IBM Could Be a Dark Horse in the Virtual Assistant Market

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Around 39 million Americans own a smart speaker, according to research from NPR and Edison Research. Devices powered by Amazon's (NASDAQ: AMZN) Alexa lead the market, with Google Home in second place. The popularity of artificial intelligence assistants, which respond to voice commands, has been growing quickly, although the jury is still out on how useful they really are.

International Business Machines (NYSE: IBM), a company that has based its multiyear turnaround partly on artificial intelligence, is now entering the virtual assistant market. IBM's Watson Assistant, launched earlier this week, is powered by various Watson APIs running on IBM's cloud. But unlike Amazon and Google, which are aiming at peoples' living rooms, IBM is taking a different approach.

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Stepping back from the spotlight

Don't expect IBM to launch a smart speaker, and don't expect to be saying, "Hey, Watson." The company is targeting enterprise customers with Watson Assistant instead of going after consumers directly. Watson Assistant can be used by companies and organizations to build industry-specific applications. It's a white-label product, meaning that applications built on Watson Assistant will be branded and customized however the developing company chooses.

IBM provided an example of how this could work in a post announcing the product:

The most important thing about Watson Assistant is that any data generated is owned and controlled by the company that built the particular application. Companies could integrate Amazon's Alexa instead, but they'd likely be ceding control of their data to the tech giant.

Speaking to The Verge, IBM VP of Watson IoT Bret Greenstein commented on the main problem with Alexa: "If you start running the entire world through Alexa, it's an enormous amount of data and control to give to one company."

This strategy makes sense

IBM's business revolves around helping other businesses. Its strategy with Watson Assistant is exactly what you'd expect from IBM. Giving companies the ability to build their own virtual assistants while maintaining control of their own data should be a pretty strong selling point.

IBM already has a few partners, including HARMAN, which demoed a digital cockpit solution at IBM's THINK 2018 conference. Other partners include Airwire, Munich Airport, Kaon Media, The Royal Bank of Scotland, and IFTTT.

I'm still not convinced that general-purpose virtual assistants will ever be all that useful. Sure, you could ask your Amazon Echo about the weather. Or you could take five seconds to look at a weather app on your phone, absorbing far more information in less time. I don't really get the appeal, to be honest.

But industry-specific virtual assistants powered by Watson Assistant could be a different story. If the company can get enough companies on board, and if the Watson cloud services work well enough, IBM could find success in a market dominated by Amazon and Google.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Timothy Green owns shares of IBM. The Motley Fool owns shares of and recommends Alphabet (A and C shares), and Amazon. The Motley Fool is short shares of IBM. The Motley Fool has a disclosure policy.