IBM to Invest $3 Billion in New Internet of Things Unit

International Business Machines Corp said on Tuesday it will invest $3 billion over the next four years in a new 'Internet of Things' unit, aiming to sell its expertise in gathering and making sense of the surge in real-time data.

The Armonk, New York-based technology company said its services will be based remotely in the cloud, and offer companies ways to make use of the new and multiplying sources of data such as building sensors, smartphones and home appliances to enhance their own products.

For its first major partnership, IBM said a unit of the Weather Co will move its weather data services onto IBM's cloud, so that customers can use the data in tandem with IBM's analytics tools.

As a result, IBM is hoping that companies will be able to combine live weather forecasting with a range of business data, so companies can quickly adapt to customer buying patterns or supply chain issues connected to the weather.

(Also See: Apple, IBM's New Apps to Help Business Get in Step With Mobile Customers)

For example, insurance companies could send messages to policyholders in certain areas when hailstorms are approaching and tell them safe places to park, saving money all round.

Or retail stores could compare weather forecasts with past data to predict surges or drop-offs in customer buying due to extreme weather, and to adjust staffing and supply chain logistics accordingly.

IBM said it was already working with some large companies, such as German tire maker Continental AG and jet engine maker Pratt & Whitney to help them use data in their processes.

Focusing on the cloud is part of IBM's gradual shift away from its traditional hardware and consulting business. The company is targeting $40 billion in annual revenue from the cloud, big data, security and other growth areas by 2018, which should be about 45 percent of its total revenue at that time, based on analysts' growth estimates.

© Thomson Reuters 2015