Laid-off IBM Watson Health workers call AI initiative a bust: 9 things to know

Engineers recently laid off from IBM Watson Health, the division rooted in artificial intelligence, say the company's mission to make AI profitable is failing, according to IEEE Spectrum.

IBM cut dozens of Watson Health employees—primarily from its three acquired companies Phytel, Explorys and Truven—at the end of May. The company is severely disorganized, which led to redundancies and internal competition, the former employees said.  

Now they are speaking out about IBM's issues with its AI.

Here are nine things to know:

1. Two laid-off engineers from Phytel told IEEE Spectrum that IBM's leadership has mismanaged its company since its 2015 acquisition. They allege the problems at Phytel stem from IBM's inability to make Watson profitable.

"Phytel was a really good company, it was really strong," one of the former engineers told IEEE Spectrum anonymously so as not to jeopardize his severance package. "Many people who got laid off are disappointed because they helped build this company, and they really thought IBM would take it to the next level — not destroy it within three years."

2. An IBM spokesperson declined IEEE Spectrum's request for comment on the former employees' claims about Phytel. It issued this statement about the layoffs:

"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. 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."

3. The spokesperson said the layoffs were part of its restructuring following the acquisitions, which was corroborated in a Morgan Stanley analyst note.

4. Other analysts refuted those claims. A July 2017 Jefferies report claimed Watson wouldn't be able to drive a profit despite IBM's extensive investments. That report said IBM is "outgunned in the war for AI talent and will likely see increasing competition."

5. While Watson first sought to revolutionize healthcare, starting with oncology, a STAT investigation revealed it wasn't as promising as the company led on. The three acquired companies were supposed to provide data and analytics, but IBM struggled to properly integrate them into its business. "People were sitting around doing nothing for almost a year," one of the engineers told IEEE Spectrum, adding that IBM leadership told Phytel workers to halt work on improving its existing products.

6. Both engineers cited IBM's "offering management" department, which is responsible for coming up with the products that IBM sells to customers, as the reason Watson flunked. "They couldn't decide on a road map," one of the engineers told IEEE Spectrum. "We pivoted so many times."

7. The engineers said the offering managers didn't have adequate technical expertise and would propose projects that were impossible. IBM's Phytel didn't release new tools and just burned through money, they said.

8. The two Phytel engineers said they estimate at least 300 people were given notice at their company, Explorys and Truven, and about 80 percent of Phytel's workforce were laid off. IBM has not released official layoff totals.

9. The engineers said they do believe AI will disrupt healthcare, but they don't think IBM will lead that effort. Some of the employees who escaped the layoffs are now shifting their projects toward the insurance industry, they said.

"IBM has great potential, but in modern business, you adapt or go away. Workers will go to other companies," one of the engineers said. "The winner will not be IBM."

Click here to read the complete IEEE Spectrum report.

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