What’s going on at IBM’s Watson Health?

Company lays off a number of the unit’s workforce, but says the move will not hurt its core cognitive computing business.

IBM has laid off a number of employees in its Watson Health unit, but says initial reports that as much as 50 percent to 70 percent of the unit’s workforce was furloughed are not accurate and that the reductions will not hurt its core cognitive computing business.

A company representative, however, would not provide additional details or give the specific number of employees being let go. The company also refused to say how many people are employed in the Watson Health unit.

“IBM is continuing to reposition our team to focus on the high-value segments of the IT market, and we continue to hire aggressively in critical new areas that deliver value for our clients and IBM,” said the vendor in a written statement. “This activity affects a small percentage of our Watson Health workforce, as we move to more technology-intensive offerings, simplified processes and automation to drive speed.”

“We continue to invest in high value segments of the healthcare industry like data management, analytics and AI,” added an IBM spokesperson.

Investment firm Morgan Stanley issued a research update communication regarding the alleged “mass layoffs” at IBM Watson Health, concluding that the press reports were misleading—in their view. “First, any layoffs come on the back of IBM’s reported $613 million restructuring announced on the April 17 earnings call—of which, about $100 million related to the Cognitive business division,” stated Morgan Stanley. “To put this in perspective, the total annual Cognitive cost and expense base ($3.95B COGS + $7.7B OpEx) is $11.7 billion, meaning the total restructuring cost is less than 1 percent of the business.”

Morgan Stanley noted that IBM has a long history of allowing recently acquired businesses to run independently for a short period—one to two years—before fully integrating them with its core operations. In recent years, Big Blue has been on a buying spree for healthcare technology companies, including 2015’s acquisitions of population health management vendor Phytel and medical imaging software vendor Merge Healthcare. This was followed by 2016’s acquisition of healthcare data and analytics company Truven Health Analytics. All three companies were folded into the IBM Watson Health unit.

Matt Guldin, senior analyst at Chilmark Research, says he is not surprised by the restructuring at IBM and believes it was just a matter of time before it affected Watson Health based on the company’s acquisitions over the past few years.

“Most of the layoffs seem focused on companies that they acquired—which they had managed to avoid until now,” observed Guldin. “It’s all part of the natural M&A process and is typical of IBM’s track record.” He adds that “any organization would have struggled, given what they were acquiring.”

As an IBM business unit, Watson Health was launched in April 2015 to help physicians, researchers, insurers and patients leverage big data, analytics and mobile technology to achieve better healthcare outcomes. In particular, the unit was created to leverage the cognitive computing capabilities of IBM’s Watson supercomputer to quickly identify patterns and insights from the tsunami of data being generated in healthcare in order to find the proverbial needle in a haystack that will lead to medical breakthroughs and better patient care.

Watson Health offers cloud-based access to its Watson supercomputer for analyzing enormous amounts of data in order to make it easier for healthcare organizations to store and analyze patient data. Watson also utilizes data mining, pattern recognition and natural language processing to mimic the way the human brain works in an effort to rapidly and intelligently parse through the disparate data.

Also See: IBM CEO: Watson Health is ‘Our Moonshot’ in Healthcare

Morgan Stanley analysts made the case in their report that “IBM management, as recently as the March 8th, 2018 investor day, discussed aggressive hiring in strategic areas including Oncology within Watson Health suggesting any lay-offs in the Watson unit are gross headcount reductions while net headcount is likely still expanding.”

“Watson is the only AI technology tackling a wide range of the world’s biggest healthcare challenges,” said IBM in its written statement.

The company has actively targeted its Watson Health cognitive computing system to the area of cancer research and treatment. Delivered through the cloud, the system is meant to help clinicians quickly sift through big data providing them with insights.

Three years ago, soon after the launch of Watson Health, IBM announced that 14 major cancer centers were using its cognitive capabilities to quickly analyze patients’ DNA, identify cancer-causing mutations and speed identification of personalized treatment options. It’s an area of focus in healthcare that continues for Watson Health.

In fact, IBM claims that Watson Health is “at work supporting cancer care in more than 200 hospitals in 11 countries,” adding that “just last week, Watson Health announced a prominent new client in India with Apollo Hospitals, India’s largest specialty healthcare systems, which is adopting two products, Watson for Oncology and Watson for Genomic.”

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