As it competes with Microsoft, Alphabet and others to take the lead with artificial intelligence tools for business, IBM will invest $240 million in an AI lab with the Massachusetts Institute of Technology.

(Bloomberg News) IBM Corp., reaching beyond its own walls to compete as a provider of artificial intelligence applications for business, will spend $240 million over 10 years to develop an artificial intelligence research lab with the Massachusetts Institute of Technology. The venture will pool the organizations’ resources as competition among companies like Microsoft Corp. and Alphabet Inc. intensifies to produce breakthroughs in the field.

The competition is really stiff in both business and academia, so we looked at this situation and spoke together and said, ‘let’s do something big.'
John Kelly, head of cognitive solutions group
IBM Corp.

John Kelly, senior vice president, IBM Research and Cognitive Solutions

The MIT-IBM Watson AI Lab will fund projects in four broad areas, including creating better hardware to handle complex computations and figuring out applications of AI in specific industries, the Armonk, N.Y.-based company said last week in a prepared statement. While IBM has always conducted long-term research internally, it decided AI was such a vast field that it needed to reach out for talent and ideas, said John Kelly, the senior vice president in charge of IBM’s research and cognitive solutions groups, which includes Watson products. Watson, a supercomputer named after IBM founder Thomas Watson, uses artificial intelligence and analytics technology to produce useful information tailored to specific applications. AI is a term used to describe software that learns from the data it compiles to improve on its own such functions as recommending products or sources of products through e-commerce sites.

“The competition is really stiff in both business and academia, so we looked at this situation and spoke together and said, ‘let’s do something big,”’ Kelly said in an interview.

While researchers will focus on long-term innovations in artificial intelligence, IBM will also be looking for developments—a new medical imaging algorithm, say—that it can immediately plug into its existing products. Big Blue expects to see results that boost its Watson-branded AI business in the next year or two, Kelly said. The plan is to change the focus and number of teams as needed to produce results, he said.


Kelly said he would monitor the lab’s research to see whether the company was “getting the breakthroughs and is that translating into our product, resulting in higher prices, margin or share?”

The partnership underscores IBM’s focus on building a business selling AI software, a strategy that requires clients to adopt such products and the company to develop offerings that add actual business value and are competitive with juggernauts in AI, including Microsoft and Alphabet. Currently, for example, IBM has a tool that allows programmers to use computers to read, analyze and understand chunks of text. Another software product uses AI to help interpret genetic test results.

IBM needs its AI strategy to pan out as it deals with continuing struggles in the company’s traditional business segments that have led to 21 straight quarters of declining revenue. While IBM hasn’t yet broken out sales generated by its most advanced AI products—which fall under the Watson brand—these represents its biggest long-term hope. Revenue generated by the company’s cognitive solutions segment, which houses much of the software and services in the newer businesses and includes the Watson AI platform, fell 2.5% in the second quarter after growing in each of the previous four quarters.

Cambridge, Mass.-based MIT will benefit from the IBM lab partnership by getting access to the company’s trove of data, Kelly said. Universities generally aren’t able to accrue the large data sets needed in AI research today, while companies like IBM can either buy the information or build up huge databases through normal business functions.


“True breakthroughs are often the result of fresh thinking inspired by new kinds of research teams,” MIT president L. Rafael Reif said in a statement. “The combined MIT and IBM talent dedicated to this new effort will bring formidable power to a field with staggering potential to improve standards of living everywhere.”

IBM and MIT will jointly own the intellectual property that results from the projects conducted together. IBM also has the option to buy out MIT for full ownership, Kelly said.

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