IBM to Invest $240M to Develop AI Research Lab With MIT

Jing Cao (Bloomberg) -- IBM will spend $240 million over 10 years to develop an artificial intelligence research lab with the Massachusetts Institute of Technology, pooling the organizations’ resources as competition intensifies to produce breakthroughs in the field.

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, New York-based company said Thursday in a 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 head of International Business Machines Corp.’s research and cognitive solutions groups, which includes Watson products.

“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 artificial intelligence, including Microsoft Corp. and Alphabet Inc. 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 percent in the second quarter after growing in each of the previous four quarters.

Cambridge, Massachusetts-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. The company also has the option to buy out MIT for full ownership, Kelly said.