IBM’s latest big bet: $3 billion on the Internet of things

Those are just three scenarios made possible through a new global, strategic relationship between IBM and The Weather Company, parent of the Weather Channel and WSI, which licenses forecast information to businesses.

Under the deal, WSI will move most of its massive weather data service—which collects information from more than 100,000 sensors, aircraft and drones, and millions of smartphones—into IBM’s cloud service. The data involved supports more than 26 billion forecasts daily. Up until now, the Weather Company has been an oft-cited Amazon Web Services reference account.

IBM plans to use the WSI platform as the foundation for industry-specific analytics services for retailers, utility companies and insurers, as a start. The data will also be available to entrepreneurial software developers that want to use it to drive new applications and services delivered via IBM’s cloud. “Fundamentally, our mission is to help businesses anticipate weather and take action,” said Mark Gildersleeve, president of the organization, when we discussed the partnership.

As just one example of the business impact, the insurance scenario described above could save up to $25 per policy per year in regions where hail is prevalent. That works out to millions of dollars annually.

The WSI alliance will be shepherded by IBM’s new Internet of Things business unit, in which the giant tech company plans to invest $3 billion over the next four years. Right now, IBM figures that up to 90% of the data generated by devices such as appliances, connected vehicles, smartphones and other connected devices is never analyzed.

“Our knowledge of the world grows with every connected sensor and device, but too often, we are not acting on it, even when we know we can ensure a better result,” said Bob Picciano, senior vice president of IBM Analytics, commenting on the creation of the new division.

Examples of early Internet of things clients including Pratt & Whitney, which is using IBM predictive analytics to monitor 4,000 commercial engines (similar to what GE and Caterpillar are doing). Whirlpool likewise is working with IBM on predictive maintenance for its appliances.

Part of IBM’s $3 billion investment is related to projects that were already under way, as part of initiatives such as Smarter Planet and Smarter Cities. By considering and prioritizing them in aggregate, IBM hopes to amplify the impact, said Joel Cawley, general manager, Information and Insights as a Service, IBM.

Among other things, IBM will train at least 10,000 consultants on data services in the coming months, including 5,000 weather specialists. It will also fund market development, research and development, and additional alliances, he said. “We are looking at non-traditional sources, data sources that people have had trouble integrating into operational systems,” Cawley said.

Relationships like the Weather Company alliance and IBM’s deal with Twitter (which allows businesses to correlate Tweet information with other business metrics) could become a key differentiator for cloud services providers in the months ahead.

“We predict that more than 80 percent of the high-value applications in the cloud are going to somehow be related to crunching big data sources,” said Frank Gens, chief analyst with market research firm IDC.

Another high-profile example is Oracle’s buyout of Datalogix, which collects insights about more than $2 trillion in consumer spending that could serve as the foundation for new marketing services. Expect more of the same from Google, Microsoft, and Amazon Web Services.

“All of these guys are racing to find companies to partner with that have these huge sources of data,” Gens said. “It will become an arms race of who can accumulate the most valuable sources.”

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