SAP signs IBM Watson deal, ChatGPT showstopper waits in the wings

50-year-old ERP vendor reaches for 15-year-old AI to be down with the kids

ERP giant SAP has inked an agreement with IBM to use its Watson AI technology, the aim being to help users find apps on its solutions cloud.

According to Europe's largest software vendor, IBM Watson will power the digital assistant in SAP Start, through which users enter its cloud solutions environment and search for, launch and "interactively engage" with apps.

Residing in cloud solutions from SAP and S/4HANA, IBM Watson is intended to help users boost productivity with both natural language capabilities and predictive insights. In a pre-canned statement, SAP CEO Christian Klein described it as a "milestone collaboration."

"Working together to incorporate additional AI, machine learning and other intelligent technologies into SAP solutions can lead to better business outcomes for our joint customers."

Watson is a question-answering system developed by IBM in the Noughties. SAP said the Watson-powered system would help managers and employees in the find answers across various SAP business applications, having already been deployed in SAP Concur, the expense management application.

Watson first hit the headlines in 2011, when it used its natural language processing and knowledge models to win Jeopardy, an American TV game show. Soon afterwards, IBM launched a commercial product, setting in motion the bandwagon for commercializing AI. But the wheels soon started to fall off.

The system under-performed financially and in 2022, IBM sold off Watson Health, the unit addressing the very domain in which Watson was hoped to make a significant impact. Watson IoT Platform was retired from IBM Cloud later in the year.

IBM called Watson cognitive computing – a claim with dubious merit, according to science sticklers – in the sense that it attempted to represent knowledge and automate reasoning.

The new kid on the AI block works differently. Large language models (LLMs) consume a vast corpus of text and rely on brute-force statistics of word embedding and vectors to produce output uncannily similar to human language but somehow lacking in basic reasoning such as high school math.

The LLM approach is set to transform business if its fan club is to be believed. The week, the Financial Times spotted the first casualties in the education sector as kids reached for ChatGPT more than online teaching tools. In a recent Gartner poll of more than 2,500 executive leaders, 45 percent reported that the publicity of ChatGPT has prompted them to increase AI investments.

SAP is paying attention as it seems to be hedging its bets in the AI arena. In a call with investors following the Q1 results last month, Klein promised a ChatGPT announcement at the forthcoming annual Sapphire shindig, set to take place in Orlando later this month. ®