefit from digitalisation.

IBM estimates that it is investing “several million euros” in the first year to the venture. The fraud sleuth is one of the pilot projects, and it embodies the hopes IBM is attaching to the partnership. The tech industry veteran is in the process of reinventing itself once again. Its new division IBM Watson is playing a key role in this, with artificial intelligence seen as the key business of the 21st century. But marketing is still in its infancy, and the company isn’t even breaking down sales figures yet. To succeed, IBM needs partners like SAP.

IBM is currently obsessed with Watson, and sees huge potential for its cognitive computer solutions, from customer service to weather forecasting, and from cancer treatment to maintenance. “It’s the beginning of a new era, the cognitive era,” Chief Executive Officer Ginni Rometti said at the Consumer Electronics Show (CES) in January. IBM is investing heavily in this future. It has already spent several billion dollars to acquire companies in the healthcare sector alone. IBM also opened an office in Munich, where 1,000 developers will program solutions for the Internet of Things, using Watson as the central element.

IBM is buying hope with these investments. Demand is shrinking for its complete solutions, consisting of servers, memory systems and software, and accompanied by services. Many customers rely on cloud computing and obtain standard services through the Internet, requiring little advice. Sales have been shrinking for the last 15 quarters, declining to about $82 billion (€72 billion) in the last fiscal year.

To succeed IBM needs to deeply integrate the system into both business processes and people's everyday lives.

“Watson’s role in IBM’s strategy and development cannot be underestimated,” said Axel Oppermann, head of consulting firm Avispador. The company’s artificial intelligence division could be more important than the PC business was in the 1980s, he explained. According to Mr. Oppermann, the services associated with Watson will play a key role in increasing sales and profits in the next few years. “At IBM, there is a lot riding on this strategy.”

This was also the impression IBM made at Cebit recently. Watson was involved everywhere at IBM’s giant booth in Hall 2. Watson will help computer users combat email overload by using communication habits to detect which messages are important. It will improve customer service by automatically analyzing a person’s mood in an email and immediately suggesting ways to respond. It will also facilitate maintenance by using sensor data to predict when a part needs to be replaced.

IBM is clearly interesting in talking about these projects a lot, but management becomes more tight-lipped when it comes to concrete results. More than two years after it established the business unit, IBM still does not itemize how many customers use the system and how much revenue it generates. The 2015 annual report merely states that cloud computing, data analysis, IT security and mobile applications comprised 35 percent of IBM’s total sales of $81.7 billion. That leaves a lot of room for interpretation.

“The question arises as to whether IBM can quickly and comprehensively find broader applications for Watson, thereby achieving comprehensive relevance and sales,” said Mr. Oppermann. To succeed IBM needs to deeply integrate the system into both business processes and people’s everyday lives.

Phil Cartner, an expert with analytics firm IDC, believes Watson is only at the beginning. “IBM is trying to create a market, but it’s still in an early phase.” There are several projects on the go but very few are in active service. . And the roughly 80,000 developers who have been using Watson so far, according to media reports, remains a relatively small number, said Mr. Cartner.

Christopher Daerr, in charge of partnerships with the German software giant at IBM, told Handelsblatt the partnership with SAP is intended to help with broader distribution. “Through the partnership, we want to acquire more projects and expand the target groups,” he said. He said the company could best serve clients by adapting the cognitive solutions involving Watson to the individual industries and the special requirements of companies. “The the partnership with SAP helps us to jointly develop such industry solutions” he said.

Mr. Carter regards this step as promising. SAP is strong in the industrial sector, he said, which is where IBM could gain new customers – especially as there is so much corporate interest in artificial intelligence. The insurance solution is only the beginning.


Christof Kerkmann is an editor for Handelsblatt Online and writes about the technology sector. To contact the author:

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