IBM Bets Big on Watson Verticals with the Acquisition of Promontory

IBM continues to bet big on Watson industry solutions. A few days ago, big blue agreed to buy Promontory Financial Group, one of the most well-known financial consultancies in the world, to expand Watson’s capabilities in the financial advisory space. Specifically, IBM disclosed plans to form a new unit to advise clients on financial regulation combining Watson and Promontory’s experts. The new unit will be called Watson Financial Services.

Promontory was founded in 2001 by Eugene Ludwig, a former. U.S Controller or the Currency. Over the years, Promontory developed a reputation as one of the top financial firms in the world of financial regulation. The Wall Street firm made the headelines right after the 2008 financial crisis when regulators paid them more than $900 million to search for errors in mortgage foreclosures in big banks.

By combining Promontory’s expertise with Watson’s artificial intelligence(AI) capabilities, IBM is aiming to building smarter financial services solutions that can detect fraudulent transactions or other irregular activities. IBM plans to leverage Promontory experts to train Watson on hte incresingly complex regulatory environment. Without a doubt, the acquisition represents an important step in the verticalization of AI and it also highlighted some important lessons of the evolution of the space.

Vertical AI is a Big Boys Game

IBM is not the only company that has been spending big dollars on the training of AI systems. After paying $650 million for AI startup DeepMind, Google hired Go European champion Fan Hui to train DeepMind’s new AlphaGo system. The result of that training materialized when AlphaGo defeated Go world’s number one player Lee Sedol in a match in Seoul earlier this year.

Whether we are talking about financial systems, healthcare or Go, training AI systems could be a very expensive excercise. Consequently, incumbents such as Google, Microsoft, IBM, Amazon or Facebook can leverage their big wallets to get an advantage in the space.

Expert Systems Continue to be the Low Hanging Fruit for Vertical AI

Watson Financial Services will focus on building systems that combine the knowledge of Promontory’s experts with Watson’s ability to analyze large volumes of information. That type of expert systems which combines human domain knowledge with AI algorithms continues to be the prototypical scenario for AI vertical solutions. Other type of AI systems that rely on more complex cognitive aspects such as creativity or imagination might become more popular as AI technologies evolve.

IBM is Dead Serious About Verticalizing Watson

The acquisition of Promontory is a strong indicator of IBM’s intentions to continue verticalizing Watson. While the first initiatives in that realm have been focused on the healthcare industry, now IBM is able to provide a series of unique solutions in the financial services space. Other industries that rely heavily on expert systems such as insurance, education or pharmacauticals could be the next target for IB Watson.

CEO of IntoTheBlock, Chief Scientist at Invector Labs, I write The Sequence Newsletter, Guest lecturer at Columbia University, Angel Investor, Author, Speaker.

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