IBM Agrees To Sell Watson Health

After many years of working fruitlessly to establish it as the leading healthcare AI platform, IBM has agreed to sell Watson Health. The deal, which was reportedly in the $1 billion range, turns over a bundle of assets including Health Insights, MarketScan, Clinical Development, Social Program Management, Micromedex and some imaging software products to tech-focused investment firm Francisco Partners.

This brings the Watson Health assets into an investment house with a history of having invested in more than 400 technology companies. Francisco Partners’ current and past investments in the sector include Availity, eSolutions, Capsule, GoodRx and Zocdoc.

The sale comes as a somewhat inauspicious end to the inauspicious tale of Watson Health, which was launched in 2015 to significant fanfare as a high-profile use of the company’s Watson supercomputer. At the time, IBM made a group of investments that reportedly cost $4 billion, including Merge Healthcare, Phytel, Truven Health Analytics and Explorys.

Over the next few years, IBM would work hard to position Watson Health as the powerful analytics engine healthcare organizations needed to improve and treat diagnoses in major health categories, including the treatment of cancers.  In fact, Watson Health leaders argued that AI (which Watson Health leaders called “cognitive computing”) was the solution to many of the healthcare industry’s problems.

What actually happened, however, was that the Watson Health technology seems to have been unready for the tasks for which it was being sold.  Reportedly, the Watson for Oncology technology made multiple unsafe and incorrect treatment recommendations. At the time, IBM not surprisingly fought back against negative reviews, and in 2017, said that it had supported care for more than 84,000 patients at 230 hospitals around the world.

Despite its denials, however, IBM never seemed to have found a path to success for Watson Health, and by mid-2018 had made plans to slash up to 70% of its staff. The layoffs cut staff levels within companies IBM had originally acquired to build out its healthcare credentials, including Truven, Merge and Phytel.

Now, at long last, the computing giant is admitting that it needs to let Watson Health go. In a prepared statement,  IBM Software senior vice president Tom Rosamilia said the sale of the Watson Health assets “are a clear next step as IBM becomes even more focused on our platform-based hybrid cloud and AI strategy.”  Rosamilia asserted that IBM remains committed to Watson and its broader AI business, and to its healthcare IT clients and partners, but clearly, Big Blue doesn’t see Watson Health itself as worthy of future investment.

Francisco Partners, for its part, is being exceedingly vague as to where it plans to take the basket of companies that it has acquired in the Watson Health deal. It could just be playing its cards close to the vest, but it has offered no hint that it has a great new idea for turning a company with Watson Health’s track record into a winner.

There’s a reason, after all, that it paid a reported $1 billion for a company which IBM spent $4 billion on related companies to build. Though I don’t know if “fire sale” is the right term, it seems IBM didn’t do well on Watson Health at any stage in the process. If Francisco Partners has some surprising strategy in mind to make these assets perform, I’m eager to see it.

About the author

Anne Zieger

Anne Zieger is a healthcare journalist who has written about the industry for 30 years. Her work has appeared in all of the leading healthcare industry publications, and she's served as editor in chief of several healthcare B2B sites.

   

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