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How Much Can Truven’s Data Actually Benefit IBM’s Watson?

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Truven marks IBM’s largest acquisition under CEO Rometty

Previously in this series, we discussed IBM’s (IBM) recent acquisition of Truven Healthcare. Prior to operating independently, Truven worked as a healthcare unit of Thomson Reuters. However, in 2012, Reuters sold Truven to Veritas Capital Fund Management and a PE (private equity) firm for nearly $1.3 billion.

Despite IBM’s ongoing struggle to post revenue growth, its buyout of Truven marks the largest acquisition under CEO Virginia Rometty’s leadership, which began in 2012. Truven’s acquisition illustrates IBM’s continued focus and investment in building out its strategic imperatives, particularly in cloud, analytics, mobile, social, and security technologies.

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Truven’s medical data will boost Watson’s AI

IBM intends to strengthen its presence in cognitive computing and machine learning space through Watson, which requires a vast pool of data so that insights trends and patterns can be extracted from them. According to John Kelly, IBM’s Senior Vice President of Solutions Portfolio and Research, “We’ve been systematically putting together the platform and the underlying data,” with an aim “to reduce costs and improve outcomes.”

Truven’s majority of data refers to medical costs, which should enable Watson to have an insight into pricing and medical expenditure. Owing to this information regarding healthcare system, IBM is bound to have an edge over its peers. How Truven is expected to significantly enhance IBM’s Watson position in healthcare space can be gauged from Kelly statement on this acquisition when he stated that now “we have all of the major data sets that we need.”

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Managing expectations

The above graph shows the expectations regarding technologies that will have a major say in shaping the future IT environment. Knowing that cloud, mobile, and cognitive computing will be the future of IT, IBM has made considerable effort to promote its AI (artificial intelligence) and cognitive computing software, Watson. At the Consumer Electronics Show in 2016, IBM’s CEO, Ginni Rometty, stated that Medtronic (MDT), Under Armour (UA), and SoftBank Robotics are already using Watson in various ways.

In the past, IBM entered into healthcare-related partnerships with Medtronic, Apple (AAPL), and Johnson & Johnson (JNJ). Investors interested in gaining broad-based exposure to IBM might consider investing in the iShares US Technology ETF (IYW), which has an exposure of 46.7% to application software and invests ~12.5% of its holdings in IBM.

Now let’s see where IBM stands on the patents front.

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